Democrats demand protection for dividend

Posted: Friday, May 02, 2003

JUNEAU (AP) Democrats say they'll demand long-term protection for the permanent fund dividend in exchange for their votes to fund the coming year's budget.

They also want the Legislature to ensure there's a dividend this year.

Minority Democrats have leverage at the end of each legislative session because the state can't balance its budget without taking money from a state savings accounts the $1.9 billion constitutional budget reserve. Tapping that fund requires a three-quarters vote.

Democrats said Thursday they'll use that leverage this year to demand protection for permanent fund dividends.

Otherwise, they said, Republicans will eventually spend dividend money to close the state's chronic gap between revenue and spending.

I want to make sure for me, for my children, there's a dividend 10, 20, 30 years down the road,'' said Rep. Eric Croft, D-Anchorage.

Croft said long-term protection for the dividend most likely would require a constitutional amendment.

Some Republicans dismissed the proposal as political grandstanding.

Senate Majority Leader Ben Stevens, R-Anchorage, said he would not be willing to enshrine the dividend in the constitution because that might mean the state has to shortchange schools some years to pay dividends.

I don't support putting the dividend above K-12, above public education, public health, public safety and public transportation,'' Stevens said.

House Speaker Pete Kott, R-Eagle River, also opposes the idea. He has said creating the politically sacrosanct dividend was one of Alaska's worst mistakes.

Senate President Gene Therriault, R-North Pole, is not opposed to protecting dividends in the constitution. In fact, he has previously pushed a proposal that would have had that effect.

I was the one doing the work on it last year,'' Therriault said.

But he said there are problems with the idea it might threaten the fund's tax-exempt status, for instance and there isn't enough time remaining in the session to resolve those issues.

He believes the Democrats are making an unrealistic demand to score political points.

They seem to have latched onto this idea that they're the sole protectors of the permanent fund, and they're the sole protectors of the dividend, which I can certainly tell you is not a fact,'' Therriault said.

The Alaska Permanent Fund, created to save some of the state's oil wealth, is protected by the state constitution. Earnings from its investments pay dividends to Alaska residents each year, but that payment is not required by the constitution.

Democrats said the program has become an important part of the state's economy.

They said one reason they are demanding protection for the dividend is that they cannot effectively use their end-of-session budget vote to boost spending on education or other priorities as they have in the past.

That's because Republican Gov. Frank Murkowski could simply use his line-item veto that spending. Former Gov. Tony Knowles, a Democrat who served from 1994 to 2002, did not do that.

While the governor can veto bills and individual appropriations, he has no such power when it comes to constitutional amendments. They require a two-thirds vote of both houses of the Legislature, followed by a vote of the people.

Democrats say one measure that would satisfy their demand for long-term protection of dividends is House Joint Resolution 3, which would prevent legislators from changing the formula for calculating dividends without a vote of the people.

Another option is a constitutional amendment being debated in the House Ways and Means Committee that calls for an annual payout of 5 percent of the permanent fund's value.

Croft said that would protect the dividend if language were added calling for a percentage of that annual payout perhaps as high as 80 percent to go to dividends.

In addition to long-term protection, Democrats also want to ensure there is enough money to pay dividends this year.

A few months ago, the permanent fund's investment total was well below the amount needed to pay a full dividend, since the principal of the fund must be protected under a provision in the state constitution.

Currently, the fund holds enough for a full dividend for eligible Alaskans, estimated at about $1,200 each, with about $800 million to spare. But the fund value can fluctuate by $100 million or more in a single day, and a few bad days in the stock market could slim the fund back down by the time the distribution is calculated on June 30.

Democrats say if there isn't enough available from the permanent fund, the Legislature should take money from the constitutional budget reserve to pay a full dividend.

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