Senate passes SB26, which would allow government to draw from Permanent Fund

JUNEAU – The Senate passed major components of a proposed solution to Alaska’s fiscal challenge on Wednesday.

Senate Bill 26 limits government spending and allows a responsible annual draw from the Permanent Fund’s earnings to help pay for a smaller government and maintain a dividend, the Senate Majority said in a press release.

“This bill protects and grows the corpus of the Permanent Fund and protects the dividend,” said Sen. Anna MacKinnon (R-Eagle River), co-chair of the Senate Finance Committee. “It uses the earnings as they were intended to be used at the creation of the Permanent Fund, to provide for the people of Alaska when oil revenue no longer could.”

The bill protects the Permanent Fund for generations by establishing a sustainable percent of market value (POMV) draw to help pay for essential services and guarantees a $1,000 dividend for the next three years. After that, the dividend will be based on a percentage of fund earnings, allowing for modest dividend growth.

“If we do not take action the dividend will go away,” Sen. Hoffman (D-Bethel), co-chair of the Senate Finance Committee. “Inaction is not an option. We need to take the next step to address the fiscal cliff that the State of Alaska is facing today.”

If oil revenue increases in the future, the bill provides a mechanism to return excess funds to the Permanent Fund, growing the corpus of the fund and future dividends.

“Our fiscal solution cuts spending, limits the growth of government and uses the tools we already have,” said Sen. Pete Kelly (R-Fairbanks), President of the Alaska Senate. “A responsible Permanent Fund draw, along with strategic use of our Constitutional Budget Reserve, will resolve our budget problems while protecting Alaska’s private sector. That’s more important than ever as we weather this recession.”

Not all Senators were quite so rosy about SB26’s impact.

“Our government cannot be all things to all people. This process can’t be one where government wins and people lose,” said Sen. Mike Dunleavy (R-Wasilla) on his Facebook page. “We have a partnership with the people of Alaska and they should be able to vote on this. If Senate Bill 26 is the only step that is taken, government wins.”