Legislature breaks up over special session location

  • Rep. Cathy Tilton, R-Wasilla, sits at a desk at Wasilla Middle School on July 8 while her desk at the capitol in Juneau is empty as an unprecendented showdown between factions of the Legislature continued over where to meet, the size of the Permanent Fund dividend and how to fund the capital budget. (Left photo/James Brooks/Anchorage Daily News/Right photo/Tegan Hanlon/Anchorage Daily News)

As legislators continue to posture in Wasilla and Juneau, a small group of them continues analyzing the history, and future, of the Permanent Fund dividend program.

Members of the Bicameral Permanent Fund Working Group discussed the pros and cons of varying levels of PFD payments July 8, the result of a “homework assignment” given them shortly after the committee was formed near the end of the first special session.

An impasse over the size of this year’s dividend payment has stalled progress on all other outstanding issues this year.

Gov. Michael J. Dunleavy and the group of 22 legislators meeting in Wasilla, mostly House Republicans, are demanding the PFD be paid according to the statutory formula — equating to roughly $3,000 per Alaskan — while the majority of the Senate and House in Juneau favors smaller budget cuts that would result in a smaller PFD.

While the governor’s $410 million of vetoes to General Fund spending increase the amount of surplus revenue available for dividends when combined with the Legislature’s approximately $280 million of budget reductions, the $1 billion available for PFDs from the Earnings Reserve Account of the $65 billion Permanent Fund is still only sufficient to pay dividends in the $1,600 per person range.

Getting to “full,” $3,000 PFDs would still require drawing about $900 million in excess of the 5.25 percent of market value, or POMV, draw cap the Legislature put on appropriations from the fund just last year.

As of this writing, the Legislature was scheduled to hold a joint session in Juneau July 10 to vote on overriding some or all of Dunleavy’s 182 line-item budget vetoes. However, with a high supermajority override threshold of 45 of 60 legislators needed to override budget vetoes and roughly a third of legislators committed to staying in Wasilla — where Dunleavy called the special session — it appears the vetoes will stand, at least for now.

Republican House Minority Leader Lance Pruitt, R-Anchorage, has said members of his caucus could be open to backfilling some of the vetoed appropriations in the still unfinished capital budget, but that would only happen after the PFD is settled.

Rep. Jonathan Kreiss-Tomkins, D-Sitka, who was paired with Sen. Shelley Hughes, R-Palmer, in the Permanent Fund Working Group to examine the consequences of a $3,000 PFD, said other issues aside, being able to put $3,000 in Alaskans’ pockets is “generally a good thing,” but noted in reality there is a “basic tension” between the size of the budget and the PFD that the state continues to struggle with.

Kreiss-Tomkins supports more modest budget cuts and a corresponding smaller PFD, while Hughes has consistently supported cutting the budget to free up enough funds to pay full dividends. Still, he said they concur on one important principle.

“Of all the available options in looking for fund sources for a $3,000 statutory PFD, we agree that overdrawing or overspending the Permanent Fund itself in excess of the POMV is least desirable or the worst option,” Kreiss-Tomkins said.

With that as a backdrop, Hughes said even after the governor’s reductions the state still has an “unsustainable budget at this point” and that’s why she feels the Earnings Reserve has sufficient funds to pay full PFDs.

The House Finance Committee also introduced a bill July 8 to pay $1,600 PFDs, but it would likely overdraw from the Earnings Reserve by a relatively small amount — less than $100 million depending on exactly how many recipients are eligible this year.

The special Permanent Fund committee is expected to draft a new PFD formula sometime this summer near the end of its work; however, whether that could gain enough support in the Legislature as well as the governor’s blessing remains to be seen.

Hughes said if the formula is changed the eligibility requirements should be examined along with the calculation because paying fewer dividends would mean larger per person amounts for those who are eligible.

Finance co-chair Sen. Bert Stedman, R-Sitka, who for years has stressed the need to limit spending from the fund to preserve its value for future generations, was tasked with examining the value of a “surplus” PFD with Rep. Kelly Merrick, R-Eagle River.

Stedman said paying dividends based on whether or not the state has surplus funds available in a given year is a good place to start working, but he acknowledged that could lead to years without a dividend, something he doesn’t think the Legislature as a whole is interested in.

“A little bit of tension, I guess, has some value between the dividend and the operating budget, but I’m personally more inclined to have and more comfortable with a predictable and robotic structure where the dividend is paid out regardless of our current fiscal situation that given year and I guess that would be created when we restructure the formula,” he said.

Stedman has supported recalculating the PFD while also saying the current formula — appropriating half of a five-year average of fund income — worked well for more than 30 years but it also was established under very different circumstances; the Permanent Fund was new and had only about $1 billion and there were far fewer Alaskans to receive dividends.

Merrick insisted that while the state has a spending cap, it is ineffective and any move towards a surplus PFD would also require drastically lowering that limit.

“Unless (the spending cap) is changed somehow government will slowly eat away at those funds and there will be nothing left over,” she said.

The Legislature’s budget sent to Dunleavy this year would have allowed for a “surplus PFD” of roughly $900 per person.

Finally, Rep. Adam Wool, D-Fairbanks, said in examining a $1,600 PFD, which is what was paid last year, said injecting additional money into the state economy through the dividend is undoubtedly a positive, but the actual economic benefits are mostly anecdotal, as it’s understood that many Alaskans save much of their dividends or spend it in ways that send the money out of Alaska.

Instead, he suggested the Legislature might consider linking the PFD in part to the state’s oil revenue in a given year to better tie it to the fiscal reality of the day.

Wool said drawing from 20 percent of the state’s oil revenue and 20 percent of the $2.9 billion POMV appropriation would provide for roughly $1,600 PFDs this year.

“The Permanent Fund is independent from oil revenue but the State of Alaska isn’t,” he said.

Elwood Brehmer can be reached at [email protected].

Updated: 
07/10/2019 - 9:31am

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