It's encouraging to see that some legislators are giving serious consideration to a constitutional amendment that would protect permanent fund dividends and open the way for using a portion of fund earnings for state expenses.
Rep. Mike Hawker, an Anchorage Republican and co-chairman of the House Ways and Means Committee, told the Anchorage Chamber of Commerce on Monday that the time is ripe for such a change.
It is indeed, since the change could now be phased in with minimal impact on individual dividend checks. At the same time it would put the permanent fund back on track for its original purpose funding the future cost of state government. The change could be accomplished by adopting a recommendation of the permanent fund board to use 5 percent of the total market value of the fund as earnings available for state use.
If the amendment were passed in the next legislative session and adopted in the 2004 statewide election, it could presumably become effective in 2005. And if half of that 5 percent were used for individual dividend checks and half for state expenses, the 2005 checks would be slightly larger than the $1,010 expected that year under the existing formula.
And perhaps more importantly, the change would free up about $625 million for state expenses. That would put a serious dent in the state's fiscal gap, making the balance more manageable with revenues from economic growth and reduced spending.
Critics of the plan maintain that the public would not accept such a change since dividend checks would otherwise be larger in the future. But unless a portion of earnings are used to fund essential government services, the public will almost certainly be facing an income tax or statewide sales tax.
Such taxes would almost certainly be more painful than phasing in the percent of market value approach at a time when dividends will be about the same as they would under the old system.
Paying larger dividend checks and then taxing them back and more would be a transfer of wealth that would convert the dividend program into a socialist form of welfare.
The Alaska Permanent Fund is a public asset. It is well-managed and wisely invested to produce a consistent return and continuing growth.
Making the change advanced by Hawker and others would enable the state to keep large dividend checks flowing while using a portion of earnings to pay the legitimate cost of state government.
The Voice of the (Anchorage) Times
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