Are PFD days numbered?

Fund tops $40 billion; state lawmakers debate its uses

Posted: Wednesday, August 01, 2007

Alaska's Permanent Fund, which recently topped $40 billion, has been the source of significant dividends for state residents since the early 1980s and become something of a sacred cow, politically off limits to legislators trying to balance annual state budgets.

That may soon begin to change.

As the fund grows, pressure at the state level will continue to build to begin spending what many saw at its creation as a rainy-day account meant to help cover the rising costs of state responsibilities.

Meanwhile, with the state's reputation suffering from the "bridge to nowhere" flap, at least some congressional support for appropriations to Alaska could drain away.

Atop that, no one knows what political fallout may result from the ongoing federal corruption probe begun last year at the state level that has since grown to include investigations of influential members of Alaska's Congressional delegation - Sen. Ted Stevens and Rep. Don Young. Should the probe lead to provable allegations against the two, the flow of federal dollars on which the state has learned to depend could be severely impacted.

Eyeing all of that, state lawmakers from the Kenai Peninsula agreed this week that calls for spending permanent fund earnings, if not its corpus, have not yet reached the critical level necessary to open the account to legislative dipping in any significant way.

Sen. Majority Leader Gary Stevens (no relation to Ted Stevens) said in Homer last week that he did not see any move to spend the fund over the next year or two, but further out sentiments could change.

"We've just celebrated it reaching $40 billion. In a few more years, it will hit $50 billion," Stevens noted. "In another 10 years or so, it could reach $100 billion."

When it does and dividends start exceeding $2,000, people may view the fund differently.

"At some point, the public has to decide whether to leave it there or make some other kind of use of it," he said.

That decision may not be entirely up to state residents, said Rep. Mike Chenault, R-Nikiski. As the permanent fund grows, he said, the federal government will start asking pointed questions, like whether Alaska has enough of its own money and why isn't it spending it.

"They certainly have to be looking at $40 billion and wondering why they are giving us money," he said.

With oil prices hovering above $70 a barrel, however, the day the state Legislature starts tapping the fund is a ways off, Chenault predicted. On the other hand, declining Prudhoe Bay production will be an important factor in any decision regarding use of the fund.

Sen. Tom Wagoner, R-Kenai, agreed that state lawmakers are not yet ready to start spending the fund. But if the level of federal appropriations falls, state lawmakers could face some really tough decisions.

And with the federal probe into possible corruption at the state level broadening to include Alaska's congressional delegation, that is becoming a real possibility.

"If we ever lose the representation (in Congress) we have now and the ability to get money into the state, the difference between the permanent fund income and the money from the congressional delegation will be pretty great.

"The permanent fund won't take care of all things for all people," Wagoner said.

The investigation launched in Alaska by the FBI last summer already has resulted in bribery indictments against three state lawmakers and guilty pleas from two former VECO Corp. executives who are now cooperating with federal investigators. A fourth state lawmaker has already been convicted of taking bribes, though not from VECO.

On Monday, federal investigators searched Ted Stevens' Girdwood home, reportedly in connection with an expensive remodeling done there in 2000 reportedly overseen by VECO executives.

Congressional watchdog groups have called on Stevens to step down from any senate committees on which he serves that oversee appropriations.

Meanwhile, Ted Stevens' son, former state senator Ben Stevens, also is under investigation in connection to VECO, and reportedly so is Rep. Don Young. Neither has been charged with anything.

Also broad brushing the Alaska delegation was an ethics complaint filed last week against Sen. Lisa Murkowski over a Kenai River land deal with real estate developer Bob Penney.

Murkowski has said she would sell the land back saying the land was not worth compromising the trust of the Alaskan people.

Deserved or not, given the rising political trouble Stevens and Young are facing, their long-successful argument that Alaska is a young state in need of and deserving of federal largess may start falling on deaf ears.

Wagoner said he was not going to rush to judgment on any of the unresolved issues in the federal probe.

"I'm pulling for Ted," he said. "I don't know that he's done anything wrong. And Don Young, I don't know what involvement he may have with VECO. We'll have to wait and see how it all plays out."

Wagoner said he was more concerned at this point with the probe at the local level than at the federal level.

"As far as this corruption probe goes, I don't think it's done yet," he said.

If the appropriations pipeline out of Washington, D.C., dries up, the permanent fund could start looking a lot more inviting, the peninsula's delegation agreed.

"I guess it depends on what happens with the federal delegation and the money they bring us. That's a big if," Chenault said.

"And if we don't change our spending habits, it (use of the fund) will be something we have to look at in the future."

Hal Spence can be reached at hspence@ptialaska.net



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