Gov. Mike Dunleavy

Gov. Mike Dunleavy

The special legislative session that began May 20 in Juneau continues, defying predictions by many that all would be done before Memorial Day.

Gov. Mike Dunlevy called lawmakers into special session as the regular session ended May 19 with the state budget unfinished and a Permanent Fund Dividend for 2021 undecided.

Since then a budget conference committee has continued work to reconcile versions of the budget passed by the state House and State Senate. Differences between the two are relatively minor, except for the PFD.

Discussions on that are underway, mostly behind closed doors.

Basically, the disagreement is on how much the dividend will be and how it can be paid. Talks are ranging between a modest dividend, such as $750 or $1,000 supported by some legislators, or a larger PFD of over $2,000 based on a new formula proposed by Gov. Mike Dunleavy. The new formula, called the “50-50” plan, would split the annual payment the Permanent Fund makes to the state to support the budget.

Estimates by the Legislative Finance Division are that a modest dividend of $750 to $1,000 can be paid from existing revenues and cash in the Constitutional Budget Reserve, a state savings account. There would not be a need to take more money from Permanent Fund earnings.

The larger PFD, however, would require a larger withdrawal from Permanent Fund earnings. The governor has said that he’s open to this as a one-time “overdraw,” assuming that it would be followed by legislators’ approval of a constitutional amendment putting the dividend into the Constitution, thus guaranteeing it, along with the “50-50” split of funds from the Permanent Fund.

However, there is no guarantee the Legislature, or Alaska voters, will approve the amendment, and the short-term plan for an overdraw to fund this year’s dividend is meeting opposition in the Legislature, where many lawmakers feel it just demonstrates that whenever the Legislature needs more money it is just drawn more from the Fund’s earnings.

Meanwhile, the slow pace of the budget and PFD negotiations is a growing concern. If things will drag on in Juneau until June 19, the end of the 30- day special session, the session will end with 11 days left before June 30, the end of the state fiscal year. If there is no budget passed and signed by the governor on July 1, the start of Fiscal Year 2022, the state cannot legally operate. State employees, contractors and vendors cannot be paid.

That would be very disruptive, although it has come close to happening before. There are short-term “workarounds” for an even like this including short-term borrowing to fund essential state operations like troopers and prison guards, but this might be the case only if the operating budget is agreed on and it is just a matter of days in getting the governor’s signature.

But if it’s a political impasse with no clear near-term solution, those options may not be available. All indications are, however, that an operating budget will be passed by June 19 to avoid disruptions. The divisive PFD decision might be deferred, for example by inserting it into another appropriation bill that could be debated in a second special session called by Dunleavy later in the summer.

If the PFD can’t be decided by June 19 the governor may not want to wait until late summer, however. He could call another special session immediately to keep lawmakers in Juneau another 30 days to work on the dividend.

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