Juneau

Alaska State Capitol building. 

Legislators are gathering in Juneau for the kickoff of the 2022 legislative session on Tuesday, Jan. 18.

There are worries that 2022 may be a repeat of 2021, when bickering over the size of the Permanent Fund Dividend, or PFD, preoccupied lawmakers and almost led to a shutdown of state government last June.

Is there any hope of breaking the gridlock this year? Near-term prospects don’t look good, but it is an election year and legislators may be mindful of once again presenting a picture of dysfunctional government to voters.

2021 saw a four-month regular session and two 30-day special sessions as well as a near-shutdown of government when lawmakers couldn’t agree on a state budget (they finally did).

As in Congress there are deep partisan divisions but the argument in Alaska is mainly over the size of the annual PFD, the check sent to all Alaskans paid by earnings of the state’s $80-billion-plus Permanent Fund.

Here is why this is important. Because the Legislature gets locked up fighting over the PFD, usually near the end of the session, not much else gets done.

Important bills on education, public safety and natural resources, get sidetracked because legislators’ attention is diverted to the dividend squabble.

For the Mat-Su, important issues this year include state assistance on for school bond debt payments (otherwise local taxpayers pick up more of the tab), continued assistance for roads, and for Palmer a state capital appropriation for remaining modifications to the city’s wastewater treatment plant.

If these get sidetracked by the PFD argument, local taxpayers will get the tab.

There’s a lot connected to the PFD argument. First is whether there should be a revised formula that sets the dividend each year (a current formula is considered unworkable).

Second, there’s whether citizens should pay state taxes to help pay for a higher PFD if there is one, and to help support traditional public services like state troopers, schools, or wildlife management if the larger dividend cuts into ordinary revenues at support those.

Gov. Mike Dunleavy has proposed a one-time extra draw on Permanent Fund earnings, beyond what the Fund now provides for state budget support, but he got a strong pushback from legislators on tis.

On the matter of state taxes, “Most people don’t realize that Alaska is the only state where there are no state taxes paid by citizens,” although people do pay local property and sales taxes, said House Speaker Louise Stutes, R-Kodiak, in a talk to a business group in December.

Senate President Peter Micciche, R-Kenai, said senators have a wide range of opinions on the fiscal issue. “Some favor the extra ‘bridge draw’ on the Fund earnings, some want broad-based taxes (like a sales or income tax) and some just like the status-quo, with an annual battle over the dividend,” the senator said.

Last summer, with the near-shutdown of the state looming, the Legislature formed a bipartisan task force to develop a comprehensive fiscal plan that would settle the annual fights.

A committee that included legislators from all of the warring factions held extensive work sessions over a month between the two special sessions and to the surprise of many produced, if not a final plan, the outline of one that all in the working group agreed on.

Basic elements of the plan included a new PFD formula, new revenues (that were unspecified) to pay for higher dividends, and a spending cap so new revenues wouldn’t be seen as permission to simply grow the budget.

But when the full Legislature came back for a second, and final, special session, nothing happened. There has been a lot of finger-pointing as to why that happened.

One reason cited for not doing more work on the fiscal plan was the near-certainty that Gov. Mike Dunleavy, who faces reelection in 2022, would veto any tax bills passed by the Legislature.

Why waste time, legislative leader asked, thrashing though the details of a fiscal plan, even when the outline was agreed, if the governor would veto a key part of the plan, on new revenues?

Possibly a deeper reason for the continued logjam was that many legislators didn’t want to hand the governor a victory, in the form of a higher PFD, on the cusp of his reelection campaign.

All of those divisions are back in 2022. Speaker Stutes said she believes the fiscal discussion will continue this session on at least the components of the outline in the fiscal working group product from last summer.

Most legislators, however, doubt a final plan can be agreed on this year. That’s because it’s not only an election year but there’s the added complication of the redistricting that followed the 2020 census. I

t appears now that 58 of the 60 House and Senate members will have to stand for reelection because the boundaries of several senate districts have changed enough to require the incumbent senator to have to run again.

If this actually happens (the redistricting plan is still in court) it will add uncertainties to those already there for the session. Normally only half of the 20-member senate is up for reelection in a biannual election cycle, which means that 10 senators don’t have to run and campaign. This adds an element of stability in a normal year that may not be present in 2022.

There is one issue this year that will likely cut through legislators’ nervousness about doing anything substantial. That is the hundreds of millions of dollars coming to Alaska in the federal infrastructure bill.

The governor will play a key coordinating role in managing much of the infrastructure money but the Legislature will be involved because it must approve the spending as a part of the state budget.

Some of federal money will go to expanding existing state infrastructure programs such as the traditional state transportation, in roads, airports and ports.

However, a lot will go to municipal-led infrastructure and new programs like broadband. Deferred maintenance on public buildings, particularly those at the University of Alaska, will be another priority.

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