There’s now a chance there will be no Permanent Fund dividend this year.
Legislators continued a high-stakes game of Chicken in Juneau Thursday and Friday as the special session on the dividend, the third this year, ground on.
There’s a mid-September required adjournment. Special sessions can only go for 30 days and this latest one began Aug, 16, so the clock is ticking.
It’s still possible that an agreement on a 2021 PFD can happen as a part of a revised budget bill pending in the House, House Bill 3003, although the different sides are far apart on the PFD amount.
At this point there seems little chance, however, that heavy agenda issues for this special session can happen before the mid-September adjournment, like Gov. Mike Dunleavy’s goal to put the dividend in the state Constitution along with a new funding formula.
Here are how the battle lines are drawn over the PFD, the main source of contention:
Right now, there is no money for a PDF in the approved Fiscal Year 2022 budget. The governor vetoed funds in the budget passed on June 30 that would have paid a modest PFD.
The House Majority, led by Democrats who are joined by a few moderate Republicans, are now proposing Fiscal Year 2022 budget changes in HB 3003 that would fund a $1,100 PFD.
That amount for the dividend had been put forth earlier this year. House Republicans are pushing for a higher dividend and are balking at the $1,100 dividend.
As of Thursday, the House Republican Minority was boycotting floor sessions of the House, in effect stopping action on a vote on the budget and PFD change. A vote of 21 “yes” are needed in the 40-member state House for a bill to pass.
Since a handful of lawmakers are typically excused for illness or other reasons the 18 Republicans who didn’t show up Thursday effectively stopped the House action.
Things could change quickly, even overnight, if negotiations result in a compromise, but as this is written the House Republicans’ request that the Democrat-led Majority support the governor’s plan for a PFD constitutional amendment, and new funding formula, appears to be hitting a solid wall.
Dunleavy’s new funding formula is the so-called “50-50” plan that splits the Permanent Fund’s annual contribution to the state budget so that half the money, or about $1.5 billion of the $3.1 billon paid from the Fund to the state, goes to pay for a higher PFD.
The 50-50 plan itself represents a compromise by the governor for a smaller PFD. Earlier he had pushed for a dividend based on a formula now in state law, which many argue is obsolete because it can’t be afforded given the state’s revenue situation.
For 2021 the 50-50 plan would result in a PFD of about $2,300, just over twice the size of the PFD proposed in HB 3003, the House Majority bill that is stalled. Meanwhile the state Senate has taken no action on the budget or other measures, like the constitutional amendments, and is basically waiting for the budget bill from the House.
The big hang-up is how the deficit created by the 50-50 plan would be paid for. The governor’s plan calls for a temporary increase in the annual draw from the Permanent Fund earnings as well as a set of unspecified new taxes. There are reports that revenue proposals will be introduced in the next week.
The House Majority, along with Senate leaders, said the overdraw on the Fund, temporary or not, is a nonstarter because it would put the state’s financial credibility at risk and if continued would lead to a depletion of the Permanent Fund.
Meanwhile, there has been no work done in either the House or Senate so far on the overall fiscal principles document crafted by a bipartisan House-Senate working group, although there are reports that committees in both bodies will be working on the plan next week. One committee, the House Ways and Means Committee, has already begun a review.
The bipartisan working group held intensive meetings over several weeks prior to the start of the current special session. While the documents did not recommend solutions, it laid a foundation for one with general agreement on basics like spending trends and reserve balances. While the documents did not recommend solutions it laid a foundation for one with general agreement on basics lie spending and budget trends, which are important for any solution.
Meanwhile, to defuse the tense situation the governor, on Thursday, directed his Office of Management and Budget to implement the remaining outstanding appropriations passed in the FY 2022 state budget that were subject to a “reverse sweep,” meaning they were not funded in programs with the money transferred to the restricted CBR fund.
The directive affects appropriations including the University of Alaska Performance Scholarship Awards of $11.7 million and the WWAMI Medical Education Program of $3.3 million.
In a statement, Dunleavy said, “Alaska’s students who worked hard and excelled and chose to stay in Alaska deserve stability in their university education. Performance scholarship recipients and WWAMI students can rest assured the funding for their secondary education is secure.”
Dunleavy said his decision came after an analysis on the recent court decision on the Power Cost Equalization Program and Endowment. The review determined the appropriations made in the general fund budget were enacted prior to the required “sweep” of funds into the CBR, and therefore that they should be funded. The funding action is effective immediately.