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Alaska editorial: Don't link Hess funds to permanent fund dividend

Posted: Friday, November 18, 2005

This editorial first appeared in the Fairbanks Daily News-Miner:

"Wham!" That's the sound of a couple of Democratic state lawmakers springing into action to smack Gov. Frank Murkowski's proposal to provide financial help to Alaska's local governments, many of which have been crippled by high fuel prices and sharp increases in their required contributions to the state-run retirement systems.

What's annoying is that comments attributed to Anchorage Reps. Berta Gardner and Ethan Berkowitz, a candidate for governor, indicate they don't quite understand the governor's idea to use money in a special subaccount within the Alaska Permanent Fund, but that has nothing to do with the calculation of the annual dividend. That subaccount could be emptied out or pumped up with a gazillion dollars and the dividend wouldn't change by a penny.

But the two Anchorage legislators instead seem to insinuate, in their published comments, that the governor wants to "raid" the fund.

"I'm glad there is a growing support for municipal revenue sharing, but I certainly don't understand why, in a year of a billion-dollar surplus, we go first to the permanent fund," said Rep. Gardner, who with two other Democrats - Rep. Les Gara and Sen. Johnny Ellis, both of Anchorage - has instead proposed using $69 million of the state's oil revenue windfall for municipal revenue sharing.

Rep. Berkowitz, the House minority leader, seemed to read from the same script. "You can't go to the permanent fund when the state has record profits from the oil companies."

It's easy to see how comments like those can whip people into the usual "Don't touch my dividend!" frenzy. Surely that's not the intent of Reps. Gardner and Berkowitz. Surely.

For the record, here are some details about the fund the governor proposes using to aid local governments:

The account at issue is popularly known as the Amerada Hess account, named for an oil company that was one of 15 oil companies involved over the years in legal action with the state regarding the value of the state's share of North Slope royalty.

The separate account was created during the legal process because the oil companies argued they couldn't get a fair trial in Alaska since judges and jurors were receiving permanent fund dividend payments. The companies argued that the size of those payments would be affected by the financial outcome of the legal action, thereby giving judges and jurors a direct benefit from rulings made against the companies. Removing the finances of the case from the dividend calculation satisfied those concerns. The final legal action ended in 1995. At the end of fiscal 2004, the account held $424.4 million, including interest earnings.

Again, the account has no connection to the dividend.

That's unimportant to critics of the governor, however. But he must have expected as much, having known from his experience earlier this year when he proposed using the Hess account to repay bonds that he wanted to issue for capital projects. He was probably standing around looking at his watch last week just waiting to see how long it would take for his opponents' knees to jerk after his municipal aid package was made public.

Alaskans should be open to spending the Amerada Hess funds without fear. This year's capital budget, approved by the Legislature a few months back, actually relies on some of the Hess money, though to a much lesser extent than what the governor first proposed.

What Alaskans shouldn't be open to is distortion about how the Hess account actually works.



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