The new model, known as the percent of market value plan or POMV approach, is intended to create a more stable, predictable payout from the $27.4 billion fund, according to the trustees.

"We think this takes away the risk of a dramatically smaller or zero dividend," said Bob Bartholomew, chief operating officer for the Alaska Permanent Fund Corp.

While trustees are focusing on changing only the structure of the fund, some state lawmakers are pushing to use part of its earnings to help cover the state fiscal gap.

Gov. Frank Murkowski has endorsed the new POMV approach but has not said whether he supports using the earnings for government services.

Implementing the POMV plan would require a change to the Alaska Constitution and would need a two-thirds majority vote in the state House of Representatives and the Senate. If it is given Legislative approval, voters will then get a chance in the November 2004 election to decide if the proposal will become law.

The earnings reserve account, used to inflation-proof the principal of the fund and to pay annual dividends to every eligible man, woman and child in the state, is made up largely of investments in stocks, bonds and real estate.

Dividends now are based on a five-year average on the earnings of those investments. The Permanent Fund Board of Trustees, a group of governor-appointed business leaders that manages the fund, warns that the current method for figuring dividends could leave Alaskans with no check in years when the stock market is down.

In 2002, permanent fund investments took a nose dive in the stock market, and for a short time it looked like there would not be enough earnings to pay dividends. But a last-minute market surge boosted the fund's investments, providing $1,107 checks to almost 600,000 Alaskans.

The fund is divided between the $27.4 billion principal and the earnings account made up of the return from investments. A portion of the earnings is added to the principal every year so its value does not decline because of inflation.

The POMV approach would combine the principal and earnings, and inflation-proof the entire account. It also would limit the annual payout to 5 percent of the fund's market value over a five-year period. This would make 5 percent available, regardless of market performance, according to the Permanent Fund Corp.

"This is not a raid on the permanent fund," said Bob Storer, executive director and chief investment officer for the Permanent Fund Corp. "It's a limitation on how much can be accessed, and I think that's critically important."

Implementing the POMV model would increase dividends initially by a few hundred dollars, Bartholomew said. And over time dividends would run slightly higher or slightly lower than the amounts projected under the current management structure.

Rep. Mike Hawker, an Anchorage Republican who serves as chairman of the House Ways and Means Committee, spent the summer traveling to cities throughout the state to discuss the POMV proposal and other potential solutions to the state's budget deficit.

Hawker and some of his colleagues in the Legislature support using half of the 5 percent payout cap for government. That would raise about $650 million for the state in fiscal year 2005, which starts in July 2004.

In September, Murkowski said he supported adopting POMV management structure but had not taken a position on whether the funds should be used for government.

"The idea of expenditures belongs in the realm, specifically, of the Legislature," Murkowski said at a press conference. "I will, perhaps, comment on (POMV) if it passes and if there's support there. But I don't see any point in taking a lot of time or energy on what ifs, because the bottom line is whether or not we are going to support it."

Bartholomew, chief operating officer of the Permanent Fund Corp., said discussion of using the earnings for government "complicates the issue."

"We'd like to have the POMV issue addressed on its own merits," he said.

He said the Permanent Fund Corp. will place special inserts in newspapers statewide on Jan. 14 to educate the public about the POMV plan. It also plans to run radio and television ads later this year.

The two proposals that must be approved by the Legislature to institute POMV are House Joint Resolution 26 and Senate Joint Resolution 18. Both were introduced last session.

HJR 26 awaits approval from the House Finance Committee before making it to the full House for a vote. Senate Joint Resolution 18 is under consideration by the Senate Judiciary Committee. If approved, it will move to the Senate Finance Committee and then on to the full Senate.

• Timothy Inklebarger can be reached at timothyi@juneauempire.com.