Lawmakers discuss possibility of putting PFD calculation into the constitution

ANCHORAGE, Alaska (KTUU) - Even before the state legislature convenes on Jan. 19, conversations between lawmakers around the state’s fiscal situation and the role of the permanent fund are beginning.

Legislators will be addressing another large budget deficit, on top of oil revenues that are expected to be the lowest they’ve been in decades. To address part of this budget deficit, Governor Dunleavy proposed a $6.3 billion draw from the Permanent Fund, as well as nearly $5,000 in dividend checks in his 2021 budget proposal. Following that draw, the Governor is also proposing a change to the statutory formula for the dividend which would reduce payouts by roughly 25%. That would require approval by Alaskan voters.

“What I would say to the people of Alaska is that we have to work on the Permanent Fund and making it permanent, and we have to work on making the Permanent Fund Dividend permanent,” the governor said after releasing his budget in December.

At a panel Saturday, hosted by the non-profit group Permanent Fund Defenders, legislators, and members of the group discussed how best to protect the Permanent Fund, and avoid draining it like many of the state’s other accounts.

“The Statutory Budget Reserve account is blown, the Constitutional Budget Reserve account is blown,” said Joe Geldhof, an attorney and member of the Permanent Fund Defenders.

After five years of the legislature not following the statutory PFD formula and using some of those funds to pay for government expenses, some in the panel questioned the future of the Permanent Fund as well.

“If you just go on doing what you’re doing now, kicking the thing down the road and stealing from the Permanent Fund, not inflation-proofing it, in 10 or 15 years, it’ll be gone,” said Clem Tillion, a former legislator and president of the Permanent Fund Defenders.

As legislators prepare to convene in Juneau, how to handle the future of the fund is likely to be a big debate. Some, like Sen. Bill Wielechowski, (D) Anchorage, favor putting the statutory formula into the constitution. Wielechowski has filed legislation to do just that for the last eight years.

“The people of Alaska deserve the same sort of predictability and stability when it comes to the dividend,” Wielechowski said.

At Saturday’s panel, Senators Mike Shower, (R) Wasilla, and Scott Kawasaki, (D) Anchorage, also discussed the possibility of putting a dividend calculation for the Permanent Fund into the constitution. The two agreed it would likely be the only way to ensure a consistent calculation.

“I foresee, based on our past performance, that a solution that does not involve a constitutional change, which is a heavy lift, and we need a lot of legislators to agree to that to get something to work, but without it, I think we’ll still be contending with this for years to come,” Shower said.

The panelists also argued locking the formula into the constitution would eliminate a variable during budget discussions and could bring more stability to debates around the deficit.

“The the public can say ‘okay, you did it, you put it in the Constitution, we may not like the amount or whatever, but it’s done…’ and then we can balance our budgets,” Kawasaki said.

Conversations around the Permanent Fund are very likely to continue through the session as the legislature looks at Dunleavy’s budget proposal. The Permanent Fund Defenders have also said they intend to host more panels and debates moving forward as addressing the Permanent Fund becomes more and more of a pressing issue for lawmakers.

“The folks who are listening really want us to do something to solve the PFD issue,” Kawasaki said.