Ketchikan Borough Assembly Considers Urging State to Include Permanent Fund in Fiscal Plan
By MARY KAUFFMAN
October 03, 2015
At the current pace of spending, the State is anticipated to drain the Constitutional Budget Reserve and Statutory Budget Reserve account in the years to come. Three primary sources of revenue have been discussed to help bridge the fiscal gap: tapping Permanent Fund earnings, a statewide sales tax and/or an income tax. The Ketchikan Assembly will consider in new business Resolution 2619 which if passed, will encourage the State of Alaska to implement a long-range fiscal plan which, among other things, utilizes Permanent Fund earnings and cuts State spending.
Borough Assembly Chambers, 1900 First Avenue, Suite 144 (WhiteCliff Building).
According to Sen. Wilken's "Everyone Helps A Little" fiscal plan, $1 billion can be raised for the state's General Fund by:
According to KGB's Resolution 2619, failure to develop a long-term plan to deal with the fiscal challenges will have serious ramifications for the Alaska economy and is evidenced by the decision by Standard & Poor to lower Alaska's credit outlook from "stable" to "negative" in August. Moody's Investors Service revised its outlook for Alaska in December 2014 from "stable" to reflect a "negative" outlook also.
Alaska House Rules Chairman Craig Johnson (R-Anchorage) said, “Alaska is an owner state, and the dividend represents each Alaskan’s personal stake in the management of our resource wealth." Johnson said the PFD creates an “ownership” interest that helps connect Alaskans to the Permanent Fund and keeps politicians from raiding it.
Representative Johnson said, “Like shareholders in a corporation, Alaskans through the dividend have a stake in what happens to the Permanent Fund.” As a result, Johnson said, politicians are very reluctant to tamper with it. “Anyone thinking about raiding the Permanent Fund knows they’ll have to answer to Alaskans.”
Johnson added that the PFD has become a major economic driver for local economies. “All you have to do is look around,” Johnson said as the PFD is now being distributed. “Stores and restaurants are crowded, people are shopping, fixing their homes, and paying for their children’s education. The economic impact and rollover benefit to our economy and for small businesses is tremendous.”
Alaska Senator Bill Wielechowski (D-Anchorage) has again urged the Senate Republican Majority to quickly take up and pass a resolution aimed at enshrining the Permanent Fund Dividend into the Alaska Constitution. Senator Wielechowski filed this resolution back in April 2013. It was not heard in 2013 or 2014. He again filed it in January 2015, yet has still not received a single hearing.
Currently, language in the Alaska Constitution does not define how the Permanent Fund Dividend shall be calculated, nor does it protect the funds eligible for distribution to the Alaskan people from being spent by the Legislature. Senate Joint Resolution 1, pre-filed by Senator Wielechowski on Jan. 21, 2015, would amend the Alaska Constitution to ensure the annual dividends Alaskan families rely on are protected for generations to come. Although a formal hearing request was submitted to the Senate State Affairs Committee on Feb. 3, SJR1 has yet to receive a hearing.
In 1976, as the Alaska pipeline construction neared completion, Alaska voters approved a constitutional amendment to establish a dedicated fund owned by the state: the Alaska Permanent Fund.
In 1980, the First Permanent Fund Dividend legislation was enacted establishing a program giving every adult Alaska resident $50 for every year of residency since statehood in 1959 and also established a dividend Fund. Payment of dividends were stayed under litigation (Zobel v Williams) challenging the constitutionality of the program. In 1982, the U.S Supreme Court ruled the 1980 legislation unconstitutional. In response to the litigation, the Alaska legislature passed legislation authorizing equal dividend payments to all six-month residents. The first dividend amount was $1,000. The first dividend checks were distributed June 14, 1982.
The established fund placed at least 25 percent of all mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses received by the state in a permanent fund, the principal of "which may only be used for income-producing investments".
The Alaska Constitution states that the Fund's principal cannot be spent and the dividend can only be paid from Fund earnings allowing only five percent of the Fund's total market value to be paid out each year as PFD.
At a market value of $51 billion, the fund has been successful over the years because is has not been used as an economic development bank.
The Ketchikan Borough Assembly will meet in the Borough Assembly Chambers, 1900 First Avenue, Suite 144 (WhiteCliff Building). The meeting is scheduled to begin at 5:30 PM. The public is invited to attend.
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