Alaskans would lose their permanent fund dividends for good and the state eventually would raid the fund itself without a plan to deal with the state's financial problems, according to former Gov. Jay Hammond.
At a press conference Tuesday in downtown Juneau, Hammond said if nothing is done to fill the budget gap, which threatens to exhaust the Constitutional Budget Reserve in the next few years, the Legislature will be forced to dip into Alaska Permanent Fund earnings.
"And even though the Legislature may say, 'I'm going to protect it; we're not going to do that,' the courts will compel them to do it because the constitutional stipulation says you must balance the books," Hammond said.
Tuesday's press conference was the second stop for Hammond, who is campaigning for Lt. Gov. Fran Ulmer, the Democratic candidate for governor. Hammond said Ulmer is the best candidate to solve the state's fiscal crisis.
Ulmer worked as a policy advisor in Hammond's Republican administration in the 1970s. Despite differences in party affiliation, the former GOP governor encouraged Republicans and independents to forget about partisan labels and cast their votes in the Nov. 5 election based on their own best interests.
Hammond, who served from 1974-82, isn't the only former governor who has broken party ties in the campaign.
Former Democratic Gov. Bill Sheffield has supported the Republican gubernatorial candidate Frank Murkowski, Alaska's junior U.S. senator.
Sheffield, Alaska's governor from 1982-86, said the state has a mentality of "managing the decline" when there is still a lot of opportunity for development that would help raise revenues.
He said if elected, Murkowski would be a voice for growth and work to develop untapped oil resources in the state. With economists projecting two years until the fiscal gap depletes the state's budget reserve, Sheffield said there is still time to create revenues without taxing Alaskans.
"Those fields would be brought on-line very quickly," Sheffield said, noting that the financial revenues would help mitigate the impact of the state's fiscal gap.
"I think we have some time to see what can be done about more income and the budget and how we're going to get more income," he said. "We don't have a lot of time ... but I think we have a couple years, and I think those things should be tried first."
Murkowski campaign manager Gregg Renkes told The Associated Press that Murkowski agrees with Ulmer on the endowment approach.
"The endowment approach has a lot of merit as a mechanism for protecting the long-term integrity of the fund," Renkes told the AP.
Sheffield said Murkowski's service as a former commissioner of economic development in the mid-'60's makes him more knowledgeable about the economics of the state than his Democratic opponent is.
And as a Republican working with a GOP-led Legislature, Murkowski also would be in a better position to move legislation on divisive issues such as subsistence, Sheffield said.
Hammond, who was governor when the permanent fund was created, has been an ardent supporter of protecting the state's oil-wealth savings account.
He said Ulmer's support of an endowment approach to managing the fund would help protect the dividend program in the long term. The plan would limit the amount that could be withdrawn in any one year to 5 percent of the fund's total market value.
Ulmer said the plan, which has been endorsed by the Alaska Permanent Fund Corp.'s board of trustees, would institutionalize inflation-proofing of the fund and provide a better prediction of the fund's yearly payout.
Yearly dividends are now determined by a five-year average of the fund's performance.
Inaction would lead to a raid on the fund, Hammond said.
"Any reduction in dividends has exactly the same effect as imposing a flat dollar amount income tax on every Alaskan," Hammond said. "The destitute, the children and the multi-millionaire would pay exactly the same. That makes no sense at all."
Timothy Inklebarger can be reached at email@example.com.