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Senate OKs Permanent Fund bill, saying Alaska needs to reduce dividends to save them

JUNEAU – The Alaska Senate late Monday passed legislation converting the Permanent Fund into an endowment and setting dividends at $1,000, a move designed to help reduce the state's $4 billion budget gap.

The 14-5 vote, which supporters described as a necessary step to head off a financial collapse, came quickly after months of discussion and debate about Senate Bill 128. The vote came about 8:30 p.m. on the same day the bill emerged from the Senate Finance Committee.

The legislation still must pass a more skeptical House before it could head to Gov. Bill Walker for his signature. And a House vote is unlikely to come before next week, with lawmakers taking a five-day break from Juneau starting Wednesday, with most of the city's hotel rooms booked for a festival of Alaska Native culture.

Senators who voted yes Monday were Lyman Hoffman, D-Bethel; Pete Kelly, R-Fairbanks; Anna MacKinnon, R-Eagle River; Lesil McGuire, R-Anchorage; Peter Micciche, R-Soldotna; Donny Olson, D-Golovin; Bert Stedman, R-Sitka; Gary Stevens, R-Kodiak; Click Bishop, R-Fairbanks; John Coghill, R-North Pole; Mia Costello, R-Anchorage; Dennis Egan, D-Juneau; Cathy Giessel, R-Anchorage; and Kevin Meyer, R-Anchorage.

Opposed were Bill Wielechowski, D-Anchorage; Berta Gardner, D-Anchorage; Johnny Ellis, D-Anchorage; Bill Stoltze, R-Chugiak; and Mike Dunleavy, R-Wasilla.

SB 128, the centerpiece of a deficit-reduction plan proposed by Walker but subsequently modified by the Legislature, allows lawmakers to spend annually about 5 percent of the Permanent Fund's total value, with smaller draws on the fund when the state's oil revenues are higher.

The legislation also sets residents' dividend checks at $1,000 for each of the next three years.

That's down sharply from last year's $2,078. But senators who voted for the bill, and Walker, say that a quick move to restructure the $54 billion Permanent Fund is the only way to prevent lawmakers from making emergency withdrawals from the fund as soon as next year — which could ultimately lead to the elimination of the dividend program altogether.

"Tonight, the Senate took the bold step to address our fiscal challenge," MacKinnon, the co-chair of the Finance Committee, was quoted as saying in a prepared statement late Tuesday. "SB 128 preserves Alaskans' dividend while providing a sustainable revenue stream to fund those services Alaskans count on every day. This was an historic vote — one I was compelled to take — for Alaska's future."

In his own prepared statement, Walker praised the vote as a "bold step" that sets the state "on the path for a sustainable future."

Senate minority Democrats criticized the move, saying Republican leaders in both the House and Senate hadn't proposed steep enough reductions to cash subsidies for oil companies to justify reducing Alaskans' dividends.

SB 128 now heads to the House, where it faces a wary 11-member Finance Committee.

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