House votes to move $250 million to fund principal

Posted: Thursday, April 13, 2000

JUNEAU (AP) -- The House voted Wednesday to move $250 million of Alaska Permanent Fund earnings into the principal of the $27 billion oil-royalty savings account.

The shift would not change the size of the fund's annual dividend, but because the principal is protected by the state constitution, lawmakers could never spend the money. Over the years, virtually all of the fund's earnings that were not paid out as dividends have been moved into the principal.

Rep. Ramona Barnes, R-Anchorage, said lawmakers need to reassure the public after last year's lopsided voted against a plan to use some of the earnings to balance the state's budget.

''After the 84 percent of the people said 'No, we don't trust you,' we should in fact do something to show good faith to the people,'' said Barnes.

Moving the money could provide political cover for lawmakers whose vote for last year's plan may become issues in tough re-election fights this year. Barnes retained her seat by 72 votes two years ago.

''It would not surprise me to see this piece of legislation figure prominently in legislative campaigns,'' said House Minority Leader Ethan Berkowitz, D-Anchorage, who voted for the transfer.

However, the shift would leave about $2.6 billion in the fund's earnings reserve, which could theoretically be spent by a simple majority vote of the Legislature. When this year's earnings are deposited this summer, the amount could grow to more than $4 billion. Several lawmakers expressed doubt that voters would be reassured by a mere $250 million.

''We cannot purchase the public's trust,'' said Rep. Gene Therriault, R-North Pole, who called mistrust of politicians ''a public sport. It's expected.''

Barnes had proposed a larger deposit, but the House Finance Committee reduced it to protect the dividend from a sharp drop in the fund's value.

By law, about half of the fund's average earnings over the past five years is paid out every year in dividends. But the same law prohibits paying out more than half of the earnings reserve, even if the average calls for a higher amount.

''It could be significant, it could drop from $2,000 to $300,'' said Rep. John Davies, D-Fairbanks. ''I think there would be some questions from constituents about that.''

Davies said the Alaska Permanent Fund Corp. has recommended keeping a cushion of between $6 billion and $10 billion in the earnings reserve.

The fund paid dividends of $1,740 last year.

The bill passed 30-10. Seven Democrats and three Republicans opposed it. Four of those voting no -- Davies, Gary Davis, R-Soldotna; Bill Hudson, R-Juneau; and Gail Phillips, R-Homer -- are pushing plans to use some of the earnings to help balance the budget.

Retiring Rep. Ben Grussendorf called the transfer paltry by comparison to big deposits made when oil money flowed freely in the early 1980s. Grussendorf, D-Sitka, also voted no, saying he wasn't facing another election and didn't want to hamper future lawmakers.

''I don't want to do anything that will handicap you budget builders, you schemers and dreamers,'' Grussendorf said.

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