After putting forward an operating budget to the governor’s desk late last week, the Legislature is now looking at a measure to restructure the Alaska Permanent Fund.
In a special session called by Gov. Bill Walker, legislators were retained in the capital in order to pass a budget for the coming year. The budget they placed on his desk last week, a compromisory draft of House Bill 4001 and its Senate counterpart, SB 4001, remains largely unfunded.
To remedy this, late on Monday evening the Senate passed SB 128, which would restructure the earnings of the permanent fund to allow for appropriations from the fund for unrestricted state revenues. Initially put forward by Walker, the bill would allow for the state government to spend up to 5.25 percent of the APF’s average market value each year.
Individual dividend pay outs would effectively be cut in half for the coming three years as a result, with appropriations to the fund coming from 20 percent of mineral lease royalties collected and 20 percent of an amount based on a five-year average.
Sen. Bert Stedman (R-Sitka) was among the 14 who voted for the bill, which has now passed to the House for consideration. He framed the decision as one of fiscal necessity. “We’re getting to the point quickly where we’re going to have no options,” he said.
At the state’s current rate of spending and in light of its lowered revenues, it would burn through one half of the Constitutional Budget Reserve in the coming year.
“Which would give us one more year, which would be the budget we would put together this winter,” Stedman pointed out. “We have to do something, and this is a good start I think.”
The measure would greatly help reduce the estimated $3.8 billion deficit the current draft budget would still leave for next year, leaving legislators with more to work with next year. Stedman said a combination of further cuts and revenue enhancements would need to be made before the budget could be balanced.
Looking ahead to the foreseeable future, Stedman said he would be surprised if the Legislature took on any new tax bills in the special session. One major area of spending it did take on was to oil and gas subsidies, with a bill passing both chambers and making its way to Walker, where it awaits a signature.
Long critical of the state’s gas and oil tax rebate structure, Stedman felt the updated version of HB 247 still gave away too much in subsidies. He was one of six senators who voted against the corrected conference committee bill (CCB) on Monday.
“It’s a step in the right direction, but there’s quite a bit more it can do,” he explained.
While the bill would remove a number of subsidies and credits benefitting operations in Cook Inlet, Stedman found there were still issues remaining with reductions and net loss credits being offered to North Slope producers.
Voting shortly afterward after CCB HB 247 progressed to the House, Rep. Dan Ortiz (I-Ketchikan) also joined 18 others in voting against the bill. It passed by a slim 21-19 majority.
“That’s just hard for me to look at voters and say ‘yeah, that’s in our best interest,’” he said.
With SB 128’s counterpart awaiting action in the House, and in light of better than $400 million in tax credits to be distributed under HB 247, Ortiz felt it would be difficult to justify cuts to the Permanent Fund Dividend.
“It’s going to be a tough vote because there’s going to be no doubt that we need a fiscal plan for the state,” he explained. Ortiz added the measure itself would be a big step forward toward stabilizing the state’s fiscal situation.
“If it was just that in itself I would vote for that,” he said. “That said, if it were up today I would have a hard time voting for that. I’m going to have to give it some long, hard thought.”
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