Another special session underway without elusive fiscal plan

  • Senate President Peter Micciche, R-Soldotna, left, talks to Senate Minority Leader Tom Begich, D-Anchorage, before the start of the Alaska Legislature’s third special session of 2021 on Aug. 16. (Photo/James Brooks/Anchorage Daily News)

Gov. Mike Dunleavy called it “Groundhog Day” in an Aug. 16 briefing, while others might prefer “déjà vu all over again,” but the bottom line is the Alaska Legislature has convened for another special session in Juneau yet again with no clear path to solving the state’s persistent fiscal imbalance.

On the same day that Dunleavy emphasized to reporters the ability of the Permanent Fund to provide for the state without the need of taxes, the Legislature’s bicameral Comprehensive Fiscal Plan Working Group unanimously recommended new revenue measures to generate between $500 million and $775 million per year.

According to the group’s four-page report, members could not reach consensus on what specific type of tax they would be willing to see the state implement but they generally urged “adoption of a broad-based revenue measure, in addition to other revenue measures, as a part of a comprehensive solution.”

Lawmakers serving on the special committee that uniquely gave each caucus equal representation also agreed that special fiscal measures relating to the Permanent Fund should also be part of the state’s eventual solution but were split on what it should be.

A key component of Dunleavy’s plan to constitutionally direct half of the Permanent Fund’s annual available earnings of more than $3 billion towards dividends with the other half going to other state programs is a separate, one-time, $3 billion appropriation from the Fund to cover near-term budget shortfalls.

Department of Revenue officials project annual deficits starting at $826 million next fiscal year that should decrease to less than $100 million by 2029 under the governor’s plan.

Some work group members supported a single “bridge” appropriation from the Permanent Fund’s Earnings Reserve Account to cover the expected deficits, while others pushed for a “stair step” dividend that gradually grows to the full amount called for under a new, constitutionally guaranteed PFD, according to the report.

Dunleavy stressed that the $3 billion bridge appropriation to the Constitutional Budget Reserve can be made now because of the gaudy returns achieved by Alaska Permanent Fund Corp. managers of late.

The Fund had an unaudited value of $82.4 billion as of Aug. 13; it generated a return of 29.7 percent in state fiscal year 2021 that ended June 30.

Revenue Commissioner Lucinda Mahoney previously told the working group that Dunleavy could support a broad sales tax if such a bill would get through the Legislature.

“If this fund were still around $65 billion I think there would be more of a case (for taxes), but at $82 billion-plus, in Alaska’s time of need like we haven’t seen in decades, if forever, and all the needs that the people have, all the needs that businesses have, all the needs that government has, the solution’s contained right here,” Dunleavy said, referencing a chart showing the Permanent Fund’s growth over the past year.

He told reporters Aug. 16 that his administration has presented numerous models of taxes to legislators in an effort to help them make decisions, but any tax bill that they approve will need corresponding assurances for limiting spending.

“If it comes to my desk without an appropriation limit, a constitutional appropriation limit, I don’t see how it’s going to work,” Dunleavy said of prospective tax legislation.

Enough legislators have consistently opposed the type of ad-hoc draw from the Fund that Dunleavy is proposing to make it unclear whether he could generate support for it with other concessions.

Legislators have also generally acknowledged that there is not currently enough support for the 50-50 plan to get the two-thirds majority votes needed in both the House and the Senate to send a constitutional amendment to the voters.

Legislative leaders vowed the working group’s recommendations — of which there are 12 — would directly translate to legislation in the special session; however, there are few recommendations specific enough to quickly convert to legislation that could be passed in the 30-day special session that is now underway.

Additionally complicating matters is the unresolved issue of this year’s PFD, which currently doesn’t exist after Dunleavy vetoed the appropriation in the state budget for 2021 dividends of approximately $525, calling it “a joke” after signing the budget.

A stalemate over the PFD pushed lawmakers to within days of a government shutdown before the budget passed with the $525 per person appropriation; a proposal for an $1,100 dividend failed when it didn’t garner the required three-quarters vote from both chambers of the Legislature after being tied spending from the Constitutional Budget Reserve.

Dunleavy said his administration would submit a spending bill soon to deal with this year’s PFD.

Elwood Brehmer can be reached at [email protected].

Updated: 
08/18/2021 - 9:44am