$25,000 dividend gets first hearing

Posted: Thursday, March 02, 2000

JUNEAU (AP) -- The sponsors of a plan to hand out a $25,000 dividend next year and then dedicate the Permanent Fund's earnings to the state budget pitched the idea to a House committee Wednesday as the only practical way out of the state's financial problems.

But the plan proposed by Senate Majority Leader Jerry Mackie drew questions from dubious House Judiciary Committee members, reflecting the Legislature's generally cool reception to the idea.

Mackie and Rep. Gary Davis, who introduced an identical constitutional amendment in the House, contend paying out half of the $27 billion fund's value is the only way to get the public to allow the Legislature to spend the fund's earnings.

That income is now used almost exclusively to pay the dividend and inflation-proof the fund's principal. Under the plan the dividend would be eliminated and the smaller fund would be used to balance the budget.

''This plan does three things,'' said Mackie, R-Craig. ''It balances the budget, it requires a vote of the people and there are no new taxes.''

Opponents of the plan contend it would superheat the economy, squander the state's assets, and shortchange future generations.

''I think the public sentiment right now is totally in opposition,'' said Rep. Pete Kott, the chairman of the committee. ''They don't trust us.''

Kott, R-Eagle River, said he doubts the plan has the votes to clear his committee, much less pass both houses of the Legislature with the required two-thirds majorities required to put it on the November ballot.

However, Mackie contends lawmakers will soon be forced to spend money from the permanent fund in any case.

Alaskans pay no income tax and no state sales tax while receiving a yearly check from the fund. Over the past few years, declining oil production has caused a gap between the state's spending and its other revenue. Filling that gap is expected to exhaust the smaller Constitutional Budget Reserve within the next few years.

Meanwhile, the Republican-controlled Legislature opposes new taxes, and voters last year rejected a plan to reduce the dividend and use half the Permanent Fund's earnings to balance the budget. A few days later the fund paid a record dividend of $1,769.84.

Mackie dismissed the results of two polls that indicated public opposition to the plan just after it was introduced in January. About 60 percent of people surveyed in both polls opposed the idea, but Mackie contends the results indicated uncertainty more than opposition.

''Are you better off having 15 years of dividends right now up front, or do you trust the Legislature'' not to reduce the dividend in the future, Mackie asked. ''It's in people's best interest to take the money now.''

Mackie reeled off a list of answers to early concerns about the plan, noting that people who depend on welfare, Medicaid and public housing would not be disqualified by receiving the check, although they might choose to leave those programs voluntarily.

''The reason people are poor is because they don't have any money,'' Mackie said.

People on food stamps would remain eligible for four months, Mackie said. If they still had the money after that period, they would lose eligibility.

Meanwhile, the state would recover millions in bad debt from the big payout.

The Department of Revenue estimates that 7,500 of 11,000 back child support cases would be eliminated. All told, $103 million would to flow families that are often financially strapped by lack of support from deadbeat parent, Mackie said.

Of 10,100 defaulted student loans, the state could completely wipe out 9,000 and recover a total of $67 million, Mackie estimated.

The dividends of 3,500 convicted felons, which are confiscated by law, would bring another $87.5 million into the state treasury, Mackie said.

But as soon as Mackie finished his presentation, the questions began.

''Won't this have a tremendous tendency to overheat the economy,'' Rep. Joe Green, R-Anchorage, asked.

Mackie said the plan's effect on the economy wasn't clear, and predicted that many people would use the money to buy houses, or invest for retirement or the education of their children.

''There'll probably be some overheated mutual funds around the country,'' said Davis, R-Soldotna.

Green also expressed concern that the plan would bring in scam artists, and suggested changing the plan to ''try and build a fence to try and keep the scumbags from coming up to bleed these people.''

Mackie and Davis both seemed uncomfortable with limiting how the money was spent.

''How much baby-sitting do you want to do with the citizens?'' Davis asked ''If they piddle it away, they piddle it away.''

The committee did not vote on amendment on Wednesday, although Kott said he planned to hold another hearing. If it passes out, the bill would go to the House Finance Committee and then to the floor, where 27 votes would be required to pass it.

Mackie said he has not yet asked for a hearing on the amendment in the Senate Finance Committee. To pass the Senate, the measure needs 14 of 20 votes.

Senate President Drue Pearce stopped short of declaring the plan dead, but added: ''He certainly doesn't have 14 votes right now.''



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