Analysis: Fourth special session of Legislature ends quietly with no results. What comes next?

The fourth special legislative session called by Gov. Mike Dunleavy ended Nov. 2, with no result.

The few legislators who were in Juneau, and didn’t live there, just quietly left down.

No speeches or press releases.

Gov. Mike Dunleavy, obviously disappointed, issued no statement.

The next act comes in January when the regular 2022 session begins. Meanwhile, exhausted lawmakers get a break.

The special sessions, all four of them, were called by Dunleavy to deal with state fiscal changes and to stabilize the Permanent Fund Dividend, or PFD, at higher level.

The governor was hoping that the Legislature would approve a constitutional amendment he proposed for a new formula to calculate the dividend. Under the plan it would be before for voters in 2022 along with a constitutional amendment for a cap on the state budget.

Neither was approved, or even got to a vote in the state House or Senate.

The same thing happened through the summer in the third, second and first special sessions through the summer as well the regular session, which ended June 28.

Although the governor is frustrated, the unresolved PFD squabble really doesn’t affect overall state finances.

The FY 2022 budget is approved and a modest $1,100 dividend has been issued that will put $739 million into the economy. Deficits that were expected now appear to be history, thanks to new estimates for higher oil revenues.

Alaska Permanent Fund income is also rising in strong financial markets and part of this is shared with the state for budget support. Oil production is holding steady, too. So far, there seems no immediate problem.

However, there is still this challenge: The annual preoccupation with the PFD detracts from other state business. Mat-Su Sen. Shelley Hughes says the dividend debate this year, for example, derailed an important bipartisan initiative she supported that would expand early childhood education as well as enhanced literacy teaching, which is also important to the governor.

Without having the PFD calculation in a formula agreed on by legislators (an existing formula set in the 1980s is considered obsolete) there will be arguments every year on how much the dividend would be, with these typically coming at the end of the legislative session with other issues like the budget also on the table.

One of the governor’s motivations this year was to settle the matter so that it doesn’t take so much of legislators’ time and attention. Dunleavy prefers a constitutional amendment because, unlike a state law, it can’t be changed at the whim of whoever happens to control the state House and Senate.

However, the idea got little traction in special sessions this summer.That is partly because Dunleavy is running for reelection in 2022, and his detractors in the Legislature don’t want to hand him a victory just before he faces the voters.

It’s quite possible that with an improved revenue outlook the Legislature may look more favorably on a large dividend next year, even one calculated along the line of the governor’s “50-50” fiscal plan.

This splits revenues from Permanent Fund earnings now shared with the state, with half allocated for budget support (100 percent now goes to that) and half for the dividends. In 2022 this would pay a dividend of about $2,300 compared with $1,100 appropriated this year by the Legislature.

The state Legislative Finance Division, in projections updated Oct. 22, assumed a $1,100 PFD and a $387 million deficit for next year, FY 2023. However, rising oil revenues and higher shared Permanent Fund earnings will change this calculation, erasing the deficit, if the higher income actually appears.

However, if the governor feels frustrated at the lack of progress on his proposals to there is also some thinking that he might throw his support behind a new constitutional convention, and to secure a new PFD formula that way.

The question on the convention, whether not to have one, is required by Alaska’s constitution to be on the general election ballot every 10 years. It appears again in 2022.

A constitutional convention, however, could get messy if the voters approve one. Besides the dividend a host of other issues would be pushed forward by advocacy groups. Right-to-life activists will get busy as well as pro-choice groups, both pushing to have their issues voted into a new constitution.

The Permanent Fund itself could be opened up. The current prohibition against spending the corpus of the Fund which ois embedded in the 1976 amendment to the constitution, could be changed. One scenario on this is the Fund would be asked to finance big and risky but politically popular development projects that would lose money, dissipating the Fund.

Precisely this happened in Alberta with the Aberta Heritage Fund, the province’s version of a Permanent Fund of saved oil revenues

In Alaska, politicians have pushed this idea of the Fund financing a North Slope gas pipeline, but the Fund’s trustees have always been able to fall back on the language of the 1976 amendment that protects the Fund.

Rural Alaskans will likely push a subsistence preference in a constitutional convention, while pro-hunting and sports fishing groups will press proposals to ease state regulatory oversight.

Also, the constitutional requirement that the state’s natural resources are managed on a sustained-yield basis could also be under attack. The sustained yield principle for resources is one of the foundations of Alaska statehood.

Prior to 1959 Alaska resources, mainly fisheries, were over-exploited by out-of-state interests and gaining local control was a key objective of statehood.