Hawker: Spend permanent fund on state budget

Posted: Thursday, September 18, 2003

FAIRBANKS - Alaska needs to take a serious look at funding some state services with Alaska Permanent Fund money, according to the co-chairman of the state House Ways and Means Committee.

"When the state's got $25 billion in the bank, and that (capital) has made $2 billion so far this year ... we don't have a fiscal problem. We have a problem of will," said Rep. Mike Hawker, an Anchorage Republican.

Hawker told the Fairbanks Chamber of Commerce that the way to fill the state's gap between revenues and expenditures, estimated at $600 million next fiscal year, is through a fivefold strategy.

He wants to control government costs, promote economic development, use some permanent fund money for government, increase existing taxes or institute a new broad-based tax and institute a mechanism to mitigate rapid changes in oil prices.

Hawker said controlling government cost is a key and called for a spending cap on government. However, he also said that it would be impossible for the state to trim its way out of a projected $600 million hole.

Cutting the popular Denali Kidcare program would save only $10 million, he said. Cutting all Medicare would save only $200 million. The entire budgets of the state departments of Transportation and Public Safety are under $100 million, he said.

"We are going to have to cut 25 percent of the state budget just to balance the budget with a cut," he said.

The alternative to cutting, he said, is new revenue, but new revenue from economic development is years away. The state will not see earnings from a natural gas pipeline until seven years after the project has begun, he said, while the state $1.8 billion reserve fund will be empty in two to five years.

A principal part of Hawker's preferred solution is to adopt the "percent of market value" proposal. That plan, originally put forth by the Permanent Fund Board of Trustees, would allow the state to spend 5 percent of the total value of the fund each year. The money could be split between dividends and government services.

Currently, the state only has access to earnings of the fund, which can make dividends rise or fall due to fluctuations in the stock market.

If backed by the Legislature next year, the percent of market value proposal could go for a public vote in November 2004.

Hawker pitched the idea as a way to stabilize dividends, even though they would be smaller in the long run, and supply a steady stream of money to help pay for government.

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