Court rules on PFD veto lawsuit

  • Alaska state Sen. Bill Wielechowski, D-Anchorage, argues in Superior Court on Nov. 17, 2016, that Gov. Bill Walker’s veto of half the Permanent Fund Dividend was illegal and should be overturned. Wielechowski and two former state senators were ruled against from the bench that day, and on Aug. 25 that decision was upheld after an appeal to the Alaska Supreme Court. (Photo/File/AJOC)

JUNEAU — The Alaska Supreme Court ruled that Gov. Bill Walker acted within his authority in reducing the amount set aside for checks to state residents from Alaska’s oil-wealth fund last year.

The decision, released Aug. 25, affirms a lower court decision that sided with the state in the dispute over Alaska Permanent Fund dividends.

The high court decided that the legislature’s use of fund income is subject to normal appropriation and veto processes. It says Walker validly exercised his veto authority when reducing the amount available for dividends last year.

The case was brought by Democratic state Sen. Bill Wielechowski and two former legislators. Wielechowski said he is “bitterly disappointed” by the court’s ruling. Walker called it “by far” the most difficult decision he’s made as governor.

They had argued that the Alaska Permanent Fund Corp. was required by law to make available nearly $1.4 billion from the fund’s earnings reserve for dividends, despite Walker’s veto.

The case was heard before the Supreme Court on June 20.

The court determined the “narrow question” it had to answer was whether the constitutional amendment that created the Fund and dedicated 25 percent of all state resource royalties to feed it also exempted the use of the Fund’s income from the anti-dedication clause, according to the ruling.

“The answer cannot be found by weighing the merits of the dividend program or by examining the statutory dividend formula,” the justices wrote.

Wielechowski’s group argued in part that Walker overstepped his authority by crossing out the reference to the dividend formula statute in the budget in addition to replacing the original estimated $1.36 billion collective dividend payment with $695 million.

The Alaska governor has the authority to veto appropriations, but not existing laws.

In its discussion of the ruling, the court noted it ruled in a 1982 case that the anti-dedication clause of the Alaska Constitution “prohibits the dedication of any source of revenue” without a constitutional exception.

The crafters of the state Constitution believed dedicated funds to be a “fiscal evil,” according to the ruling, because they took control necessary to manage state finances away from the governor and Legislature.

“No party suggests that Permanent Fund income (distributed for dividends) is not state revenue,” the ruling states.

“Our starting point must therefore be that the anti-dedication clause prohibits the dedication of Permanent Fund income unless the 1976 constitutional amendment exempted not only the dedication of enumerated revenues into the Permanent fund but also — as Wielechowski argues — the Legislature’s potential future, unspecified dedication of revenues out of the Permanent Fund.”

Attorney General Jahna Lindemuth thanked the state’s attorneys that argued the case in a Friday Department of Law release.

“I know this was not a decision Gov. Walker took lightly, but I’m glad we have more clarity around the use of Permanent Fund earnings as we continue to try and resolve the state’s fiscal crisis,” she said.

Walker announced that he roughly halved the dividend appropriation among other vetoes in June 2016 on what he called “a day of reckoning” to drive home his message to legislators and the public that drastic changes to state finances need to be made to resolve Alaska’s ongoing multibillion-dollar budget deficits.

This year, the Legislature itself ignored the statutory dividend formula and set an arbitrary dividend appropriation to pay dividends of $1,100 per Alaskan, a compromise amount based on what dividends would be under the differing versions of Walker’s Permanent Fund restructure bill passed by the House and Senate.

To Wielechowski’s arguments, the court concluded that a plain reading of the Permanent Fund amendment, which states that income from the fund will go to the General Fund, “unless otherwise provided by law,” does not amount to a dedication.

The Fund clause in the Constitution directs the Fund’s income to be deposited for appropriation, but it does not give the Legislature the authority to dedicate that income, according to the court.

“Interpreting the 1976 constitutional amendment to allow dedications of Permanent Fund income would create an anti-dedication clause exception that would swallow the rule,” the justices concluded.

Updated: 
08/30/2017 - 11:43am

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