6 days into special session, Alaska’s budget progress has been slow with dividend debates still looming

Updated: May. 26, 2021 at 7:45 PM AKDT
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JUNEAU, Alaska (KTUU) - Almost one week into a 30-day special session, the Alaska Legislature’s progress on passing a budget and a Permanent Fund dividend has been slow.

The House of Representatives passed a budget late into the regular session after taking one month to organize. There were also delays waiting for federal guidance on how to spend from the latest COVID-19 relief package. The Senate then raced to pass a budget with a $2,300 dividend last Wednesday in the final hour of the regular legislative session.

Since the special session began last Thursday, only one substantive committee hearing has been held to resolve the differences between the budgets passed by the House and the Senate so a single bill can pass through the Legislature. The meeting on Wednesday afternoon dealt with largely uncontroversial differences between the two bills.

There had been hopes to pass a budget and adjourn before the Memorial Day weekend and then reconvene in August for another special session to tackle the state’s fiscal challenges. That timeline has been thrown out the window.

Nome Democratic Rep. Neal Foster oversees the operating budget in the House and said the Legislature doesn’t have a planned date to adjourn the special session.

“Speaking with the Senate, I think we’ve come to the conclusion that we’re just taking things one day at a time right now,” he said.

Pressure is on to pass an operating budget before layoff notices are sent out to 14,346 state employees ahead of the start of the next fiscal year on July 1. If a budget does not pass by then, Alaska’s state government would shut down for the first time.

Brent Wittmer, a spokesperson for the Alaska Department of Administration, said the goal is to provide 30 days of notice to state workers of a looming shutdown, but the administration must send out layoff notices 10 days before that is set to happen.

“There is significant costs associated with that,” said Sen. Bert Stedman, R-Sitka, on Monday.

He explained that when the Legislature has come close to a shutdown in the past, state employees have rushed to schedule medical appointments and cash in leave, costing the state millions of dollars.

Foster had suggested peeling off the operating budget from a bill that also contains the capital budget and the Senate’s dividend to pass it quickly and avoid that from happening. The plan now is to keep debating them all together to give legislators “maximum flexibility” to decide where funding comes from.

“It is all tied together,” Foster said of the appropriations bills, the dividend and how to spend $500 million in federal COVID-19 relief.

There have been conflicting accounts for the slow progress in the Capitol: From key legislators being away from Juneau for work and other responsibilities, which is typical as sessions drag into the summer, to organizational issues in getting committee work ready and then deadlock over the dividend.

The sharpest policy divide between legislators remains over the PFD. There are those who support a larger dividend than has been paid in recent years and those who are concerned about overdrawing the Permanent Fund by $1.5 billion, as would happen under the Senate’s dividend proposal.

Foster said the House majority coalition has a strong desire to not overdraw the fund. The nonpartisan Legislative Finance Division has previously estimated that for every $1 billion taken out of the fund, the state would lose $50 million in investment earnings each year in perpetuity.

Senate Minority Leader Tom Begich, D-Anchorage, voted for the Senate’s $2,300 dividend, following a new 50-50 formula supported by the governor, but said that was a starting point for a compromise. He suggested a $1,000 PFD could get enough support to pass.

One option is that that dividend could pass now and the August special session could see it increase during broader fiscal debates.

Senate President Peter Micciche, R-Soldotna, also voted for the 50-50 dividend. He said if the House doesn’t bend on the $1,000 dividend figure that could be an option, but noted there were dozens of other ideas floating around the Capitol.

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