Scalzi, Moses propose measures using permanent fund's earnings

Posted: Sunday, February 10, 2002

JUNEAU -- One of the most powerful legislators in the House, Finance Co-Chairman Eldon Mulder, is backing two bills to spend permanent fund earnings.

One bill would use a portion of permanent fund earnings to refill a reserve account that is used each year to balance the state budget. Rep. Drew Scalzi, R-Homer, introduced that bill Friday.

Mulder, an Anchorage Republican, has also signed on to a measure by Rep. Carl Moses, D-Unalaska, that would use permanent fund earnings to pay dividends to communities throughout the state. In exchange, the state would reduce the general fund money it sends to those communities.

Mulder said the Moses bill is the most likely of the two measures to become part of a long-term fiscal plan adopted by the House this year.

''I believe it is viable. I believe it can garner the support to get through the House this year,'' Mulder said.

Mulder has made no secret of his preference for using earnings of the permanent fund, Alaska's oil-wealth savings account, instead of taxes to close a budget gap.

The Moses and Scalzi bills are among a number of proposals -- including sales taxes and income taxes -- that legislators are mulling to plug the budget hole.

State officials estimate that to balance the budget, the state may need to pull close to $2 billion this year and next year from the Constitutional Budget Reserve, a state savings account. They project that fund will be drained by 2004.

Scalzi's bill calls for refilling that fund, called the CBR, once it drops below $1.5 billion. Scalzi's proposal would do that by pulling money from the permanent fund earnings reserve account.

The measure calls for continuing to inflation proof the permanent fund itself. But after that, any leftover money in the reserve account would automatically go first to keeping the CBR at $1.5 billion. Whatever had to go to the CBR would be subtracted from the permanent fund dividends all Alaskans receive.

''The permanent fund dividend check will obviously be affected by this, depending on how much other revenue would be available,'' Scalzi said.

However, if taxes or other income are sufficient to keep the state from pulling too much from the CBR, the dividend wouldn't be affected, he said.

The Moses bill would take about $89 million from the permanent fund earnings reserve and distribute it to communities to pay for police, fire, emergency medical services, road maintenance or other projects.

The Legislature would then cut $51 million in municipal pass-through programs that now come out of the state's general fund.

Moses said money would continue to be set aside to inflation proof the permanent fund and pay dividends.

The Permanent Fund Corp. estimates Moses' measure would not affect the size of dividends until 2010 and then would reduce them by $20 per person.

''It would have a minuscule effect on the dividend way downstream,'' Mulder said.

Because it affects dividends potentially much less than Scalzi's proposal, its chances of passage are better.

Moses' bill passed two House committees last year and now awaits a hearing in House Finance.

Scalzi's bill was referred to the State Affairs and Finance committees.



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