- Associated Press - Thursday, February 6, 2014

JUNEAU, Alaska (AP) - A proposal by House Democrats to provide constitutional protection for the annual checks Alaskans receive for their share of state’s oil wealth got a cool response Thursday from some majority members, who worried it could limit lawmakers’ options if the state falls on tough financial times.

House Speaker Mike Chenault, R-Nikiski, said the Legislature has shown restraint since the Alaska Permanent Fund was created, but protecting dividends would provide fewer choices if state government exceeds its available revenue.

“When we talk about that type of long-term planning, it means one thing, taxes, and do you want to institute a state income tax?” he said. “And that’s exactly one thing that I believe that that leads to, if you ever get to that point, is instituting a state income tax or a state sales tax.”

Rep. Alan Austerman, co-chair of the House Finance Committee, said at some point, if the state’s revenue stream remains the same, dividends might need to be on the table for discussion.

Both said, at this point, they do not support HJR17, which would protect the dividends in the state constitution. Austerman, R-Kodiak, told reporters he wouldn’t say he’d oppose the final version of the proposal until he sees it.

The proposal’s primary sponsor, Rep. Les Gara, D-Anchorage, told the House State Affairs Committee that cutting the dividend would be a regressive step. He said recipients use dividends for necessities or otherwise buy things, pumping money into the economy.

He said with the state facing financial pressures, the first place people will look to help blunt the impact will be the dividend. He said he wants to guard against that.

House State Affairs Committee chair Bob Lynn, R-Anchorage, said the panel would probably hear the proposal again.

Voters in 1976, during construction of the trans-Alaska pipeline system, approved a constitutional amendment establishing the Permanent Fund. According to the Alaska Permanent Fund Corp., the idea was to save part of the state’s oil money for future generations. Several years later, a law establishing a dividend program was passed. The first dividends were paid in 1982.

While the fund itself was created by a constitutional amendment, the dividend was not.

Dividends are distributed annually to Alaska residents who meet certain requirements. The amount is based on a five-year average of the Alaska Permanent Fund’s investment earnings. Last year, dividend recipients each received $900.

According to a 2013 Legislative Research brief requested by Sen. Bill Wielechowski, D-Anchorage, there have been debates over possible uses of Permanent Fund earnings since the program’s inception. The brief, by legislative analyst Susan Haymes, says legislative sessions with budget deficits saw more measures proposing use of fund earnings for government services.

Jay Hammond, who as governor proposed the constitutional amendment establishing the fund, was part of a failed 2002 initiative effort to protect the dividend formula. It was rejected for relating to subject matter that cannot be tackled by an initiative.

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