Vetoes final with PFD session to come
Gov. Michael J. Dunleavy said he plans to continue to push for a Permanent Fund dividend calculated using the formula in state law. He also wants to keep cutting state spending, he said.
“My plan is to continue to work at reducing this deficit as much as we possibly can, as soon as we possibly can,” Dunleavy said during a conference call with reporters Aug. 20, the day after he announced his final decisions on the state operating budget for the fiscal year that started July 1.
Despite Dunleavy’s decision Aug. 19 to reverse a list of his prior vetoes, the governor said his budget plan moving forward remains the same: Cut state spending.
“I’d like to get this issue of the deficit settled sooner rather than later,” Dunleavy said.
The budget signed by Dunleavy this week formally has a surplus of $145.7 million, according to the state Office of Management and Budget. That takes into account a dividend reduced from the traditional formula and the draining of about $300 million from the state’s savings accounts: the Constitutional Budget Reserve and Statutory Budget Reserve.
The traditional formula calls for a dividend of about $3,000 — costing around $1.94 billion total. The budget crafted by legislators and signed into law by Dunleavy calls for spending about $1 billion on the dividend, or about $1,600 per person.
If the traditional formula is used to pay the dividend, there’s a deficit. If it isn’t, the deficit goes away.
‘There may need to be two checks’
In interviews on conservative talk radio shows earlier Aug. 20, the governor confirmed his intention to call the Alaska Legislature into a special session this fall to pursue a supplemental dividend payment above the amount already approved.
He said he believes the upcoming 2020 election will put pressure on legislators, a majority of whom have refused to approve a $3,000 dividend.
“There are a number of folks who don’t want to have an incomplete dividend hung around their necks,” Dunleavy told radio host Dan Fagan.
Speaking to talk show host Michael Dukes, the governor said, “I believe in talking to some of the legislators that having the sole focus on the PFD will — not using a pun here, Michael — will return dividends.”
On the radio and during the call with reporters, the governor said he intends to change his communications strategy and reach out directly to voters, in part because he is unhappy with news reports.
Dunleavy announced his budget decisions Aug. 19 in a pre-recorded video, and he told reporters that the announcement was a “direct appeal to the people,” and his office will continue to do that. When it comes to the dividend, he told Dukes, he hopes the strategy switch will help convince legislators to change their minds on the dividend.
“I am hoping the people of Alaska get agitated. I am hoping the people of Alaska really get on the phones and really start sending letters to their legislators,” Dunleavy said.
Anne Weske, director of the Permanent Fund Dividend Division, previously said that any PFD payment in October must be finalized by the end of August. Given that, any additional payment would come later.
“There may need to be two checks, one after another,” Dunleavy told Fagan.
The Legislature and governor disagree about the dividend in large part because paying a traditional dividend — at current levels of state spending — requires violating a spending cap approved last year.
Going above that cap increases the risk that the Permanent Fund will lose value, according to analyses by the Alaska Permanent Fund Corp. Some legislators have proposed a possible compromise: a change in the traditional payout formula in exchange for a one-time boost this year.
Dunleavy said during the call with reporters that if people want to discuss “a potential statute change and constitutional amendment, we can have that discussion, but first and foremost we need to complete this incomplete dividend.”
‘The right thing to do at this time’
For months, state lawmakers have wrestled with the PFD and spending on services.
The Legislature first cut $76 million from the state operating budget, according to figures from the Legislative Finance Division. Dunleavy then vetoed more than $400 million from that budget. The Legislature responded by passing a bill that added back most of that money.
On Aug. 19, Dunleavy cut more than $200 million of those add-backs before signing the bill. Again, away went funding for Medicaid, the state court system and school bond debt, among cuts to other programs and agencies. Dunleavy agreed to restore other funding, but the majority of the cuts remained.
Asked during the call about his reasons for cutting some programs and not others, Dunleavy said based on input from Alaskans and how late in the fiscal year final budget decisions were made “led us to conclude that adding money back into some of these areas would be the right thing to do at this time,” he said.
“Our plan is, as we move forward in building a budget for the following year, is to engage a number of these organizations and groups early on this fall and have the discussion as to how they can assist by working together with us to lower the state’s footprint with regard to these programs and these services,” Dunleavy said.
Dunleavy said that would also give groups more time to seek additional funding from other sources.
Next year, the goal is to end the legislative session in 90 days, he said.
That way, he said, “everyone has plenty of time to adjust to whatever budget realities will come out of this session.”
What will this year’s PFD be?
Though the governor and legislators have repeatedly mentioned a “$1,600 dividend,” this year’s payout has actually been estimated at $1,580, according to figures provided by Department of Revenue Commissioner Bruce Tangeman.
That’s because the Legislature appropriated (and the governor approved) a set total amount for dividend payments, and that amount will be divided by the number of applicants.
Legislators had estimated a slightly smaller number of applicants, leading the Legislative Finance Division to estimate a $1,597 payout on July 27.
This is the first year since 2015 that the state budget does not set a specific amount for the dividend.