Senate panel gives permanent fund bill chilly reception

Posted: Thursday, May 09, 2002

JUNEAU (AP) -- The first clash between House and Senate leaders over using Alaska Permanent Fund earnings to close the state's budget deficit played out on Wednesday.

The Senate Judiciary Committee heard a proposal to split permanent fund earnings between government and dividends to help close an expected $963 million budget deficit next year.

Senate Judiciary Chairman Robin Taylor, R-Wrangell, said there wasn't enough support on his committee to pass the bill on Wednesday. A Republican on the Senate Finance Committee vowed that if the measure didn't die there, it would in his committee.

''I don't believe there is a majority on the committee that can or will support raiding the fund,'' Taylor said.

Alaska's fiscal straits has monopolized much of the debate this session in the House largely due to a group of Democrats and moderate Republicans who have been pushing the issue.

House lawmakers there have proposed the permanent fund bill along with a measure to impose an income tax on Alaskans. Lawmakers repealed the state's income tax in 1979 as oil riches began flowing into state coffers.

But North Slope oil -- which constitutes about 80 percent of the state's revenues -- has declined by half since its peak production of 2 million barrels in 1988.

Meanwhile, the state's Constitutional Budget Reserve of $2.4 billion is anticipated to run dry in October 2004. The Legislature has used that fund to make up for past budget shortfalls.

The state Department of Revenue estimates Alaska will have an $826 million shortfall this fiscal year that ends June 30 that will grow in the next fiscal year. The department estimates the state will have a $1 billion shortfall in 2004 if oil prices stay constant.

The permanent fund bill changes the way dividends are calculated, using 5 percent of the fund's market value to calculate the pool of money used.

It would split that pool of money 50-50 between government and dividends. In the first year, lawmakers would use $300 million and in 2003 they would use $657 million, under the bill.

Dividends would drop overall by about 12 percent under the plan, falling by about $24 for each eligible Alaskan in 2003 and $306 less in 2007.

Rep. Bill Hudson, R-Juneau, who testified in favor of the bill, said the state is on a collision course with deeper fiscal woes in the coming years and using some permanent fund revenues now will avoid a larger raid on the fund when the state's budget reserve is drained.

But Senate lawmakers have protested that the permanent fund should not be used and the Legislature should instead put a constitutional amendment before voters in November to limit state spending.

Sen. Jerry Ward, R-Anchorage, asked the Judiciary Committee to attach passage of the spending cap legislation to any deal with the House to close the gap. Ward predicted the measure would not move out of Senate Finance Committee.

Taylor chided lawmakers backing the plan for turning to the permanent fund and said many politicians were elected on promises of protecting dividends for Alaskans.

''I think the only way this bill will move is if there are some reasonable heads that prevail on the Senate side,'' Hudson said.


-- The permanent fund measure is House Bill 304.

-- The income tax measure is House Bill 303.

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