JUNEAU (AP) -- Alaska's Permanent Fund could easily sustain a plan to use $89 million for local services that are now supported by state coffers, a fund official said Wednesday.
Surplus earnings from the $21 billion fund could support the state's current contribution to local police, fire, emergency medical services, road maintenance and other projects, said Jim Kelly, Permanent Fund spokesman.
Kelly said the fund's earnings reserve account -- which is in excess of $2 billion -- could absorb between $175 million and $300 million for such programs and still pay dividends and be inflation-proofed.
''Whenever you decide to tap it for whatever you want, it's there,'' Kelly said.
Kelly testified before the House Finance Committee, which is considering a bill to replace $51 million in state general fund spending to local communities with Permanent Fund surpluses.
The bill is seen by many lawmakers as an important element in an overall plan to close the state's budget deficit through new taxes and cuts in state spending.
''In my view this is a part, it's a small part, but it's a part of solving that puzzle,'' said House Finance Co-Chairman Eldon Mulder, R-Anchorage.
House Bill 20 would also contribute to village public safety officer programs and some local capital matching grants. Local communities could also use up to 55 percent of the fire and EMT funding for education.
Rep. Carl Moses, R-Unalaska, is sponsoring the measure. It's got the backing of the Alaska Municipal League, which has made the community dividend program among its top priorities this year.
Municipal League Executive Director Kevin Ritchie said former Govs Walter J. Hickel and Jay Hammond have also spoken in favor of such funding.
It would apply to boroughs, municipalities and about 70 unorganized communities that don't have boroughs, said Moses' aide Tim Benintendi, who testified on behalf of the bill.
Communities would receive funds from a formula that's based on population and other factors. If the earnings reserve account could not pay for all the programs, communities would receive assistance on a prorated basis.
Permanent Fund officials estimate it would reduce dividends by $20 per person in 2010. The bill is expected to have no effect on dividends prior to that, officials said.
Moses said in a sponsor's statement that the bill would not need voter approval. But Jack Kreinheder, of the state office of Management and Budget, disagreed.
Kreinheder also said the plan could create problems if the Legislature enacts a Senate proposal to cap state spending at 2 percent a year. He said under that spending cap plan, half of the allowable growth in state spending would be exhausted through this bill.
The bill was not acted on in committee Wednesday. Finance Co-Chairman Bill Williams, R-Saxman, said he plans to bring it up again on Monday and Wednesday to consider amendments.
No committee member spoke in opposition to the bill, but several debated over whether it should be approved as part of an overall deficit reduction plan.
Rep. Eric Croft, D-Anchorage, said he wanted the measure to take effect when the state enacts new taxes to close a budget deficit that's projected to grow to $1.1 billion next year.
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