Politics

Legislators want to study Walker's Permanent Fund plan but say it has merit

JUNEAU -- Lawmakers are saying it may take time for both them and the general public to digest Gov. Bill Walker's proposal to shift the focus of the Alaska Permanent Fund from paying dividends to using it to pay for some state operations.

But several said the first-year governor appears to be on the right track, and the Alaska Legislature may not have any choice but to do some version of what he's proposing.

"I think it's a concept worth exploring, and it uses our wealth in a way we haven't used it before," said Sen. Anna MacKinnon, R-Eagle River.

But moving the Permanent Fund's priority to funding government instead of paying dividends is likely to be a difficult sell to the public, said Sen. Johnny Ellis, D-Anchorage.

"There's always a healthy skepticism when it comes to politicians and the fund," he said.

Rep. Tammie Wilson, R-North Pole, doubted the public would support a plan that might have dividends of around $1,000, when the dividend this year was more than $2,000, at least not without more persuasion.

"Doing anything with the Permanent Fund and not bring in the public so that they can completely understand it is a big mistake," she said

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The endowment model that Walker is proposing is something that's been discussed by legislators already, either as a percent of market value withdrawal mechanism or some similar method.

Senate President Kevin Meyer, R-Anchorage, pointed out that Sen. Lesil McGuire, R-Anchorage, last year proposed Senate Bill 114 to go to an endowment model in which additional oil revenues would be deposited in the Permanent Fund. But her proposal called for dividends closer to current amounts, which Meyer said might be more palatable to the public.

"Walker's plan has the dividend at $1,000, but with Senate Bill 114 the dividend stays pretty close to what it is now, and that's why I like it," Meyer said.

And the public is likely going to have to see more cuts before it will support use of the Permanent Fund, he said.

"The public is uncomfortable with using the Permanent Fund for government, we know that," said Rep. Charisse Millett, R-Anchorage, and House Majority leader, after reading public comments on Walker's proposal.

She also said she's not supportive, at least not yet, of putting more oil revenues directly into the Permanent Fund, as Walker proposed Wednesday.

But she praised Walker for what he was trying to deal with with the budget crisis that led to Tuesday's proposals.

"I'm glad the governor is thinking about that, it shows leadership," she said.

Sen. Peter Micciche, R-Soldotna, said there might be a good reason to use Permanent Fund money to fund government, especially if it was instead of taxes. He said the federal government collected $350 million in income taxes from Alaskans' dividends last year.

"If we get to a point where we are going to be taxing Alaskans, we want to make sure are legacy assets are being used as efficiently as possible," he said.

"You want a system where you are adversely affecting Alaskans as little as possible, and this model does that," Micciche said after listening to Attorney General Craig Richards present the plan.

Sen. Donny Olson, D-Golovin, also praised what the Walker administration was trying to do with funding government from the Permanent Fund and using oil revenues for dividends, without endorsing it.

"I think it's a novel approach, and I'm glad they are starting to do things like that," he said.

The endowment model would smooth out damaging swings in state revenues he said.

"With what we've got now we're doomed to have these boom-and-bust cycles" linked to oil prices, he said.

But he expressed doubts about whether the entire plan could be implemented in the next session.

"Right now we're having a hard enough time trying to get things done related to something straightforward like the buyout of TransCanada," he said.

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Another part of Richards' presentation raised a number of concerns, when he referred to the possible use of borrowing, such as pension obligation bonds or capital project bonds to help close the budget gap.

"It's like putting your bills on a credit card, at some point you have to pay," Millett said.

"That debt thing really does worry us," Meyer agreed. "We stopped doing school debt reimbursement because we were taking on too much debt; it may make it difficult to finance a gas line," he said.

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