Legislators struggling to decide state budget, dividend

Alaska legislators are in the second week of a special session to finish work on the state budget for the fiscal year that starts in just five weeks, while also deciding the amount of this year's Permanent Fund dividend.

Lawmakers have held few committee meetings and many have left Juneau, as private discussions involving House and Senate leaders, their colleagues and the governor's office generally dominate such negotiations.

The Legislature adjourned its regular session after 121 days on May 19, unable to agree on a state budget and the size of the dividend - the two issues that usually divide the 60 lawmakers and the governor.

Gov. Mike Dunleavy called legislators into special session to start the next day to finish work on the budget and to consider his plan to put the dividend in the state constitution, splitting the annual draw of Permanent Fund earnings 50-50 between the PFD and state-funded public services.

While the governor's plan would generate a dividend of about $2,400 per person for the next couple of years, it also would leave a $1 billion shortfall in the state budget. Dunleavy is asking legislators to withdraw an additional $3 billion from the Permanent Fund to buy more time to figure out how to match spending with revenues.

The governor has consistently opposed new taxes without public approval at the ballot box.

The House and Senate are not that far apart on much of the budget for the year that starts July 1, though there are differences and a six-member conference committee - three each from the House and Senate - was named to negotiate compromises acceptable to enough members to win passage.

The largest difference between the House and Senate versions of the budget passed in the final days of the regular session was the dividend:

The Senate voted to spend $1.5 billion, almost one-quarter of the entire state general fund budget, to pay a PFD of between $2,300 and $2,400 - about double the average of the past 10 years. It matches the 50-50 split proposed by the governor

The House budget did not appropriate any money for the dividend - not because a majority of members don't want a dividend; they just couldn't agree on an amount or how to pay for it. Much of the House is reluctant to take a bigger withdrawal from the Permanent Fund, as proposed by the governor and voted by the Senate.

One of the larger issues between the two versions of the budget is a Senate provision to pay a one-time $1,200 bonus to unemployed Alaskans who go back to work full time. The bonus would be $600 for Alaskans who find part-time jobs.

The governor this month added Alaska to the growing list of states that is stopping an additional $300 a week in federally funded unemployment benefits during the pandemic, claiming that the expanded jobless aid is dissuading people from going back to work.

Anchorage Sen. Bill Wielechowski, on the final night of budget deliberations in the Senate, convinced his colleagues to approve the additional assistance of a one-time payment, in lieu of the reduced weekly benefits. It would be paid after the person has completed four weeks of work.

The governor has not publicly announced a position on the employment bonus, should it remain in the budget after House-Senate negotiations.

If the Legislature fails to reach a budget compromise acceptable to the governor before June 1, the state is contractually required to send notices to many of its employees, warning of possible layoffs if the budget is not adopted by the July 1 start of the fiscal year.

Legislative leaders have said they hope to reach a deal and finish their work before the Memorial Day weekend, though that was looking less likely by mid-week.

Senate Finance Committee Co-Chair Bert Stedman said he did not believe a weekend adjournment is realistic. "I don't think to get a compromise on the dividend and the (Permanent Fund) earnings overdraw is going to be very easy," the Sitka lawmaker said in a meeting with reporters Tuesday.

The governor also has called lawmakers back to a second special session starting Aug. 2 to work on two more constitutional amendments and to decide how to spend from the pot of $1 billion in federal pandemic relief aid coming to Alaska this year and next.

Under the federal aid formula, Alaska could spend half of the $1 billion this year and use half in the next budget.

Dunleavy's proposed constitutional amendments would impose a spending limit on the state budget and would prohibit any new taxes from taking effect without voter approval. His plan also would allow legislators to override a citizens' initiative on taxes, and make it harder for lawmakers to raise the rate of any existing taxes.

It requires a two-thirds majority of each the House and Senate to place a constitutional amendment before voters - a steep hurdle in the Legislature that is divided over taxes, spending, the size of the dividend, how to pay for the PFD, and whether it is wise to draw more money from the Permanent Fund to pay a larger dividend.