Dunleavy to get pushback on plan for $3,900 PFD this year

Gov. Mike Dunleavy’s proposed FY 2024 budget introduced Dec. 15 promises fireworks with the Legislature over the governor’s push for an estimated $3,800 Permanent Fund Dividend, or PFD, that would cost $2.4 billion.

Revenues are meanwhile down $1.1 billion for the the current-year FY 202 from estimates by the Department of Revenue last March, when oil prices were higher. Revenue will be down another $400 million in FY 2024, the financial year starting next July 1. The revenue department also released its fall forecast Dec. 15.

The governor’s PFD proposal will get a frigid reception from most of the new Senate majority although some in the coalition will favor the plan. The House, which has yet to organize, will also play into the coming debate.

Last year Dunleavy favored a more modest “50-50” PFD plan, which would have split the annual Permanent Fund contribution to budget between the dividend and budget support.

However, the governor has now reverted to his original push for a “full” dividend, which is based in a 1980s-era formula in state law, and which would result in a higher amount in the dividend.

Financial analysts say both the full dividend and the more modest 50-50 plan would create deficits, requiring spending reductions, unless there are also new revenues.

For new income the governor is proposing sales of carbon tax credits from undeveloped state forest lands but there are questions as to practical the idea is, at least as a source of substantial income.

Legislators are mixed in their reactions to the proposed budget.

Incoming Senate President Gary Stevens, R-Kodiak, said:

“This initial budget proposal is a good starting point for the upcoming legislature to begin their work. With any proposal, we won’t agree on every principle.”

“I do have some concerns with the proposed PFD amount, no additional resources for education funding, a skeleton version of a capital budget, and the possibility we may need a supplemental budget for FY 2023 because of the decline in oil revenues,” Stevens said in a statement.

Sen. Shelley Hughes, R-Mat-Su, was more upbeat: “As I have stated before, our efforts must continue to be focused on finding ways to decrease our operating budget to a sustainable level while providing for essential services and meeting our obligations including the dividend. Unless the (dividend) law is changed — which it has not been — we should adhere to the (PFD) formula prescribed by law.”

“The carbon (tax credit) monetization is a positive opportunity as are efforts to bolster student learning through evidence-based reading instruction,” in the Alaska READS act passed in the 2022 session, Hughes said in a statement.

Sen. Mike Shower, R-Mat-Su, said: “I am pleased to see the governor’s initial budget takes the path of fiscal restraint. It prioritizes funding state programs with no implementation of new taxes. Public safety, education, PCE (Power Cost Equalization), are included as well as a capital budget taking full advantage of federal money to continue investment in Alaska infrastructure.”

“Interestingly, it still fully funds a PFD helping average Alaskans in our struggling economy, while providing a needed boost to our private sector,” Shower said.

Rep. DeLena Johnson (R-Palmer), a current member of the House Finance Committee said: “The Governor brought in a balanced budget with funding for many programs Alaskans want and need. Of significant note include the highest level of funding for the Alaska Marine Highway System in recent memory and fully funding K12 education with a modest increase in the base student allocation (BSA) resulting from the passage of the Alaska READS act.”

“Despite declining revenue due to declining oil prices in the fourth quarter, Governor Dunleavy offered a balanced budget with only a modest draw of $265 million from the Constitutional Budget Reserve,” Johnson said.

“The Governor’s budget proposal is 15 percent lower than FY 2023 (the current budget year, and approximately 4 percent lower than FY19, his first budget as governor,” she said.

The state House has yet to organize, so it is unclear what the dynamics will in that body on the budget and PFD. The Senate has a Republican-Democrat coalition and many of its leaders can be expected to be cool toward Dunleavy’s PFD. However, a lot will happen between January, when the Legislature convenes, and its scheduled adjournment in May, 2023.

The 33rd Alaska State Legislature convenes in Juneau on Jan. 17, , when they will take up the Governor’s FY24 budget.