Legislature should do right thing, act to close budget gap

Posted: Tuesday, May 04, 2004

With the May 11 end of the legislative session looming, and with the odds looking long for a legislative solution to the state's chronic budget gap, Gov. Frank Murkowski has hit the road to win public approval for his fiscal plan.

Murkowski wants a constitutional amendment that would allow permanent fund earnings, this year in the $1.4 billion range, to be used for annual dividends for Alaskans and government operations. If passed by a two-thirds majority of the Legislature, the plan could be on this year's general election ballot.

The governor is facing balking Democrats who shortsightedly want higher taxes on the oil industry and everybody else and dissenting Republican members of the Senate who fear that voters will reject the plan, slamming the door on the use of fund earnings for years to come.

To deal with those problems, Murkowski is traveling around the state to put out the details of his proposal to the public. He's hoping lawmakers will feel pressured to act.

The governor has lobbied business leaders and others in Juneau, Anchorage and Fairbanks to win support for his plan. News accounts indicate he has found receptive audiences. A recent poll indicates a majority of Alaskans want a fiscal plan this year.

Murkowski's proposal would change the management of the fund to a percent-of-market-value approach. There are several variations of the POMV under discussion in Juneau. Generally, they would take up to 5 percent of the fund's five-year average value and use that amount for dividends and some form government spending, most likely education.

Some of the POMV plans have added protections for the fund's corpus in bad years. Others rely the pure POMV approach that depends on the fund's long-term growth. The POMV method was suggested by the fund's trustees and is in use by some of the largest funds in the nation.

The net result of adopting a POMV approach would be about $600 million of the fund's earnings being used for government and about $600 million for dividends that would be larger than those expected this year and next. Over the years, the dividends are expected to be more than $1,000.

The choices are few. Devastating cuts to government that could topple the state into a severe recession are not the answer, Murkowski says, and neither are the onerous taxes that would be necessary to balance the budget. But both, he says, are the only alternatives if a fiscal plan such as his is not adopted by the Legislature.

Skyrocketing oil prices have dulled the sense of urgency somewhat, with the fiscal gap this year expected to be $90 million, but that is a poor reason not to act. The gap could widen tomorrow.

The governor has the right idea. We hope his road show succeeds. We hope the Legislature can do what is necessary.

The Voice of the (Anchorage) Times

April 27

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