Delegates want dividends kept safe

Measure to spend some fund earnings on state services also passes

Posted: Friday, February 13, 2004

FAIRBANKS Delegates to the Conference of Alaskans recommended spending some Alaska Permanent Fund earnings for state services, but not without strong protection for the dividend.

Delegates voted Thursday in favor of an amendment to the state constitution that would protect the dividend checks that go out each year to state residents.

The measure if approved by voters would remove from the Legislature the power to decide how a significant part of permanent fund earnings are spent.

''I feel this money is not the same as general fund money,'' said former state Sen. Clem Tillion of Halibut Cove. ''This was set aside by the people. It belongs to them.''

''What we would do is enshrine the only widely recognized thing Alaskans have done right since statehood, fiscally,'' said Byron Mallott of Yakutat.

The 55 delegates making up the conference were invited to the University of Alaska Fairbanks this week to advise Gov. Frank Murkowski on four questions.

Besides protecting dividends, delegates Thursday approved resolutions to:

Back spending part of permanent fund earnings on essential state services. The measure was passed with the understanding that the Legislature at the same time would consider other sources of revenue, including a personal income tax and other broad-based taxes.

Urge the Legislature to let Alaskans vote on the Percent of Market Value Plan, allowing up to 5 percent of the market value of the permanent fund to be spent annually rather than only fund earnings. The change would put inflation-proofing of the fund into the constitution and allow spending flexibility in times of low or no earnings.

Maintain a minimum balance in the Constitutional Budget Reserve to stabilize state finances against the fluctuation in oil production or prices and provide a cash flow reserve to the state treasury. The reserve is the state bank account used to fill the gap between earnings and state spending.

Delegates met for three days at the University of Alaska Fairbanks and also approved a letter to Alaskans laying out their reasons for the actions taken. The letter stresses that Alaska faces a fiscal crisis and that state spending is inadequate to satisfy needs for education, public protection and other necessary services.

The vote to protect dividends with a constitutional amendment came over the strong objections of state Sen. Ben Stevens, R-Anchorage, a nonvoting delegate to the conference. He vowed to oppose the measure on the Senate floor and at the ballot box.

The constitution dedicates revenue to no other issue, Stevens said. The amendment proposed would place a higher priority on dividends than education, public safety, roads, courts, infant learning or safe water in villages.

''It puts dividends above you name it,'' Stevens said.

Putting the dividends in the constitution would tell bond rating companies and Congress that, ''We have money. We're going to pay ourselves first,'' he said.

Delegate Lupe Chavez, director of women's health programs at the YWCA of Anchorage, agreed.

''It's saying that it's me, me, me,'' Chavez said. ''First, give me my dividend so I can put it in my pocket. I don't care what's going on. I don't care that we don't have strong schools. I think that's the wrong message.''

But other delegates said their hometowns had sent them off with a strong message to protect the permanent fund and dividends.

Support for spending permanent fund earnings for state government only would fly with assurances that dividends would not evaporate, some delegates said.

''Without passing this, we're just sanctifying a raid on the permanent fund,'' Tillion said.

Without protection of the dividend, other parts of a fiscal plan such as the switch to the percent of market value plan would be jeopardized, said Anchorage school superintendent Carol Comeau.

''It's good public policy to protect a reasonable portion of funds for a dividend when the money is coming from the people's account,'' said Ketchikan Mayor Bob Weinstein.

Delegates backed spending some fund earnings on state services with the caveat that dividends must be paid out first and that the governor and the Legislature ''take action to balance the state's revenues and expenditures'' by considering a personal income tax, other taxes and other sources of revenue.

On Wednesday, 69 percent of the delegates said they supported an income tax and they resisted efforts to drop that reference. Former state Sen. Steve Frank of Fairbanks urged them to do so.

''We haven't spent any time discussing the pros and cons of various other revenue sources,'' Frank said.

Backing an income tax could be out of touch with what the general public wanted, he said, and the conference could be labeled a gathering of the ''tax and spend elite.''

Fairbanks businesswoman Margaret Russell said the conference had received plenty of information on the permanent fund but not enough on the ramifications of an income tax.

''I don't think that we have had the time or the comprehensive data to make a clear determination on income tax,'' Russell said.

Delegate Clark Gruening of Juneau said deleting the income tax reference would be backtracking on a strong position taken Wednesday. Stan Stephens of Valdez said most delegates had indicated that the state needs extra money to pay for schools and other declining services.

''I think we need to take money out of the (permanent fund) program, but to add money to it through an income tax, or something similar,'' Stephens said.

Conference chairman Mike Burns of Anchorage said delegates got a lot done in three days.

''I hope their voices were loud enough, strong enough and clear enough that the Legislature will listen,'' Burns said. ''We were trying to break a logjam, not add on more logs.''

Murkowski in a statement from Juneau called the conference a success.

''It focused attention and created an opportunity for dialogue on important questions for Alaska's future,'' he said.

Murkowski said he would forward the conference report to the Legislature. Legislation he proposes, however, would be limited to the four issues he asked the conference to debate, Murkowski said.

Income and other taxes was not among the four topics.

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