The Senate passed a bill Monday evening to use part of the Alaska Permanent Fund as an endowment to pay for the state’s annual budget.

The latest version of Gov. Bill Walker’s Senate Bill 128 emerged from the Senate Finance Committee Monday afternoon. It allows the Legislature to draw up to 5.2 percent of the permanent fund’s market value each year from the fund’s earnings reserve, while guaranteeing PFD checks of $1,000 for Alaskans for the next three years.

Up until now, the reserve has only been used to pay dividend checks and to inflation proof the corpus of the fund, but is not constitutionally protected.

SB 128 sets a limit on how much can be taken from the fund, depending on the price of oil. When prices are between $75 and $100 a barrel, the permanent fund payout is reduced to between $3.1 and $1.2 billion. Draws on the fund discontinue when oil reaches more than $100 a barrel.

Under the plan, at current oil prices of $47 a barrel, the amount drawn from the fund would be $2.2 billion a year.

The measure is the cornerstone of Walker’s long term fiscal plan to solve the state’s unprecedented $4.1 billion budget shortfall — and one that he has insisted must be passed this year.

“This is historic. This is a historic time in Alaska. We’re in historic times because of the deficit, but this this a historic time to make this shift, make this turn,” said Walker, who entered the Senate gallery for a front row seat on the vote.”I didn’t want to interfere with what they were doing in any way but I wanted to be there. It was just a time that, you know, watching even just across the street on a big screen isn’t the same as actually just being there.”

SB 128 is a variation of a proposal that originated in the Senate last year, introduced by Sen. Lesil McGuire.

“This bill is the most important thing that I will do in my 16 years,” McGuire, who is not seeking re-election this fall, told colleagues on the Senate floor. “And I would dare to say anyone here in this room will do in their political career. It is the main step toward stabilizing Alaska’s future.”

Sen. Lyman Hoffman echoed McGuire’s statements.

“We are fortunate that in Alaska when we, the state, formed the permanent fund, we were fortunate because we turned a non-renewable resource into a renewable resource,” Hoffman said. “No other state in the union can say that.”

The measure passed with ample margin, by a vote of 14-5. Senators Bill Stoltze, Bill Wielechowski, Mike Dunleavy, Johnny Ellis and Berta Gardner opposed the measure.

“I made a promise to my constituents,” Wielechowski said, explaining his ‘no’ vote to Senate members. “I’ve run for my seat three times and every time it’s a big issue that my constituents have asked me about, and every time I’ve said I will do my best to protect your permanent fund, I won’t cut your PFDs.”

Gardner, the Senate Minority leader, told members she couldn’t support the measure because she thought it would lift pressure to continue reform on oil taxes.

The bill must still pass the House. A hearing on the measure is scheduled for June 14, when the Legislature returns from a recess to accommodate Sealaska Heritage’s Celebration in Juneau.

Walker said beyond SB128, he will continue to push for other parts of his fiscal plan, including an income tax and a slew of taxes on alcohol, tobacco, motor fuel, mining and fishing.

“We see this as, not as an endgame,” Walker said, referring to SB 128. “We see this as an important, one piece of many pieces.”

The governor said he thanks those who voted for the permanent fund proposal, but understands those that didn’t.

“I respect that, and again, most of the concerns were about balance, and again, that’s what the rest of the fiscal package provides is that balance that is so critical to Alaska,” he said.

The Legislature also passed a compromise bill on oil tax credit reform Monday, another piece to the governor’s plan, though the bill now bears little resemblance to his original measure. Walker said he doesn’t think the new version “goes far enough,” and will make a decision on whether to sign it into law or veto it when it reaches his desk.

KTVA 11’s Liz Raines can be reached via email or on Facebook and Twitter.

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