JUNEAU -- Facing tough budget choices, state leaders are looking at the Alaska Permanent Fund's billions as one solution.
That's not a new idea. Facing a choice between income, sales or oil taxes, or cuts that could hurt schools, rural communities and a host of local and state government services, the $52 billion Permanent Fund has been seen as fiscal solution before.
Former Gov. Frank Murkowski proposed treating the fund as an endowment, taking out 5 percent of the fund every year for spending. That 5 percent is called "percent of market value," or POMV.
His plan won some legislative support, passing the Alaska House before failing in the Senate. It never faced the voters.
A 1999 plan would have used a similar endowment model, but lost in a 5-to-1 landslide in an advisory election.
Among the opponents in the House to Murkowski's 2006 proposal were Mike Chenault, R-Nikiski, and Kevin Meyer, R-Anchorage. Those two are now the House speaker and Senate president. And the opposition crossed party lines, including Anchorage Mayor Ethan Berkowitz, then the House Democratic leader.
Now the idea of using the Permanent Fund is getting a new look from Gov. Bill Walker and others.
"There's a realistic expectation that the fund will now become an important part of government funding going forward," said Randy Hoffbeck, commissioner of the Department of Revenue.
POMV is a fairly standard method used by large endowments that want to sustain the principals of their funds but spend a stable sum every year. Under POMV, a set percentage is withdrawn from an endowment each year to be spent. It differs from the state's unique and complicated method of calculating and withdrawing money from the Permanent Fund set out in state law.
But the idea of taking a POMV approach to using the Permanent Fund hasn't gone away. Rep. Mike Hawker, R-Anchorage, one of its supporters then and now, has introduced POMV legislation this year.
In an interview with Alaska Dispatch News about his legislation during this year's session, Hawker said his current proposal would protect the Permanent Fund. In 2006, after having helped win approval in the House for using a POMV technique to tap the fund, he said his goal was to use some of the Permanent Fund to pay for state government.
"Alaska is the wealthiest state in the nation. We do not have to live in self-imposed poverty," he said in an interview at the time.
But critic Sen. Bill Wielechowski, D-Anchorage, said he's willing to learn more about POMV. But, he added, any plan that takes money out of the Permanent Fund would reduce dividends. During a recent meeting with seniors in his district, the proposal to take money out of the fund got panned.
"They were very vocal about protecting the Permanent Fund and the dividend, and I'm representing the people of my district," he said.
A POMV method might allow state leaders to withdraw more money from the Permanent Fund than the current statutory method. Legislators already have authority to spend Permanent Fund earnings, but haven't.
Exact amounts that might come from the fund would depend on legislative approval. The Alaska Constitution forbids spending any of the fund's principal. A POMV plan with a fixed rate of withdrawal could, in years of weak investment returns, result in taking some of the principal for the state budget, but that couldn't happen unless voters approved a constitutional amendment.
The current statutory dividend calculation only allows money to be taken from the earnings in the fund.
Those earnings include such things as profits made when a stock or other investment the fund owns goes up and is sold. Also part of the fund's earnings are interest payments on bonds, rents paid on office or other buildings owned by the fund and dividends paid by stocks.
Those profits make up the fund's earnings reserve from which Permanent Fund dividends are paid.
Dividends are calculated every year based on an average of five years' earnings, and have ranged from 1983's $331 to this year's $2,072. Several years of strong market returns mean there are now several billion dollars in the earning reserve.
As state officials watch several years of budget deficits erode the state's savings, they're again talking about using the Permanent Fund to help balance the budget.
Sen. Dennis Egan, D-Juneau, said that no matter what Walker proposes, any use of the Permanent Fund that would limit, cap or otherwise reduce dividends likely won't happen in the next legislative session.
"I think there's going to be a lot of discussion about that, but I don't think they're going to do it because it is an election year," he said.
Commissioner Hoffbeck has been talking up a proposal he's calling "synthetic POMV," which would manage the Permanent Fund as if it was under a percent-of-market-value structure.
That strategy, he said, would let legislators act to tap into the Permanent Fund under the authority they have now, but not ask voters immediately to amend the Alaska Constitution to make such use of the fund a fixture.
Because of good investment returns over the last few years, the earnings reserve has about $5.2 billion -- enough to pay dividends (this year's cost $1.4 billion) and fund state government as if a POMV structure were in place. All the Legislature needs to get that money out of the earnings reserve is a simple majority vote.
With oil on the decline and the state's investments growing, using the Permanent Fund is the future, Hoffbeck said.
"Investment earnings for the last couple of years have made substantially more than we've made in taxes and royalties on oil and gas," he said.
The "synthetic POMV" could build credibility for a constitutional amendment formally allowing an annual POMV withdrawal regardless of that year's earnings, Hoffbeck said.
"The idea is if we did that for two, three or five years that wouldn't deplete the fund, the dividends aren't going to disappear, and people might be willing to vote on a constitutional amendment to establish the full extent of POMV," Hoffbeck said.
It is not clear what percentage might be withdrawn from the fund on an annual basis, and Hoffbeck declined to provide additional details of what was under consideration.
Gov. Murkowski in 2006 proposed a 5 percent withdrawal, while in 1999, for the advisory vote, economist Gregg Erickson said the plan then called for a 5.88 percent withdrawal, which he called "dangerously high." Hawker has proposed a 4.5 percent withdrawal amount, while Hoffbeck has mentioned possible rates of 4 percent and 4.25 percent in recent discussions.
Newly named Permanent Fund Corp. Executive Director Angela Rodell said questions about the use of the fund for government operations were outside her role as the fund's manager. But she noted that the corporation's trustees have publicly endorsed POMV since 2000.
Public opinion polling this year suggests winning approval for spending the Permanent Fund will be difficult.
A poll commissioned by the House Majority earlier this year found 61 percent somewhat or strongly opposed to using money from dividends to pay for government, with only 36 percent in favor. But a Rasmuson Foundation-commissioned poll in August found more support for use of the Permanent Fund to close the budget shortfall than for sales taxes, reducing oil tax credits or instituting an income tax, the least popular revenue alternative.