Legislature passes budget, punts PFD to second special session

  • From left, Alaska state Sens. Lora Reinbold, Mike Shower, David Wilson and Shelley Hughes speak during a break in a Senate floor session on June 10, in Juneau. The Senate on Monday approved a compromise state operating budget but failed to revive a bill that would pay residents a full Permanent Fund dividend this year, with the four senators pictured coming up short in a 10-10 vote that killed the legislation. (Photo/Becky Bohrer/AP)

Legislators have done their part to at least end the threat of a government shutdown by passing a state operating budget, but what Gov. Michael J. Dunleavy will do in response remains to be seen.

The House-Senate budget conference committee resumed meetings June 8 after a three-week hiatus when it became clear the issue holding up everything else — the size of this year’s Permanent Fund dividend checks — could not be resolved in the Senate.

The House proceeded to quickly pass the nearly $4.4 billion unrestricted general fund operating budget along caucus lines.

In the Senate the budget passed unanimously, with minority Democrats approving the budget with $189 million in cuts in lieu of the governor’s plan for more than $1 billion in reductions.

While Senate Republicans touted it as the smallest adjusted operating budget the state has had in 15 years, resulting in a $600 million surplus, House minority Republicans called it “bloated” in a caucus statement.

House Minority Leader Lance Pruitt, R-Anchorage, was sharply critical of the fact that the budget does not contain a PFD appropriation.

“At this point, it is clear that the House Majority is completely unwilling to have the tough, voter-mandated conversations, and plans to dictate to the people what will happen with the PFD, regardless of what the law says,” Pruitt said.

The budget also does not settle the stalemate between legislative leadership and the Dunleavy administration over forward funding of K-12 education, which appears headed for the courts. How exactly that issue will impact school districts preparing for the upcoming year is an open question as well.

The House Finance Committee also picked the roughly $200 million unrestricted general fund and mostly non-controversial capital budget back up June 11 and readied it for a subsequent floor vote.

Legislation to pay full, roughly $3,000 PFDs according to the statutory calculation died 10-10 in the Senate, exemplifying the split over the issue that crosses party lines. That pushed lawmakers to change course and pass a budget without resolving the PFD to avoid a government shutdown July 1, which is the start of the 2020 state fiscal year.

Combined with the operating and capital budgets, paying full PFDs would require a draw on the Permanent Fund Earnings Reserve Account of about $1.5 billion beyond what is allowed by the 5.25 percent of market value, or POMV, structure lawmakers passed just last year.

The fiscal 2020 POMV draw is approximately $2.9 billion and House and Senate leaders have been resistant to make additional cash calls on the fund; they contend doing so would set a dangerous precedent and put the long-term value of the $65 billion Permanent Fund at risk.

Instead, the Legislature’s budget moves $10.5 billion from the $19 billion Earnings Reserve Account — which is spendable through simple majority votes — into the constitutionally protected corpus of the fund to cover inflation-proofing payments for the next nine years.

The Dunleavy administration had proposed a nearly $1 billion inflation-proofing payment for 2020, but the additional transfer could make it more challenging to pay the full dividends, and three years of forgone PFD amounts from 2016-18, that the governor has demanded from legislators.

Dunleavy did not issue a customary statement from his office after the Legislature passed the operating budget, but instead tweeted that he would “review and scrutinize” the budget and noted he could veto portions or all of it.

“I am absolutely determined to address the budget issues that have haunted #Alaska for years,” Dunleavy tweeted.

In an attempt to solve the PFD debacle, legislators approved a House resolution establishing an eight-member Bicameral Permanent Fund Working Group to examine the best path forward for the state in regards not only to PFDs but also the broader fund structure.

The working group, which was scheduled to meet for the first time June 12, consists on the House side of majority caucus Reps. Jennifer Johnston, R-Anchorage; Adam Wool, D-Fairbanks; Jonathan Kreiss-Tomkins, D-Sitka; and minority Republican Rep. Kelly Merrick of Eagle River. In the Senate, it is Republican majority Sens. Bert Stedman, R-Sitka; Click Bishop, R-Fairbanks; Shelley Hughes, R-Palmer; and minority Democrat Donny Olson of Golovin.

As of this writing, the Permanent Fund Working Group was scheduled to have two meetings to conclude the special session, which ends June 14.

Elwood Brehmer can be reached at [email protected].

06/12/2019 - 9:12am