Hudson mulls lump permanent fund payout

Change to earlier proposal could give Alaskans up to $15,000, suspend dividends

Posted: Sunday, September 09, 2001

Sen. Jerry Mackie retired from the state Legislature in 2000, but a controversial bill he filed before his departure has a political life of its own.

Juneau's Rep. Bill Hudson on Friday night floated the idea of a revised version of Mackie's doomed bill, which would have doled out $25,000 from the Alaska Permanent Fund to every eligible resident but extinguished the popular dividend program.

Under Mackie's plan, the state would have used earnings from the fund's leftovers to pay for government instead of the annual checks. The bill, which required voter approval, was seen by some as a way to tap the fund's wealth for state services without committing political suicide. But the measure died in committee.

Hudson, a Republican, told a Juneau crowd he is talking to other lawmakers about introducing a "mini-Mackie."

"A little Mac, not a big Mac," said Hudson at a public meeting called by the Fiscal Policy Caucus, a loosely-formed group of about 30 lawmakers.

Hudson said after the meeting the revised version probably would distribute to residents a smaller lump sum perhaps $10,000 to $15,000 but only suspend the dividend program, not end it. The state would use earnings from the fund balance to pay for government until new revenues came online, said Hudson, noting the state could re-establish a smaller dividend program after six or seven years.

"It's a little like the Mackie plan, which had a lot of popularity, then lost its popularity," said Hudson, a Republican.

Hudson emphasized it's just a concept and he's not sure he or any other lawmaker will even pose it in a bill. It's just one idea to help guide the state from its financial woes, Hudson said.

"At this point in time it's nothing more than a thought."

An exchange of ideas was the whole point of the Juneau meeting, which drew more than 30 people. A panel of speakers from the governor's office and state Department of Revenue painted a gloomy picture of the state's financial future, saying things could turn grim by 2005 as oil revenues decline and the state's savings account runs dry.

The public still will demand services, but the state won't have enough money to fund schools, prisons and other programs, they said. And lawmakers won't have a savings account to fall back on.

"My friends this is not a good situation and it's going to be much, much worse if we don't start doing something," said Hudson, co-chairman of the caucus, which is holding meetings statewide to draw attention to the problem.

The panel repeated a theme: The state must raise new revenue soon to avert an economic crisis. New revenues could come from a combination of permanent fund earnings, new taxes, higher taxes and resource development, said Hudson, although the caucus has not endorsed a plan.

It would help if a proposed gas line were built to bring the state's vast reserves of natural gas to market, said Larry Persily, deputy director of Revenue. However, a gas line probably would not come online sooner than 2008, he said. Even then, it would generate only $250 million to $400 million a year in new revenues only a fraction of the $1 billion unfunded budget gap expected by 2006, Persily said.

"It's a piece of the puzzle, but you can't sit here today and say the gas line is going to save us," Persily told the crowd.

Persily said the state could generate about $200 million a year if it levied a 2 percent personal income tax. But audience member Bill Heumann said it doesn't make sense to pay a Permanent Fund dividend to residents and collect an income tax. That just sets up two opposing bureaucracies, he said.

"I would rather get rid of the dividend myself than worry about taxes," Heumann said. "But you go out to some villages that's the only money they have coming in. That's the monster we've created."

Audience member Rob Skinner said he would support a plan for new taxes if it spread the pain broadly and did not target only businesses.

"We all have to take some of the responsibility here," said Skinner, who operates a car dealership.

Lawmakers do not need approval by voters to spend earnings from the permanent fund, but they asked voters for permission anyway in 1999. Voters overwhelmingly rejected the idea, and the Legislature hasn't seriously broached the topic since then.

Juneau's Sen. Kim Elton urged the crowd to force lawmakers to make the tough decisions, rather than ask voters for permission.

"I cannot see any solution at all if we allow legislators to pass the buck and put it on the ballot because I don't think there's a proposal we could put on the ballot and pass," said Elton, a Democrat.

Hudson did not expect to change the world Friday night, but he had hoped a few more people would attend the caucus' town hall meeting the first of its kind in Juneau.

"I would have liked to have seen this place packed to the brim," said Hudson, who counted 35 people in the audience. "But it's a beginning."

*****

Kathy Dye can be reached at kdye@juneauempire.com



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