03/13/1997 03:40 PM Senate STA

 Number 001                                                                    
                                                                               
        SJR 18 CONST. AM: PERM. FUND INCOME & DIVIDEND                       
                                                                               
  CHAIRMAN GREEN  called the Senate State Affairs Committee to order           
 at 3:40 p.m. and brought up SJR 18 as the first order of business             
 before the committee.                                                         
                                                                               
 Number 020                                                                    
                                                                               
  ORAL FREEMAN , a former member of the Board of Trustees of the               
 Alaska Permanent Fund testifying via the teleconference network               
 from Ketchikan, stated he has been a resident of Alaska for 51                
 years and served in the First State Legislature.  He came back to             
 the Legislature in 1972, which was shortly after the first leases             
 on the North Slope were sold and the state collected in excess of             
 $900 million in one day.  In a few years that $900 million began to           
 disappear pretty fast and it became apparent to the legislators of            
 that time that some kind of a savings account for future                      
 generations was needed and, as a result, the idea of the permanent            
 fund was adopted.                                                             
                                                                               
 Mr. Freeman said he has spent 31 years of his life in state,                  
 municipal, appointed and policy making positions, and during that             
 time the one thing he learned was that in a policy-making position            
 you suffer a lot of frustrations, a lot of disappointments, but as            
 far as he is concerned, the permanent fund is one thing that has              
 worked exactly the way it was supposed to.                                    
                                                                               
 Mr. Freeman commended the sponsors of SJR 18 for bringing forth               
 legislation to write into the constitution the provisions that                
 guarantee the permanent fund dividend and provide for inflation               
 proofing.  He said his fear all along has been that if we, the                
 people of Alaska, through the Legislature, ever start spending the            
 permanent fund that it will disappear eventually.  He has often               
 said that the dividend program is the life insurance policy of the            
 permanent fund.                                                               
                                                                               
 In 1980, at the time when the total of the permanent fund was $364            
 million, Mr. Freeman introduced a bill in the Legislature to                  
 appropriate $900 million from the general fund and deposit it in              
 the principal of the permanent fund, although he didn't have much             
 hope he would be successful, but he was.  The permanent fund more             
 than tripled in size, and it then became apparent that inflation-             
 proofing was important.  The next year he introduced another bill             
 to appropriate $1.8 billion from the general fund which also passed           
 and became law.  As the fund grew, it became clear to the                     
 legislators and the administration that some kind of a set up was             
 needed that was devoted to the proper, conservative, careful                  
 management of that permanent fund.                                            
                                                                               
 Mr. Freeman said he wholeheartedly agrees with the idea of the                
 dividend, as well as the inflation proofing of the fund, because in           
 the first place, the permanent fund is created from money that's              
 collected from the sale of a nonrenewable natural resource that               
 under our constitution belongs to every citizen of the state.                 
                                                                               
 Mr. Freeman said he thinks it is the proper time to write into the            
 state constitution the provisions that provide for the dividend and           
 inflation-proofing as they exist right now by statute.  He said the           
 main fear of the public is that if monies from the permanent fund             
 are used to run government, the dividend will disappear, so if the            
 provisions to protect the dividend and the inflation proofing are             
 in the constitution, he doesn't think the public will get to                  
 concerned about spending undistributed income from the earnings               
 reserve of the fund.                                                          
                                                                               
 Number 225                                                                    
                                                                               
  SENATOR MACKIE  commented he has always considered Mr. Freeman as            
 one of the founders of the permanent fund, as well as former                  
 Governor Hammond and others that served in that period of time.               
 He then asked if he was suggesting that if the dividend and the               
 inflation-proofing are protected, then as the fund continues to               
 grow and earnings become greater that will allow the opportunity to           
 utilize some of the earnings.   MR. FREEMAN  reiterated the public's          
 fear that if the Legislature ever starts spending earnings from the           
 permanent fund that are not protected by the constitution, that it            
 will grow and pretty soon the Legislature will be spending all of             
 the permanent fund, but if the those protections are there, he                
 doesn't think the public would have a problem with it.                        
                                                                               
 Number 332                                                                    
                                                                               
  RALPH SEEKINS , a former member of the Board of Trustees of the              
 Alaska Permanent Fund Corporation, testifying from Fairbanks via              
 the teleconference network, said during his tenure as a trustee a             
 lot of decisions were made on how that fund should be invested,               
 and billions of dollars moved forth and back with the hope that               
 they would realize the greatest possible return for the people of             
 the state of Alaska.  He said he thinks every Alaskan recognizes by           
 virtue of that dividend check that they have a vested interest in             
 the success of that fund, so consequently there is nearly 600,000             
 people that are watching so see what's done with it, how much its             
 earnings are, and how much it will return to them as individual               
 Alaskans.                                                                     
                                                                               
 Like Mr. Freeman, Mr. Seekins said he is convinced that without               
 that dividend program, the fund probably would have been spent by             
 now.  He thinks the discussion on how to spend these funds is going           
 to go on forever unless something is done to finally take the                 
 decision away from each group of legislators every year, and he               
 thinks the resolution would accomplish what he would like to see              
 done.                                                                         
                                                                               
 Mr. Seekins spoke to the impact the dividend has on the people of             
 the state.  To some it is like a bonus, but for a lot of people it            
 really makes a difference in the quality of their lives, as well as           
 having a tremendous economic effect on the economy of the state.              
 For that reason, he has repeatedly gone on record as one who would            
 distribute the fund's earnings after inflation-proofing directly to           
 the people in ad infinitum.  To take that away from Alaskans, in              
 any respect, would be wrong.                                                  
                                                                               
 Mr. Seekins said he knows that the Legislature and the Governor               
 have in the past, and are continuing to eyeball the earnings                  
 reserve and what effect it might have on balancing the budget.  He            
 believes it is absolutely unacceptable to even discuss using any              
 portion of the permanent fund's earnings for government programs.             
  He stressed that state government needs to downsize before it                
 would take away the peoples' share of the revenue from the peoples'           
 natural resources.                                                            
                                                                               
 Concluding his testimony, Mr. Seekins said he is very much in favor           
 of letting the people decide whether or not they want to guard                
 their permanent fund.  To him, if the dividend check got to $2,000,           
 $3,000, $5,000, $10,000 a year, then he would applaud that because            
 it allows each individual Alaskan to decide how their portion of              
 the revenue from the resources that, according to our state                   
 constitution, belong to all of the people.                                    
                                                                               
 Number 430                                                                    
                                                                               
  SENATOR MACKIE  moved SJR 18 be passed out of committee with                 
 individual recommendations.  Hearing no objection, it was so                  
 ordered.