Alaska Senate’s plan for $5,500 in cash payments is dead, but what happens next?

The Alaska Legislature has yet to pass a budget and approve a PFD amount with two days left in the legislative session.
Published: May. 16, 2022 at 7:34 PM AKDT
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JUNEAU, Alaska (KTUU) - The Alaska House of Representatives voted on Saturday to reject the Senate’s budget with $5,500 in cash payments to each eligible Alaskan, sending the bill to another round of negotiations in the final days of the legislative session.

A conference committee has been busy negotiating the differences between the House and Senate’s budgets, so a single bill can pass through both chambers and onto Gov. Mike Dunleavy’s desk. The biggest decision for the six committee members will be the size of the Permanent Fund dividend.

House Speaker Louise Stutes, R-Kodiak, said on Saturday that she expects the Senate’s $5,500 in cash payments to be reduced through negotiations, but she says she doesn’t know what the final amount will be. Sen. Tom Begich, D-Anchorage, said “there is no way we are paying out $5,500.”

He said his caucus of six Democrats is pushing for an amount closer to a full $4,200 dividend. The Senate’s budget has been called unbalanced and defective by some legislators because it relies on $1 billion being drawn from savings to cover a deficit. If the oil price drops, the deficit would grow and at least one savings account could be wiped out.

A coalition of Alaska businesses urged the House to reject the Senate’s budget, saying that state savings accounts need to be replenished and that it risks taxes being imposed in the future. Resource development groups made a similar plea to legislators and so did Alaska’s unions.

On the House floor, some legislators called deficit concerns “fear mongering,” and they recounted emotional stories from Alaskans struggling with high inflation and the high cost of fuel. There are particular concerns about the impact of skyrocketing energy prices in rural Alaska.

But what will the size of the PFD be?

Sen. Mike Shower, R-Wasilla, successfully introduced the amendments to the Senate’s budget to increase the cash payments received by Alaskans this year. But he stressed at the time that the $5,500 figure was unlikely to be the final amount approved by legislators.

“I also want the people to hear loud and clear,” Shower said last Monday. “That if we start where we are, that’s the maximum you’re going to see. You’re probably going to see less.”

The Senate’s budget passed with a full statutory Permanent Fund dividend at over $4,200 and a separate one-time energy relief check at $1,300, adding up to cash payments over $5,500 in total. The House’s budget has a $1,250 dividend and the same $1,300 energy relief check. Added together, both checks would be over $2,500.

During the three-day House budget impasse, several lawmakers said that the governor had pledged to veto the $1,300 energy relief check — and other spending — to reduce the Senate’s budget by $1 billion. The idea, legislators say, was to encourage the House to pass the Senate’s budget.

Dunleavy has stayed silent on any veto promises made to legislators. Jeff Turner, a spokesperson for the governor’s office, would again not answer those questions on Monday, and would also not answer if there is a minimum PFD amount that the governor can support.

“Governor Dunleavy looks forward to learning what amount the conference committee determines will be appropriated for this year’s PFD,” Turner said by email.

At the beginning of the legislative session, Dunleavy had called on the Legislature to pay a 50-50 PFD at over $2,500 and the remainder of a 50-50 dividend for last year, which is estimated to be over $1,300. Combined, both checks would be over $3,700.

Late last month, Dunleavy amended that and said that legislators should approve “at least” a $3,700 dividend. He said he wanted to see a final PFD amount as close as possible to a full $4,200 dividend.

“We know that inflation is going through the roof; it’s not just fuel, it’s transportation, it’s lumber, it’s almost everything across the board,” Dunleavy said in April. “We’re seeing inflation like we’ve never seen before.”

Some supporters of a full PFD are focusing on delivering that this year, and are ignoring the energy relief check. That means the $5,500 in checks would not be paid out and a compromise figure would need to be approved.

The Senate has three members on the budget conference committee. Sen. Bert Stedman, R-Sitka, and Sen. Click Bishop, R-Fairbanks, are representing the Senate majority caucus. Both senators have opposed big dividends over deficit concerns, and concerns that the Permanent Fund could be drawn down.

Sen. Bill Wielechowski, D-Anchorage, is representing the Senate minority caucus. He has been a longtime full PFD supporter, arguing that reducing it disproportionately hurts lower and middle income Alaskans. He has said Alaska should increase taxes on oil producers to bridge fiscal gaps, which has been strongly opposed by the industry.

On the House side, Reps. Kelly Merrick, R-Eagle River, and Dan Ortiz, a Ketchikan independent, are representing the bipartisan House majority coalition. Rep. Bart LeBon, R-Fairbanks, is representing the House Republican minority caucus. All three House legislators voted to reject the Senate’s budget.

But their personal positions are arguably less important than what the majority of legislators will ultimately support. Too high a dividend risks losing votes on the final budget from fiscal conservatives, too small a dividend and other lawmakers could vote to reject it.

The conference committee members were cagey on Monday about discussing the final PFD amount and whether the $5,500 figure is dead. Stedman said that the committee hasn’t started talking about the dividend yet, but he said he agreed with an Anchorage Daily News editorial entitled, “Even drunken sailors know better,” which was critical of the Senate’s budget.

Bishop wouldn’t comment on the $5,500 figure but said there are no guarantees in the Capitol. Merrick said that size of cash payments is “unlikely.” LeBon said it is “less likely than likely.” Wielechowski said that it is part of negotiations.

There had been a fairly broad consensus of legislators aiming for a dividend, and energy relief check, that added up to around $2,500. The three-day House budget impasse and debates over the $5,500 in payments has increased the figure acceptable to voters, some legislators say, meaning the ultimate dividend figure could be closer to $3,700 or the full $4,200 dividend.

The November election is a factor with the governor up for reelection — along with 59 of 60 legislators — due to redistricting. But if a majority of legislators have agreed to a dividend figure for this year, they aren’t saying, and time is running out to make a final decision.

The legislative session must end by Wednesday at midnight and the Legislature is constitutionally required to pass an operating budget. The budget is required to fund state government for the next fiscal year, which begins on July 1, or there would be a shutdown. If a budget does not pass before the end of the session, two-thirds of legislators would need to support a 10-day extension. The governor could also call his own special session.

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