Legislature should follow example of cooperation and compromise set by bipartisan fiscal working group, House Minority Leader Cathy Tilton says

Frustrated by stalemate on a durable state fiscal plan for Alaska and the annual squabbles over the Permanent Fund Dividend that, House Republican Minority Leader Rep. Cathy Tilton, R-Palmer, thinks the Legislature can build on the success of a special bipartisan task force that met extensively this summer and actually forged a consensus on a least a conceptual plan, as well as agreement on underlying numbers to support it.

“I’m optimistic after conversations with Speaker (Louise) Stutes of her commitment to move toward a stable fiscal plan. Admittedly, the lack of progress by the entire Legislature, thus far, suggests that any confidence in progress during the upcoming special session, must be quite reserved,” said Rep. Cathy Tilton, R-Palmer, the House Republican Minority Leader.

There are still signs of progress, however.

“Everyone was impressed with the results of the bipartisan working group, which included representatives from all four caucuses in the Legislature. It showed people can work together. The entire Legislature should take lessons from the group,” Tilton said.

Eight members of the group spent seventy-plus hours in meetings in July and August getting a handle on complex problems in state finances and ideas for stabilizing the PFD, the annual payment to citizens from Permanent Fund earnings.

“An opportunity missed in the third special session (in August) was to have members of the group present it to the full Legislature at one time so that all 60 members get the same information. This wouldn’t have been for debate but to have members of the working group explain their reasoning in coming to the conclusions they did. I think this could have helped bring people together,” Tilton said.

There is precedent for the Legislature meeting as a group, a “committee of the whole,” to hear presentations on critical topics, and all 60 legislators now gather to hear the governor’s annual state-of-the-state address as well as yearly presentation by the congressional delegation. The Senate and House have also met as a whole to hear presentations on important topics.

The Republican group Tilton leads in the House has considerable cloud. Given its numbers, which include almost half of the 40-member state House, the House Republican Minority has a major influence in decisions, particularly on constitutional amendments where Minority House Republicans are needed to get the required three-quarters majority.

Among points at issue in the fiscal debate, is the idea of “stairstepping” the PFD from its current amount to a larger amount under the governor’s “50-50” plan (this is in SB 53, currently in Senate Rules Committee).

Tilton said there are two decisions to be made, one in coming down to the PFD amount paid under the 50-50 plan, about $2,300 in 2021, from the amount specified in the current statute that guides calculation of the dividend, which would be about $3,000 in 2021).

The governor has accepted the 50-50 PFD as well as some members, but not all, of the House Republican Minority.

“It’s a big step for people to come down to the 50-50 amount, much less agree to a graduated stairstep up to 50-50 from the current amount of $1,100,” Tilton said.

There appears to be more unity, Tilton said, among House Republicans on a constitutional amendment to merge the protected Permanent Fund principle with the unprotected Earnings Reserve Account, so that the Fund would operate like other large endowment.

Members of the House Minority also appear open to the idea of moving the Power Cost Equalization Fund (which supports rural residential power price support) to the protected Permanent Fund principle, she said. “Some members questioned this but may wind up in support if it is needed to get the large fiscal package,” she said.

There is also unity on including the Permanent Fund Dividend in a constitutional amendment, but just how this is done is still open, Tilton said.

The key decision here is whether the constitutional amendment should just allow for a PFD, with the amount to be calculated in a formula (such as 50-50) set in statute or whether the formula itself should be in the constitutional amendment.

Tilton said the need for a revised spending cap, in another constitutional amendment, is also something the House Minority is agreed on, along with other legislators, although details have to be worked out.

“For me, this is a key component for a package that would include a change to the PFD so that there would be downward pressure on the budget. It would make people more comfortable,” with the change to the dividend formula, she said. There are several proposals for the spending cap revision including HJR 7, SJR 6 (similar bills by the governor); HJR 301 by Rep. James Kaufman (R-Anch.) and in the Senate, SJR-301 by Sen. Robert Myers, R-North Pole. HJR 301 and SJR 301 are similar in language.

“My priority is to put an end to this political football we play every year because it prevents us from focusing on other important issues, including economic development. How many years can we go on with this, beginning a session so divided that we can’t even organize (the House) for a month. A lot of this revolves round the Permanent Fund dividend,” Tilton said.

While Tilton has reservations on whether the Legislature will agree on the foisal package, Senate Majority Leader Sen. Tom Begich, D-Anch., is cautiously optimistic.

However, just how interested many legislators are, now that the 2021 PFD is decided, will become known in the next few days, now that the special session has convened.

The bipartisan working group has put together a framework and some details are now spelled out in SB 53, which was on the Senate floor as the last special session adjourned but was pulled back to the Rules Committee, Begigh said.

“What SB 53 provides is a statutory framework for an escalating dividend through 2025 (approximately $1,100 this year to $1,300 in 2024) and then in 2025 a PFD based on the governor’s proposed ‘50-50’ plan, with half of the annual Permanent Fund payment going to the dividend, Begich said. He isn’t sure the full Senate, the House or the governor will accept the stair-step of PFDs to a 50-50 plan, however.

Resolving these other issues, however, might pave the way for a one-time extra draw for a supplemental dividend in December, bringing the full amount to $2,350 for the year. But much would have to happen to get there. If it shows progress Dunleavy might go along, possibly with the 50-50 funding formula in statute, if the deal includes a path toward constitutional amendments he wants in the fiscal package. Those would include amendments for a revised spending cap and a structural change to the Permanent Fund to merge the protected principle with the unprotected earnings reserve account so that all is protected (the Fund trustees have long pushed for this). Such a package could also include constitutional approval for the concept of a dividend but with the amount of the dividend to be set by formula (the 50-50 plan) that is in statute, replacing the obsolete PFD formula now in law.

Just how the reference to the dividend would fit into a constitutional amendment will likely be a point of contention, however. Some legislators are pushing for a more explicit monetary guarantee of the dividend, such as the 50-50 formula itself in the Constitution rather than statute.

However, others feel an explicit monetary formula in the Constitution may run into legal issues because it conflicts with the constitutional authority given the Legislature to decide on spending including for the dividend.

It would also conflict with other state responsibilities in the Constitution such as education and public safety. A reference to explicit funding for the PFD compared with responsibilities like education, where funding decisions are left to the Legislature, would seem to give the dividend a higher priority which might make it vulnerable.