PFD, spending stalemate remains a month into the session
The 2020 legislative session is still young but little visible progress has been made to settle one of the biggest debates in the state’s history.
The future of the Permanent Fund Dividend is still up in the air and until it is resolved it will continue to weigh heavily on nearly every other fiscal decision lawmakers can make, according to Anchorage Republican Sen. Natasha von Imhof.
Von Imhof, a co-chair of the Senate Finance Committee called the PFD “the tail wagging the dog,” during a Feb. 24 speech to the Anchorage Chamber of Commerce. She has advocated for reducing the PFD in order to preserve the viability of core state services and noted paying a full, statutorily-calculated PFD of approximately $3,100 per Alaskan this year would consume more than $2 billion, which is about 40 percent of the state’s projected General Fund revenue in the 2021 fiscal year that starts July 1.
Von Imhof recalled a Senate vote last year to pay full PFDs that was split 10-10.
“The state is divided,” on the issue she said, adding that Gov. Mike Dunleavy’s proposed budget of roughly $4.5 billion in unrestricted General Fund spending would leave the state with a projected surplus of about $470 million if the state did not pay PFDs. With the full dispersal to residents, the governor’s budget leaves a roughly $1.5 billion deficit that Dunleavy is proposing be filled via the dwindling Constitutional Budget Reserve, the state’s last remaining savings account.
The CBR currently holds about $2.1 billion and many lawmakers have resisted drawing on it much further, as it is the state’s financial buffer to fluctuations in oil revenue, emergencies and day-to-day cash management.
The CBR will also fund the large fiscal year 2020 supplemental budget that is currently pegged at roughly $300 million, and more will be drawn to cover the annual deficit as the current fiscal year plays out. That means with or without full PFDs the state’s options for dealing with its structural fiscal imbalance under the status quo are increasingly limited, according to von Imhof.
“Either way the day of reckoning is here,” she said to the Anchorage Chamber members.
The Legislature’s continued split over the PFD is exemplified in the various bills submitted to change the dividend formula.
While Dunleavy continues to push for full, statutory payments until or unless the law is changed — the administration on Feb. 19 also submitted legislation to pay a supplemental PFD of $1,034 per Alaskan for last year — the proposals from the Legislature vary widely.
Fairbanks Democrat Rep. Adam Wool, a member of the Legislature’s bicameral Permanent Fund Working Group, submitted House Bill 300 on Feb. 24, which would allocate 15 percent of the state’s annual percent of market value, or POMV, draw on the Permanent Fund to dividends. With a 2021 POMV payout of nearly $3.1 billion, Wool’s proposal would pay PFDs of roughly $700 per Alaskan in October.
HB 300 would allocate the rest of the POMV appropriation to K-12 education, the University of Alaska, community assistance and capital projects and would result in a nearly balanced budget in 2021 based on current revenue projections.
He noted in a formal statement, as von Imhof and others have, that the size of the PFD has consumed the Legislature in recent years and prevented lawmakers from budgeting on time and addressing other pressing issues facing the state.
“This plan allows a dividend that is sustainable, while also addressing the needs of our communities. Businesses, public servants, municipal governments and Alaskans all deserve stability. By protecting the Permanent Fund, committing funding to essential services, and directing funds to capital projects and communities, we can now focus on building Alaska’s future,” Wool said.
Sen. Lyman Hoffman, D-Bethel, quietly submitted legislation to change the PFD on Feb. 24, which was the deadline for individual lawmakers to propose new bills this session.
Hoffman’s Senate Bill 227 would split the annual POMV draw 50-50 between dividends and the General Fund, which would equate to PFDs of approximately $2,300 in October.
The 50-50 split has been seen as an equitable calculation by many legislators, but von Imhof noted it would still leave the state with a deficit of about $1 billion in the coming fiscal year.
She said a lot of legislators are supportive of dividends in the $900 to $1,100 range in private discussions. Legislative leaders are in regular talks with the governor on the issue, according to von Imhof, but there has been little movement publicly on the since the session started in late January.
A state spending cap, another von Imhof priority, is currently languishing in the Finance Committee where she said it currently lacks the votes among the seven members to advance to a floor debate.
In a radio interview Feb. 25, von Imhof also said there is also some desire within the Legislature to have a capital budget in the $300 million range as opposed to the bare minimum of a bit more than $100 million from recent years needed to generate federal matching funds.
The Permanent Fund Working Group, which was supposed to come up with recommendations for the PFD at the start of the session, was unable to reach a consensus on a new formula.
Von Imhof urged Anchorage Chamber members to contact their legislators with specific proposals for changing the PFD or otherwise resolving the state’s continual budget deficits.
She noted there is still nearly two months to go in the regular session and she believes the “log jam will break at some point,” but having lawmakers continue to set the PFD on an ad hoc basis isn’t workable either, according to von Imhof.
“I certainly didn’t run for office so I could argue about how big the PFD is each year,” she said.
Elwood Brehmer can be reached at [email protected].