For 13 months, Sen. Lesil McGuire, R-Anchorage, has been working on a plan to use Permanent Fund earnings to partially balance Alaska\u2019s state budget.<\/p>\n
On Tuesday, she finally unveiled the proposal, which could halve the state\u2019s nearly $4 billion deficit in a single year.<\/p>\n
\u201cWith my plan, you\u2019ll bring in approximately $2 billion, and that will put you on a glidepath (to balancing the budget),\u201d she told members of the Senate State Affairs Committee.<\/p>\n
She added that \u201cmine is not a whole plan,\u201d and while it would eliminate a substantial chunk of the state\u2019s deficit, additional taxes and further cuts will be needed to balance the annual budget.<\/p>\n
\u201cThis is only meant to stabilize one part,\u201d she said.<\/p>\n
In form and function, McGuire\u2019s plan (formally, Senate Bill 114) resembles the one brought forward by Gov. Bill Walker earlier this year. State revenue commissioner Randy Hoffbeck said the governor\u2019s staff and McGuire\u2019s staff used the same financial models and budget figures, and that any similarities aren\u2019t coincidental.<\/p>\n
\u201cQuite frankly, I think all the plans out there have the same essential target in mind,\u201d Hoffbeck said.<\/p>\n
The principal difference between the two plans is their emphasis. The governor\u2019s plan is designed to provide $3.3 billion per year to fund state government, but after its first year, Permanent Fund Dividends would be about $500 per person.<\/p>\n
Senate Bill 114 has a minimum $1,000 dividend, but it provides only about $2 billion per year for state operations.<\/p>\n
If oil averages $56 per barrel this fiscal year (July 1, 2015 through June 30, 2016), the state\u2019s annual deficit will be about $3.5 billion. Through Monday, oil has averaged $47.08, which puts the deficit at roughly $3.7 billion.<\/p>\n
McGuire said her bill \u201cstill leaves open the conversation for restructuring the size and cost of government.\u201d<\/p>\n
The mechanics of McGuire\u2019s plan are relatively simple. Right now, investment earnings from the $50 billion Permanent Fund end up in the earnings reserve account. That account pays dividends but otherwise accumulates interest and grows. Right now, it contains about $7 billion.<\/p>\n
While no one can spend from the Permanent Fund proper without a statewide vote, lawmakers can spend from the earnings reserve with a majority vote.<\/p>\n
McGuire\u2019s plan would set up an annual transfer of 5 percent of the Permanent Fund\u2019s value from the earnings reserve to the state budget. If the Permanent Fund\u2019s $50 billion principal account earns more than 5 percent when invested on global markets, the system holds up.<\/p>\n
Dividends, instead of coming from the earnings reserve, would come from the state\u2019s annual oil royalty check. Three-quarters of the state\u2019s oil royalties (last year, about $961 million) would be devoted to dividends. The remaining quarter of the state\u2019s oil royalties would go into the Permanent Fund principal.<\/p>\n
If implemented this year, McGuire\u2019s bill would result in a dividend of a little over $1,000. If not implemented, the traditional dividend formula (based on the Permanent Fund\u2019s investment returns) is expected to result in a dividend of more than $2,000.<\/p>\n
One thousand dollars is \u201cstill a big dividend,\u201d McGuire said, adding that in a state whose economy is dependent upon government spending, it\u2019s important to keep the state budget balanced and stable.<\/p>\n
\u201cThe Permanent Fund Dividend is important,\u201d she said, \u201cbut it\u2019s not the only thing that\u2019s important. Even Republicans can say that.\u201d<\/p>\n
The Senate State Affairs Committee will meet again on Thursday to hear legal analysis of the governor\u2019s Permanent Fund earnings plan. On Tuesday, it will hear public testimony on the proposed prison reform bill, and on Tuesday night, starting at 5:30 p.m. in the Capitol, the committee is expected to take public testimony on McGuire\u2019s proposal.<\/p>\n","protected":false},"excerpt":{"rendered":"
For 13 months, Sen. Lesil McGuire, R-Anchorage, has been working on a plan to use Permanent Fund earnings to partially balance Alaska\u2019s state budget. On Tuesday, she finally unveiled the proposal, which could halve the state\u2019s nearly $4 billion deficit in a single year. \u201cWith my plan, you\u2019ll bring in approximately $2 billion, and that […]<\/p>\n","protected":false},"author":426,"featured_media":6895,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_stopmodifiedupdate":false,"_modified_date":"","wds_primary_category":4,"footnotes":""},"categories":[4],"tags":[230],"yst_prominent_words":[],"class_list":["post-6894","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-state-news"],"_links":{"self":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/6894","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/users\/426"}],"replies":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/comments?post=6894"}],"version-history":[{"count":0,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/6894\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media\/6895"}],"wp:attachment":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media?parent=6894"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/categories?post=6894"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/tags?post=6894"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/yst_prominent_words?post=6894"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}