Governor unveils new Permanent Fund proposal, joining legislators to resolve the dividend debate
Pitched as part one of a broader fiscal plan, Alaska would still face a billion dollar deficit.
JUNEAU, Alaska (KTUU) - With one week left until the regular session ends, Gov. Mike Dunleavy has unveiled a proposal to put a new Permanent Fund dividend formula into the Alaska Constitution alongside a program that reduces power bills in rural Alaska.
Dunleavy said the PFD has dominated debate in the Legislature for years and has taken the oxygen out of the room.
“We need to solve this now,” he said during a Wednesday press conference.
Surrounded by 19 Republican legislators and Bethel Democratic Sen. Lyman Hoffman, Dunleavy explained his proposal would mean that 50% of a now-annual draw from the Permanent Fund would go to the dividend and 50% would go to state services.
The new formula would see Alaskans receive a roughly $2,500 dividend in 2022 compared to a $3,500 PFD if the 1982 statutory formula is used. That formula hasn’t been followed since 2015.
The governor’s proposed Permanent Fund split was introduced at the beginning of the legislative session, but on Wednesday he announced that he wants to add protecting the Power Cost Equalization Fund to the fiscal debate.
The idea is that the PCE Fund would be put into the constitutionally protected part of the Permanent Fund and that payments would be guaranteed to rural Alaskans to reduce their power bills.
Standing alongside the governor, Republican Senate President Peter Micciche of Soldotna said that Wednesday’s announcement was a “good start” for fiscal debates and would hopefully get legislators working together.
House Speaker Louise Stutes, R-Kodiak, made a quick appearance at the press conference to say that the House majority coalition wants to be part of the dividend solution. She later said that her largely Democratic caucus is still reviewing the plan.
Many of the Republican legislators standing beside the governor have supported a full statutory dividend. Wednesday’s plan was pitched as a compromise to end the dividend debates.
In the Senate Finance Committee, legislators learned about the impacts of the governor’s proposal to the state’s balance sheet.
Next year, Alaska would be around $1.3 billion in deficit.
Sen. Bert Stedman, R-Sitka, said budget cuts have been made but debt service payments have increased alongside pension obligations and costs for the Department of Corrections, meaning state expenditures have been relatively flat over the past five years.
The operating budget is over $4.6 billion in state dollars, meaning roughly one-third of state spending would need to be cut to close the fiscal gap.
“What we’d be staring into is a much higher probability of taxes,” Stedman said.
The governor’s proposal includes setting aside $3 billion from the Permanent Fund as a bridge to cover the deficit while legislators formulate a comprehensive fiscal plan, potentially with yet-to-be-determined statewide taxes.
Passing a constitutional amendment through the Legislature is a high hurdle to overcome. It requires a two-thirds vote of both the House of Representatives and the Senate followed by support from a majority of Alaska voters.
Hoffman, a fierce advocate of the PCE, told reporters that power cost equalization has been “a political football” in the state Capitol, but he didn’t know if protecting it would get 27 members in the House of Representatives and 14 Senators to pass the amendment.
“I don’t have a crystal ball. So if you want an answer to that, lend me yours,” Hoffman said.
The regular session will hit its constitutional limit at midnight on May 19. The Legislature has still not passed an operating budget which is required to keep state government functioning from July 1.
Speaking a few hours after the governor’s announcement, Stutes said the chance of passing Dunleavy’s proposed amendment before the end of the session is “slim to none.”
The governor suggested it may need to be fully resolved in the summer.
Stutes though echoed optimism expressed during the press conference that a broad group of legislators, and the governor, are committed to resolving the Permanent Fund dividend issue this year.
Editor’s note: This story has been updated with new information from the press conference.
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