Mat-Su residents can weigh in on PFD, other state finance issues, at special legislative hearing planned Friday

Mat-Su residents will have a chance to weigh in on state financial issues including a Permanent Fund Dividend, or PFD, at a public hearing scheduled Friday evening in Wasilla.

Right now there is no PFD in the state budget to be paid later this year. Whether there will be one, and of what amount, is to be hammered out in another special session of the Legislature now scheduled to begin next week, on Aug. 2.

The Legislature’s bipartisan “Comprehensive Fiscal Plan Working Group” includes Mat-Su lawmakers and has been meeting to develop recommendations, including on the PFD, for the special session.

The group will hold a hearing Friday in Wasilla from 6 p.m. to 9 p.m. at the Mat-Su Legislative Information Office, with meetings also planned Anchorage on Thursday and Saturday in Fairbanks.

There are as yet no proposals from the working group. The hearings are being held to test public sentiment.

To date the group has been gathering information on revenues, spending and state reserves including the Permanent Fund, now over $80 billion in market value.

It’s uncertain how comprehensive the recommendations will be for a special session starting next week. Besides an idea of putting the PFD in the constitution there are also proposals for a new “cap” on the state budget in a formula in the constitution along with a constitutional amendment requiring voter approval of any broad-based new revenue measure like an income or sales tax.

The dividend has been a contentious issue for several years and particularly this year, with disagreements over the amount of the annual payment to citizens causing the failure of the Legislature to fail to agree on withdrawing money from the Constitutional Budget Reserve, or CBR, to fund parts of the budget and to reverse a required “sweep” of special purpose funds into the CBR, which has restricted access.

A three-quarters vote of both the House and Senate needed to access funds in the CBR and to reverse the sweep. Both approvals require 30 of 40 members of the state House and 15 of 20 state senators.

Fifteen senators approved the actions earlier but approval did not come in the House after the House Republican Minority failed to vote to give the needed 30 “yes” votes in the House.

The underlying objection by the House Republicans was the failure of other legislators to approve Gov. Mike Dunleavy’s proposals for constitutional amendments that among other things would guarantee a higher PFD.

When adjourned in late June the Legislature approved a budget with a $1,100 PFD but funded it partly with money from the CBR. When the three-quarters vote for the CBR withdrawal failed, there was only enough in the budget for a $525 PFD. The governor vetoed that, arguing Alaskans expect a larger dividend.

Legislators supported the $1,100 dividend because that could be paid from existing revenues supplemented with the CBR funds, and without taking more money from Permanent Fund earnings than is allowed under annual payment made by the Fund to help support the budget.

Unless an agreement can be reached on the CBR withdrawal tor a smaller dividend or new taxes to support a larger one, there may be no dividend paid this year for the first time.

There are alternatives, however, legislators and the governor are looking at. Dunleavy has proposed transferring several billion dollars from accumulated Permanent Fund earnings to the CBR to cover several years of deficits to pay a higher PFD.

The governor’s idea is that the annual income of the Permanent Fund will be increasing and with it the annual payment to support the budget.

After a few years the deficits will be erased as the Fund’s annual payment increases. At some point the budget will be sustainable with the higher PFD, the thinking goes.

However, a set of unspecified new taxes that would bring in new income are also part of the governor’s plan.

The plan also assumes a continued tightening of the state budget but no major slash of spending like Dunleavy proposed in 2019, his first year in office.

Legislators have put forth other ideas that are now before the Legislature in bills, and before the working group.

One is proposal by Rep. Adam Wool, D-Fairbanks, for a modest tax, income or sales tax, to help pay for a PFD. There is also a more visionary plan by Sen. Natasha von Imhof, R-Anchorage, that would create a separate Permanent Fund with its income dedicated to supporting dividends. This would leave the present Permanent Fund dedicated to supporting the budget. Von Imhof’s plan would require no new taxes.

The special fund for dividends is similar to what several Alaska Native corporations have done in creating special endowments for dividends to shareholders and with ordinary corporate dividends used for business investment.