Using the Permanent Fund for state expenses: AK Legislature clears the way

With Gov. Bill Walker making rare appearances in the galleries, the Senate and the House both passed Tuesday the latest version of Senate Bill 26, the measure that allows for controlled use of the Permanent Fund for state government expenses.

The bill was originally sought by Walker last year, though it’s changed considerably from the version he introduced as a fiscal plan for the deficit-plagued state budget.

Supporters say the new, slimmed-down version of the bill would protect Permanent Fund dividends deep into the future by ensuring that investment earnings from the $64.6 billion fund aren’t overly tapped — 5¼ percent of the principle for three years, and 5 percent after that.

But some opponents said that because the bill is just a law, and the Legislature is legally free to ignore state statutes, Alaskans in the future could be shocked by losing their dividends.

“This bill doesn’t matter. You can ignore the rules,” said Sen. Bill Wielechowski, D-Anchorage, who lost a lawsuit in the Alaska Supreme Court challenging an earlier dividend cut. “You could take out 5.5 percent, you could take out 6 percent, you could take out 10 percent — and there’s nothing anyone in the state of Alaska could do to stop you.”

Wielechowski said the Alaska Constitution should be amended by adding the dividend program, creating law that the Legislature couldn’t break — like it has the statutory 90-day session limit or previous dividend cuts. The Alaska Constitution allows sessions to last 121 days.

The vote took place on Day 113. Senate Bill 26 was one of the important pieces of legislation that lawmakers needed to pass before they could adjourn.

Though the compromise was approved Tuesday, both chambers had approved versions of the bill last year and could have created the compromise through a conference committee in 2017.

Speaking for the bill, Sen. Anna MacKinnon, co-chair of the Senate Finance Committee and a Republican from Eagle River, said she hoped the measure would encourage future legislators to consider what they want to do with the dividend, “we all hope in better times.”

The other Finance Committee co-chair, Sen. Lyman Hoffman, D-Bethel, said the bill was “monumental” for how it restructured the Permanent Fund. Even though he might have wanted something else, Hoffman said, “We are a legislative body that needs to compromise.”

“Everyone said more work needs to be done,” Hoffman added, “but I don’t believe the right step would be to leave this decision, even though it doesn’t go all the way, as originally intended, to leave it for another legislative body.”

Sen. Berta Gardner, D-Anchorage, complained that the bill amounted to a tax on Alaskans.

“We remain the only state in the nation without a broad-based tax — a statewide sales tax or a statewide income tax — and what we have done to address that is simply to effectively live on our savings, which are almost gone, except for the Permanent Fund,” Gardner said.

But MacKinnon said the Legislature had run out of options.

“There isn’t another choice before us at this point in time to balance our budget,” she said. “To regain stability for our economy, I urge you to vote yes on the compromise before us.”

The Senate passed the bill 13-6, with the five members of the Democratic minority voting against it. They were joined by maverick Palmer Republican Shelley Hughes, who has left the Republican-led Senate majority.

In the House, the 23-17 vote was more mixed. Democratic-led majority members Harriet Drummond, Scott Kawasaki, Sam Kito, Gabrielle LeDoux, Justin Parish, Geran Tarr and Majority Leader Chris Tuck voted against it. They they were more than offset by Republicans Chris Birch, Jennifer Johnston, Gary Knopp, Chuck Kopp, Lance Pruitt, Dave Talerico, Steve Thompson and minority leader Charisse Millett, who voted for it.