The Senate Finance Committee’s proposed solution for the interminable debate over the PFD is to cut the payout to what budgeters say would get the state’s current financial situation under control and then raise the amount when—and, critically, if—legislators get around to improving the state’s budget picture.
In technical terms, the plan would cut the dividend to 25% of the spendable earnings of the Alaska Permanent Fund—an amount that would equate to a PFD in the range of $1,300 over the next few years—with the plan ratcheting the dividend up to 50% of the spendable earnings—about $2,700—once legislators implement additional revenues.
While the plan has general support in the Senate (but not in the House, which is moving forward with a budget containing a larger PFD, increased K12 funding and a $600 million deficit) as a way to finally break through the gridlock over the dividend, the critical question for them is just how much the state’s financial picture needs to improve to trigger those larger dividends.
The answer, so far, has been bigger and higher and sooner. It’s drawing mixed receptions.
In a new version of Senate Bill 107 rolled out this morning, legislators would have over the following three Legislatures (by 2031) to implement $1.3 billion in additional revenue and put an extra billion dollars in the state’s key savings account above where it sits today.
Pete Ecklund, an aide to Senate Finance Committee co-Chair Sen. Bert Stedman, told the committee that the combination of measures is aimed at bringing stability to the state’s financial picture and is based on a more realistic look at the governor’s long-term budget projections, taking into account K-12 spending and the state’s capital projects budget.
He said the plan would make the new dividend proposal “durable and achievable.”
But several committee members were skeptical.
Senate Finance Committee co-Chairs Sens. Lyman Hoffman and Donny Olson raised concerns that the bill’s standards were unrealistically high. Hoffman, who had helped draft the resolution that set up the Constitutional Budget Reserve (the account that’d need to grow to $3.5B under the plan), said that savings provision is well outside the realm of the dividend.
Sen. Olson asked his aide, Ken Alper, what the legislation would do for the dividend.
“The new version would make that hurdle somewhat higher. It would make it harder to get to the point—quite possibly impossible—where the larger, so-called 50-50 dividend would take effect in future years,” he said. “In the end, the harder it is to make that step, the more likely it is we stay at the 75-25 level—or the smaller dividend level—indefinitely.”
Hoffman—who has backed the general idea of a stepped approach to the size of the dividend—said bringing some finality to the dividend discussion is one of the most important things the Legislature can do this year, but putting extra-high hoops in the plan would deter legislators altogether.
“(This bill) is one of the most important pieces of legislation this Legislature is facing. Without the establishment of a split bill, we are heading down a cliff that I believe will be irreversible,” he said. “Those changes, as was stated, could deter us, particularly the $3.5 billion.”
Sen. Stedman, who has pushed for a more conservative approach to balancing the state’s budget, defended the changes. He said the previous version of the legislation, which included a trigger of $900 million on new revenue and no requirement on savings, could push the state into “a position worse than where we are today.”
The updated version of the legislation was adopted on a 4-3 vote, with Sen. Stedman being joined by Sens. Click Bishop, Kelly Merrick and Jesse Kiehl. No votes were Sens. Olson, Hoffman and Sen. David Wilson. The committee took no further action on the bill, which is not currently scheduled to be heard for the rest of this week.
Matt Acuña Buxton is a long-time political reporter who has written for the Fairbanks Daily News-Miner and The Midnight Sun political blog. He also authors the daily politics newsletter, The Alaska Memo, and can frequently be found live-tweeting public meetings on Twitter.
