Lawmakers shuffle funds for dividends

GOP adds provision allowing $260 million to be moved from fund that pays out PFDs

Posted: Friday, May 23, 2003

Republican and Democratic lawmakers offered different assessments Thursday on the results achieved in the first year of the 23rd Alaska Legislature. The GOP majorities proclaimed success while Democrats warned the Alaska Permanent Fund dividend was jeopardized.

Running right up to Wednesday's midnight deadline, lawmakers passed the state public works budget, extended the Regulatory Commission of Alaska for an additional four years and approved a new approach to bridging the state's chronic budget gap.

In one of the most controversial moves in the final hours of the session, Republicans passed a state public works budget that included a provision allowing the Legislature to dip into the state's savings account without approval from minority Democrats.

Republicans have needed Democrats' support in recent years to tap the state's Constitutional Budget Reserve. The Legislature has used the $1.9 billion account to bridge the gap between spending and revenues.

It takes a three-fourths majority vote in both the House and Senate to remove any money from the fund, and Democrats have used their votes to negotiate increased state spending.

This year, however, Democrats called on the Legislature to enshrine protection of the permanent fund dividend program in the state constitution in return for their CBR votes.

The Republicans responded by adding a provision to the public works bill that would move about $260 million from the earnings reserve of the permanent fund, which is used to pay annual dividends, into the principle of the fund, which cannot be spent.

Making the money unavailable for spending would allow the Legislature to invoke a clause in the state Constitution that says if spending is lower this year than last year only a simple majority vote is needed to tap the CBR.

This could mean smaller dividend payments in 2004, according to Bob Bartholomew, chief operating officer of the Alaska Permanent Fund Corporation.

"This will make less available for appropriation in the future," Bartholomew said. "This could mean less payouts in the future."

He said dividends could be as much as 20 percent smaller in 2004.

But Gov. Frank Murkowski said Thursday dividends are not in jeopardy.

"There is no evidence of any kind to suggest that it is going to have an effect on the dividend," he said. "That information (from the Permanent Fund Corporation) is contrary to information that I've gotten internally."

House Minority Leader Ethan Berkowitz, an Anchorage Democrat, said there was no attempt by the administration to negotiate with Democrats on the CBR vote.

"I think the (administration) actively separated itself from the negotiations and actively tried to undercut the authority of some of the people in our caucus, and they've played a divide and conquer because all along I think it was their intent to try to (invoke the constitutional clause)," he said.

On Thursday, Murkowski still gave no indication of where he would cut the state budget.

Spending measures passed this year by the Legislature were $133 million above Murkowski's goal of drawing no more that $400 million from the Constitutional Budget Reserve.

At the beginning of the session, Murkowski laid out a package of new taxes and government cuts to reach the budget target.

Some of the taxes passed, but many of the governor's proposals, such as a $100 head tax, a seasonal sales tax, an increase in the state gasoline tax and a tourist tax on wildlife viewing, were rejected by Democratic and Republican lawmakers.

The Legislature was successful in passing taxes on tire purchases, car rentals, vehicle registration and business licenses.

Three weeks before the end of the session, the House Ways and Means Committee proposed a 3 percent statewide sales tax that would have raised between $300 million and $400 million a year, but the measure also was rejected by the Legislature.

Murkowski responded with a promise to cut state programs to reach his budget target. Some of the proposed cuts include $22.2 million for municipal revenue sharing, $32.1 million for education grants, $44.8 million for the Longevity Bonus Program and $47.8 million for public works projects.

Murkowski has said that meetings with New York bond analysts near the beginning of the session revealed that failure to reach the $400 million target could damage Alaska's bond rating.

Following the close of session on Wednesday night, Democrats criticized Murkowski for the proposed cuts.

"I think the greatest failure of this Legislature and the greatest failure that this governor has demonstrated so far is that they've focused solely on cutting the budget, they focused on a number - we focus on people," Berkowitz said. "The budget is irrelevant unless it's taking care of people."

• Timothy Inklebarger can be reached at

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