- The Washington Times - Tuesday, February 10, 2004

ANCHORAGE, Alaska (AP) — The Alaska Permanent Fund, created in 1976 to capture a share of the state’s vast oil wealth, has grown to $27.7 billion, a sum so large its earnings underwrite handsome checks for every state resident.

But Alaska is running out of revenue to pay its bills, and Republican Gov. Frank Murkowski has raised the sensitive question of whether residents should trade part of their dividends for schools, police and roads.

A group of 55 residents who make up the Conference of Alaskans is headed by Michael Burns. The group was summoned by Mr. Murkowski and began a three-day meeting yesterday to decide whether the state’s most sacred cash cow should be carved up to help pay for state government.

“We are threatened with an erosion of essential public services,” Mr. Murkowski said in his State of the State speech last month. “Alaskans need to consider the health of our society in terms of both the dividends they receive and shared services.”

Alaska’s residents pay no state income tax, no state sales tax, and in the state’s two largest cities, Anchorage and Fairbanks, not even a municipal sales tax.

But cutting their dividends, paid since 1982 and ranging from $331.29 to a high of $1963.86 in 2000, will not be an easy task.

Alaskans pride themselves on their rugged individualism, but have reacted strongly to the threat of losing a collective source of wealth that many view as an entitlement.

In an advisory vote in 1999, 84 percent of Alaskans said no to using the permanent fund to help support state government.

“We think the permanent fund is the last thing the Legislature goes after, not the first thing,” said Eddie Burke, state chairman of Alaskans, Just Say No, which opposed the measure in 1999 and will fight a ballot measure this year.

The Alaska Legislature does not need a referendum to spend the fund’s earnings, but the advisory vote so cowed politicians, they have dared not do so.

Alaska’s spending problems, however, cannot be ignored much longer. In 10 of the past 12 years, state government spent more than it earned outside the fund.

A Department of Revenue in December estimated that gap this year at $275 million. The gap has been filled by withdrawing money from an account called the Constitutional Budget Reserve, created by voters in 1990 to hold oil and gas tax and royalty settlements from oil companies. Without change, that fund is projected to run dry by 2007.

Mr. Murkowski limited his new revenue options during his campaign by saying he would not spend permanent-fund income without a vote by Alaskans. He also promised to reject a state income tax. The former U.S. senator instead said the budget could be balanced with cuts and increases in revenue from additional resource development.

Mr. Murkowski’s first year in office followed five years of budget cutting by the Republican-controlled Legislature. He slashed $250 million from the budget approved by the Legislature but warns of draconian cuts next year in the absence of tapping the permanent fund.

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