Governor's budget plan picked apart as Alaskans debate Permanent Fund changes

Gov. Bill Walker's proposal that would change how the Permanent Fund dividend is paid in order to help fix the state's massive budget deficit had few supporters on Thursday when it faced public comment for the first time in a legislative committee.

"This is basically asking for Alaskans to hand over the keys to this multibillion-dollar Permanent Fund lockbox," said speaker Pam Goode. "If you guys can pull this off without being tarred and feathered, I will congratulate you for pulling off the biggest crime of the century."

"I request it be tabled as unconstitutional because it is the most costly, offensive and incompassionate source of revenue among those proposed," said Tom Lakosh, speaking at the Anchorage Legislative Information Office. "It is the most regressive tax we could possibly institute."

Senate Bill 128, sitting in the Senate State Affairs Committee that organized the statewide hearing, is the centerpiece of Walker's fiscal plan to close the $3.8 billion budget hole caused primarily by low oil prices.

If the plan is approved by lawmakers, future dividend checks would come from oil revenues, instead of the current approach of using investment earnings from the $49 billion Permanent Fund. The fund's principal would be strengthened with additional revenues, and earnings would then help generate $3.3 billion annually to pay for government.

The dividends issued to nearly all Alaskans each October would immediately fall, dropping from above $2,000 in the coming years to $1,000 and below, based on estimates. But supporters have said it would help stabilize the economy and ensure that dividends would continue to be paid annually to all Alaskans.

More than 200 Alaskans submitted written testimony, and another 106 people signed up to speak Thursday night. About 20 people showed up to speak at the Legislative Information Office in Anchorage.

Lauren Blanchett, who owns small clothing stores in Anchorage and employs a dozen people, urged lawmakers to use the fund.

"Use the Permanent Fund to fund state government as one tool available to you in the toolbox," she said. "I want to raise my three children in a community that funds it educational and health care systems."

Dave Hanson of Anchorage said he supports a cap on the dividend of $1,000, pointing out that it has averaged $1,150 for its 34-year life.

"This would not be the end of the world," he said.

Many pressed for large cuts to sharply reduce the budget before the Permanent Fund is touched or new taxes are created. Others called for a sunset clause on any effort to tap the fund, in case oil prices unexpectedly shoot up and the state's fortunes improve.

Dave Glenn, a small-business owner from Wasilla, called for ending the fund, giving half to the government and the other half to Alaskans.

"If the Legislature gets their toe in the door we'll see the diminishment of the Permanent Fund dividend," Glenn said. "It will be zero in five to 10 years."

Mike Swanson of Palmer said he appreciated Walker's effort to jump-start the conversation, but said the bill should be rejected. He offered a balanced approach that included using Permanent Fund earnings with sizable government cuts.

"We can't cut our way to prosperity but we can definitely spend our way to poverty," he said.

Donald Westlund of Ketchikan said he supports the bill, but it needs a sunset clause. He said dividends should end for the next few years. He said the Legislature should start the cutting by leaving the recently upgraded Anchorage LIO that will cost $40 million over the next 10 years.

"Get out of the building," he said.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.