Senate stalls over PFD amount
The clock is ticking towards important deadlines but legislators remain stalled over the size of this year’s Permanent Fund dividend checks.
Senators rejected the latest attempt to break the logjam with a compromise amount June 4 with just 10 days remaining in the special session; they also failed to pass a full, roughly $3,000 per person PFD.
Finance Committee co-chair Sen. Bert Stedman, R-Sitka, presented the Rules Committee with a proposal on June 3 to pay $1,600 dividends — equal to last year — with a mix of money totaling just more than $1 billion from the General Fund, Statutory Budget Reserve and the Higher Education Investment Fund. The bill was quickly advanced to the Senate floor despite facing clear bipartisan opposition.
Sen. Shelley Hughes, R-Palmer, immediately introduced an amendment to increase the PFD amount to equal the statutorily calculated amount of more than $1.9 billion, or about $3,000 per Alaskan, coming from the Permanent Fund’s Earnings Reserve Account, which holds about $19 billion of the roughly $64 billion fund value and is accessible by a simply majority vote.
Hughes and others said Stedman’s proposal fundamentally changed the PFD by drawing it from sources other than the fund.
Stedman and fellow Finance co-chair Sen. Natasha von Imhof, R-Anchorage, have been among the most ardent opponents to appropriating from the fund in excess of the 5.25 percent of market value, or POMV, draw passed just last year.
Doing so would set the dangerous precedent of spending above a sustainable annual amount and could very well lead to the long-term degradation of the fund’s value, they stress.
“We need to get away from the ‘me-me’ generation attitude and look to the future,” Stedman said on the Senate floor. “I think protecting the corpus of the Permanent Fund exceeds the benefit in any year of a dividend.”
Hughes said her amendment, which passed 10-8, would not have to overdraw the Permanent Fund if the Finance co-chairs would agree to adjust the funding sources in the budget to make it jive with paying a collective $1.9 billion PFD from the Earnings Reserve as residents expect.
“I get the math but right now trust is more important,” said Hughes, referring to the belief that the public does not trust lawmakers to make the appropriate decisions after three years of deviating from the PFD formula set in law amid large and ongoing state budget deficits.
Former Gov. Bill Walker vetoed half of the PFD appropriation in 2016 in an action that was eventually upheld by the Supreme Court, and the Legislature followed that precedent in 2017 and 2018 to ignore the statutory formula by setting the dividend amount at $1,100 and $1,600, respectively.
Stedman noted that a formula-funded PFD would mean violating the POMV statute, a fact many legislators gloss over.
“Frankly, we’re running out of liquidity and room to maneuver so something’s got to give,” he said.
The fiscal year 2020 POMV draw will be roughly $2.9 billion.
Anchorage Republican Sen. Chris Birch, who unsuccessfully proposed an amendment to pay the roughly $900 per person PFDs that would be available with a balanced budget under the POMV draw, called Hughes’ proposal “the height of big spending.”
He emphasized that Alaskans receive the benefits of their collectively owned resources through government services provided without personal taxes, not just the PFD.
“This ($3,000) dividend erodes public confidence in our ability to protect the Permanent Fund,” Birch said.
Von Imhof insisted that making continued draws on the Fund equal to what Hughes proposed would drain the Earnings Reserve — the spendable portion of the Permanent Fund that proponents of a full PFD note currently has nearly $19 billion — by 2025.
Gov. Dunleavy issued a statement June 3 in response to Stedman’s proposal in which he promised to veto the bill and said, “it would kill the Permanent Fund Dividend as we know it.”
The governor has said any change to the PFD should only be made after a public vote on the plan.
While there were enough votes to amend Stedman’s bill on the Floor, which requires a majority of the senators present, there were not enough votes to pass it to the House, which requires 11 votes, or a majority of the full body. That’s because Sens. Tom Begich, D-Anchorage, and Mike Shower, R-Wasilla, were excused from voting.
Shower, who Walker appointed in early 2018 to replace then-senator, now Gov. Michael J. Dunleavy in the Senate and was elected to a full term last fall, said via social June 1 media that he has used up all of his personal leave at his primary job and would have to be excused from much of the remainder of the special session, which ends June 14. Shower is a pilot for FedEx.
The June 4 floor debate exemplified the split in Senate leadership over the PFD, as Senate President Cathy Giessel and the co-chairs of the Finance Committee voted against Hughes’ amendment while current Senate Majority Leader Mia Costello, R-Anchorage, supported it.
“The dividend was created to protect greedy politicians from spending the people’s fund,” Costello said, adding she is open to discussing a new PFD formula, but the historical formula should be followed until it is changed.
Bills to change the formula in both the House and Senate were soundly rejected by the public during testimony earlier in the year.
Where lawmakers go from here is unclear. The House Majority coalition has agreed to a less-than-full PFD to avoid overdrawing the Permanent Fund or again dipping into savings accounts, but the Senate is split on the issue while Dunleavy continues to demand a full PFD with the threat of budget vetoes looming if the Legislature doesn’t send him one.
House Speaker Bryce Edgmon, I-Dillingham, said in a statement after the Senate happenings that the Legislature needs to pass the operating budget that is largely agreed upon to avoid a government shutdown July 1. Layoff notices are also expected to go out to state employees June 14 if the Legislature doesn’t pass the budget by then.
“Today’s vote in the Senate perfectly illustrates why an operating budget has not yet been enacted: debate over the amount of this year’s Permanent Fund Dividend is consuming the Legislature,” Edgmon said June 4. “This is why we believe the Legislature should first pass a responsible budget to provide students, elders, and business leaders certainty in the critical services they rely on. Then we can focus on the many important questions surrounding the future of the Permanent Fund.”
The House also has yet to pass the capital budget, but that could be done after July 1, as has been done in recent years.
Elwood Brehmer can be reached at [email protected].