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Gov. Frank Murkowski has pressed lawmakers to pass a plan to use the $28 billion Alaska Permanent Fund to cover chronic budget shortfalls, but the proposal was expected to die a silent death about an hour before the close of the session. The Senate rejected the proposal last week on a 5-15 vote.

Rumors were flying in the last few hours of the session that lawmakers would revive the plan to spend permanent fund earnings under a percent-of-market-value, or POMV, structure. That plan would have used 5 percent of the entire value of the fund to pay dividends and help fund state government.

There also was talk of including constitutional protection of permanent fund dividends, but Senate Minority Leader Johnny Ellis, D-Anchorage, about two hours before midnight, said it was too late to pass a POMV plan.

"I don't think the Legislature gave it enough attention during the session for it all to come together," Ellis said.

"Why should we give the constitution the right to a check?" Weyhrauch said. "That's a terrible public policy decision. It flies in the face of why we established the permanent fund. It flies in the face of Alaskans who come up here and instead of putting a hand up on, how I can help, it's a hand out and what are you going to give me."

Murkowski has threatened lawmakers with a special session if they don't find about $650 million - the projected revenue from the permanent fund - in new taxes or budget cuts.

Tuesday night the governor restated his intention to call a special session during a brief visit to lawmakers on the second floor of the capitol.

Along with the proposal to use the permanent fund for government, plans for a statewide sales tax, income tax and a variety of smaller tax proposals were rejected by the Legislature.

The state budget office projects an $882 million funding shortfall next year, based on $25.85-a-barrel oil. Alaska North Slope Crude reached an all-time high this year of just under $40 per barrel, giving lawmakers another year of breathing room before finding a fiscal fix.

Lawmakers were poised to approve a tobacco tax, adding 60 cents to the price of a pack of cigarettes, on Tuesday. The tax would increase by an additional 20 cents in 2006 and another 20 cents in 2007.

The original version of the bill, which would have instituted a $1 tobacco tax increase, was projected to raise $35.5 million annually for the state.

Even if the proposal does pass, it will do little to fill the state's annual budget deficit.

For 11 of the last 13 years, lawmakers have dipped into the state's $2 billion savings account, the Constitutional Budget Reserve, to balance the budget.

Earlier this session, Murkowski called a conference of 40 Alaskans to provide recommendations on how to plug the state's fiscal gap. The Conference of Alaskans, held in Fairbanks in February, recommended implementing a sales tax, income tax and using a portion of the permanent fund to plug the deficit.

State Budget Director Cheryl Frasca presented conferees with a hypothetical "Plan B" budget for 2006 if no fiscal plan is put in place.

Proposed cuts included a five-year phase out of power cost equalization for rural communities; public television and radio broadcasting grants; the Office of Public Advocacy; some community jails and prisons; pupil transportation grants; the Alaska State Council on the Arts; the Alaska Human Rights Commission; tobacco prevention and control programs; rural human services grants; the Sitka Pioneers' Home; the Alaska Coastal Management Program; cross-gulf ferry service by the Alaska Marine Highway System and 50 percent of Southeast village ferry service.

The plan also would combine the Departments of Administration and Revenue, the Departments of Corrections and Public Safety, and the Departments of Natural Resources and Fish and Game.

Murkowski made good on his promise to cut the budget last year when the Legislature rejected a statewide sales tax. Last June Murkowski vetoed $138 million in funding for programs such as Longevity Bonus checks for seniors and municipal revenue sharing and Safe Communities for cities.

Weyhrauch, who supported adopting the percent of market value plan, said lawmakers have been bailed out by the high price of oil and the state will have to address the fiscal gap next year.

Without a fiscal plan, public services and education will continue to suffer, he said.

"If oil stays this high, it will be a different kind of attitude next year," Weyhrauch said. "Next year, since we don't have a fiscal plan and we don't have a reoccurring source of revenues, we're going to have to have either a taxation policy in this state or POMV."

• Timothy Inklebarger can be reached at timothy.inklebarger@juneauempire.com.