Legislature's failure to act disappointing, though not surprising

The Legislature has adjourned once again without taking action on a long-term solution to the state's fiscal gap.

That was disappointing, if unsurprising. Few legislators wanted to tackle the issue in an election year, especially since increasing state revenues, boosted by high crude oil prices, have pushed back the urgency of the fiscal dilemma for the time being.

Though legislators did pass a phased-in $1-per-pack cigarette tax, their brief special session was disappointing because they failed to approve a ballot measure that would convert the Alaska Permanent Fund to an endowment and mandate using a percent-of-market-value method for determining payouts.

That measure, called POMV, would have limited draws on the fund to 5 percent of its total value. It would have made inflation-proofing of the fund automatic.

POMV would also have protected the fund from potential raids by the Legislature in years when the earnings account is fat. And it would encourage fund trustees to retain good investments and reduce the temptation to sell them just to replenish the earnings pool and make money available for state use.

By law only realized earnings can be used for public spending, including dividends. That means investments must be sold or cashed in before their gains can be counted as real earnings and moved to the earnings account.

Since the best use of good investments is often to hold onto them and let them grow, the existing system creates motivation for the fund trustees to unload investments they might prefer to keep in their portfolio.

By itself, POMV is a good idea and probably not controversial. But the issue was fatally complicated by argument over how the 5 percent would be used. The quarrels were over how much of that money would go for dividends and how much for state expenses.

Gov. Frank Murkowski wanted the POMV issue on the ballot this November. That now seems impossible and that's the bad news.

The good news is that Murkowski and the Legislature have helped move the issue to center stage in Alaska politics and increased public understanding.

That could lay the groundwork for future resolution of the fiscal gap and for use of a portion of permanent fund earnings to pay state expenses. In the past, using earnings for anything but dividends has not been necessary because the Constitutional Budget Reserve has filled the gap each year, but the bottom of that cash pool is in sight.

Closing the fiscal gap and paving the way for a stable financial future has been a high priority for many state leaders for many years. Solving the problem has taken a long time, too long.

Let's hope it's getting closer.

The Voice of the Times

June 26