The Senate today passed a new formula for the Alaska Permanent Fund dividend, setting it at a level that backers say should be sustainable without new taxes, about $1,300. The legislation also allows for bigger dividends in the future, but only if the Legislature can generate new revenue and put more into savings.
The stepped approach has gained traction in the Senate this session as a way to break through the interminable gridlock over the dividend and the state’s fiscal plan. While it’s neutral on the form of new revenue, it would give legislators an opportunity to double the PFD if they hit benchmarks of $1.3 billion in additional revenue and grow the state’s primary savings account to $3.5 billion by 2031.
In technical terms, the legislation would devote 25% of the spendable earnings of the Alaska Permanent Fund for the dividend. It would step up to 50% if the state can hit those benchmarks (or, as is always an option, pass a new formula in the future or put additional money into the dividend through the budget process).
The legislation faces unlikely chances in the Republican-led House but could serve as a legislative vehicle for pieces of a state fiscal plan.
The benchmarks are high and perhaps impossible to hit. Still, Senate Finance Committee co-Chair Sen. Bert Stedman says it takes into account the cost of a larger dividend as well as the costs that the state will likely have in the near future, like increased public school funding, infrastructure spending and the need to keep up with inflation.
“We haven’t built any new schools in several years,” he said during the floor debate. “There are areas of the state that need new schools, and one of our fundamental tasks is to build them and educate our children. … We factored in all that stuff, and that’s where we came up with $1.3 billion.”
The proposal was met with opposition both from far-right Republicans outside the Senate’s 17-member supermajority and from several members within. Republicans said the benchmarks were impossible to hit and the legislation was a de facto cut to the PFD that they wouldn’t support, claiming it would lead to runaway spending and taxes. A handful of Anchorage Democrats also voted against the legislation, with several voicing concern that other elements of the state’s fiscal plan—namely new revenue—weren’t likely to find traction.
A shared theme between the two groups was bristling at the idea that the taxes would pay for the dividend. Sen. Matt Claman, D-Anchorage, said his constituents might support taxes, but only if it supports state services and not a cash payout.
“I see this bill as an example of places where we are suggesting there will be taxes coming, and the purpose of those taxes will be primarily to pay a dividend,” he said. “I believe the majority of Alaskans are actually in a place where they don’t want to see new taxes, and they want to follow the constitutional direction of using public funds to pay for public safety, public education, public health and capital investment.”
Republicans argued it was a matter of framing and that the large PFD they favor would be drawn first from the spendable earnings of the Alaska Permanent Fund while services would come out of the new taxes (a distinction without a difference).
Still, most senators supported the legislation despite some hangups about the political realities surrounding it. They argued that government services such as public safety, public education and road plowing are all valuable services that deserve stable and dependable funding.
Sen. Lyman Hoffman, D-Bethel, carried the bill on the floor and, in closing, recalled that the Senate passed a change to the PFD formula back in 2016 before the House rejected it. He said the state had been essentially stuck since then with the fight over the size of the dividend consuming all the political attention, and it’s time to move on.
“Everyone says the current law is unaffordable. I think everyone in the room realizes that, but unless we come up with some method that pins something down, I firmly believe we’re stuck in the mud. We’re moving nowhere fast,” he said. “This is a major step forward. I would urge members to give us a chance to move forward so we can address other issues that this state needs to address.”
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.
