Gov. Mike Dunleavy is asking legislators for $2 million in state funds to hold a special election this summer, to ask voters their opinion of a Permanent Fund dividend that would average $2,400 a year for the rest of the decade and beyond.
The governor's proposal is to split the annual withdrawal of Permanent Fund earnings between dividends and public services 50-50. He introduced legislation to call for the special election as an advisory vote, and a few days later promoted the issue in his State of the State speech Jan. 28.
But asking voters their opinion of a PFD about double the average of the past five years is not that useful of an exercise, said several Southeast legislators.
It "would give people the wrong impression that you could afford a 50-50 split," said Ketchikan Rep. Dan Ortiz, who also represents Wrangell.
The governor's 10-year budget plan acknowledges that setting aside for dividends half of the annual draw on Permanent Fund earnings would create an annual shortfall of $1 billion for public services - a gap exceeding 20% of the state budget.
The 50-50 split would produce PFDs averaging more than $2,400 this decade and increasing from there, assuming the Permanent Fund continues to grow.
The governor's fiscal plan includes a billion-dollar-plus placeholder labeled "other revenue sources" starting next year to plug the large budget hole. However, he has provided no detailed proposals for where that $1 billion in other revenue sources would come from for the start of fiscal year 2023, just 18 months from now, other than he supports legalized gambling in Alaska.
Asking voters their opinion of a large dividend could create unrealistic expectations, Ortiz said.
Sitka Rep. Jonathan Kreiss-Tomkins shared a similar view. "The question may sound simple but the implications of that question are hugely complex," he said of the advisory vote. Putting more money into dividends at the expense of other needs would affect "the level of state services Alaskans would receive and the level of taxes they would have to pay," said Kreiss-Tomkins, who also represents Petersburg.
Without any context of how a larger dividend would affect public services, an advisory question would be of limited value, he said.
There is a danger in asking the public for their opinion when the state cannot afford to make good on the expectations, said Juneau Rep. Sara Hannan, who also represents Skagway and Haines.
Hannan told the story of growing up in a matriarchal household. Her mom would ask whether her husband wanted chicken or steak for dinner. When he ordered steak and found chicken on the dinner plate, Hannan recalled, mom would answer: "I was just letting you think you had a say in what was going to happen."
The state cannot afford a 50-50 split and still provide reasonable services, such as schools and ferries, she said. When elected officials ask the public their advice but don't follow it, public confidence in government weakens even further, Hannan said.
The Legislature is in its third week of the session. The Senate has yet to hold a committee hearing on the governor's bill for the special election, which would cost $2 million to hold. The House has not settled on an organization - whether led by Republicans or Democrats or a combination - and cannot hold hearings until the members adopt a leadership team.
The governor's proposal to ask voters their opinion of how to spend Permanent Fund earnings is part of his wide-ranging, multibillion-dollar push to send more money to Alaskans in the annual PFDs.
Dunleavy is asking legislative approval of his budget request for an additional $1,900 PFD this spring, and a $3,000-plus PFD in the fall, at a combined cost of $3.2 billion from the Permanent Fund. The purpose, he has explained, is to boost the economy and help people hurt by the COVID-19 pandemic.
His plan, if approved by voters and the Legislature, would be to reset the dividend starting next year at half the annual draw on fund earnings, about $2,400. The dividend has averaged about $1,250 the past five years after lawmakers debated and decided on what the state budget could afford while still paying for public services.
According to state law, Permanent Fund earnings are general fund revenues which can go toward dividends, the same as schools and other public services.
At a news media briefing after the governor's State of the State speech, Senate President Peter Micciche downplayed the need for an advisory vote. "We have a constitutional
provision allowing for referendums to repeal laws, so we don't need an advisory
vote," said the Soldotna Republican, according to a report in the Alaska Legislative Digest report, a private newsletter.
The size of the PFD is part of the overall discussion this legislative session of how the state can afford to maintain services and pay a dividend, avoid spending down the Permanent Fund, and whether a state income or sales tax will be part of the solution.
"We must act this year or we start eating our seed corn," Micciche said of the need for a fiscal plan.
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