House OKs fund plan

Posted: Thursday, April 29, 2004

JUNEAU Three days of sometimes bitter debate ended in the House on Wednesday with lawmakers agreeing that it's time to spend part of the permanent fund for government.

After first agreeing to a constitutional amendment that changes the way the $28 billion Alaska Permanent Fund is calculated, lawmakers voted to dedicate half of its proceeds to state and local governments.

Those two measures along with a spending cap make up the balance of Gov. Frank Murkowski's plan to close the state's chronic budget shortfalls.

But the package depends on voters ratifying the two constitutional amendments in November. And they still face an uncertain future in the fractious Senate where lawmakers must muster a two-thirds vote that GOP leaders say doesn't exist.

Some Senate Republicans disagree with Murkowski on the need to balance state spending this year. Alaska has enjoyed near record high oil prices which provide more than 80 percent of the state general fund revenues and still has $2 billion left in the Constitutional Budget Reserve, they argue.

''Why would I go to the people's checkbook or dividend when I have $2 billion to go get,'' said Senate Finance Co-chair Gary Wilken, R-Fairbanks.

''We always seem to forget the CBR and we shouldn't.''

On the House side, a coalition of Republicans mostly from the Railbelt and Bush lawmakers approved a bill that would tap the permanent fund and preserve the state's reserve account for future downturns in oil prices.

In a 22-17 vote, lawmakers agreed to a measure that makes more than $650 million available for state and local government but pays a diminished dividend to eligible Alaskans.

Under the plan, dividends are estimated to increase by $120 in the first year but decline in at least each of the next 10 years, according to Alaska Permanent Fund Corp. estimates.

In fiscal year 2007, dividends are expected to be $360 lower than they would if the program was unchanged, according to the estimate.

That fact drew opposition from many House Democrats who complained bitterly that Murkowski's plan hits low-income Alaskans the hardest.

''Let's just be clear about this, we are adopting a tax. It's a dividend tax,'' said Rep. Les Gara, D-Anchorage. ''This tax is the most regressive of any tax you could come up with.''

Rep. Mike Hawker, R-Anchorage, argued that voters created the permanent fund in 1976 to help fund state government after Prudhoe Bay oil declines.

Today, the fund allows an ''almost social Utopia'' where earnings can be distributed to Alaskans to help fuel the economy and still help support government, Hawker said.

A panel of 55 Alaskans created by Murkowski earlier this year came to a similar conclusion when it recommended lawmakers use the permanent fund to help shore up its finances.

In 11 of the last 13 years, Alaska has relied on its budget reserve to fill budget deficits. The shortfall is expected to climb to about $785 million in fiscal 2007, according to the Department of Revenue.

But lawmakers have only considered using the permanent fund in past years instead turning to budget cuts and a host of smaller taxes but have never taken the politically toxic step of tapping it.

But the public's attitude has changed and Alaskans seem more supportive of using the permanent fund for government, Owens said.

''If we lived anywhere else in the country, we would pay either a sales or income tax and wouldn't be getting any money from the state government,'' Owens said.

Earlier, six Democratic lawmakers joined with Republicans to narrowly approve a constitutional amendment that changes the way the permanent fund is calculated.

That so-called ''Percent of Market Value'' measure allows the state to spend up to 5 percent of the fund's five-year average each year.

Unless voters approve the POMV constitutional amendment, the spending bill House lawmakers approved Wednesday won't go into effect.

Angoon Rep. Albert Kookesh and Rep. Richard Foster, a Democrat from Nome allied with the GOP caucus, cast the only Democratic votes on Wednesday.

Also supporting the plan were Anchorage Republican Reps. Hawker, Tom Anderson, Cheryll Heinze, Bob Lynn, Lesil McGuire, Kevin Meyer, Norman Rokeberg, Ralph Samuels; House Speaker Pete Kott, of Eagle River; and Carl Gatto of Palmer.

Interior Republicans John Coghill of North Pole; Hugh ''Bud'' Fate, Jim Holm and Nick Stepovich, of Fairbanks; also voted for it.

Reps. Bill Williams, R-Saxman, Peggy Wilson, R-Wrangell, Bruce Weyhrauch, R-Juneau, Carl Morgan, R-Aniak, Paul Seaton, R-Homer and Dan Ogg, R-Kodiak, also voted yes.

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