The Alaska House avoided a government shutdown when it voted Monday for the state budget to take effect with the start of the new fiscal year today, though the political battles over state spending and the Permanent Fund dividend are far from over.
Gov. Mike Dunleavy was expected to announce any budget vetoes on Wednesday, with Wrangell waiting to learn if he will reduce or eliminate two spending items specific to the community: Restoring the state’s commercial fisheries staffer in town, which Dunleavy eliminated a year ago, and restoring an Office of Children’s Services caseworker to Wrangell.
The budget approved by lawmakers sets this fall’s PFD at $525. It would have been closer to $1,100, but advocates of an even larger dividend — mostly Republicans — withheld their votes for the $1,100 checks in hopes of adding to the pot when lawmakers meet again in another special session starting Aug. 2.
In addition to stopping the $1,100 payout to continue the battle next month, the lack of votes by reluctant lawmakers will, at least for this month, block state financial assistance to help with electricity bills in high-cost rural communities and college scholarships for more than 5,400 Alaska students. Both programs are funded from accounts that no longer will exist at the start of the fiscal year.
Lawmakers could restore the special accounts for the utility assistance plan — known as the Power Cost Equalization program — and the scholarship payments if they can assemble a three-quarters majority vote in both the House and Senate next month.
They also could vote to withdraw additional money from the Permanent Fund to boost the dividend, which usually is paid out the first week of October, though much of the Senate leadership and the House majority coalition oppose exceeding the fund’s annual withdrawal limit to pay a larger dividend.
Just as advocates of a larger dividend strongly believe it would be OK to withdraw more from the fund, which has earned strong returns on its investments this year, opponents of such a move contend that overdrawing the fund for short-term benefits would damage the long-term health and earnings potential of the state’s largest savings account.
The regular legislative session ended May 19, with the governor calling lawmakers immediately into special session to complete the state budget, which they did — but without the start date of July 1, which passed in the Senate but failed in the House as the Republican minority pushed for consideration of other fiscal issues as part of a deal.
Dunleavy called them into another special session in late June to resolve the effective-date provision of the budget bill, and enough House Republicans voted with the Democrat-led majority on Monday to adopt the start date and avoid a government shutdown.
Lawmakers will be back in session on Aug. 2. The governor has called them to Juneau one more time to work on his ideas for a long-term fiscal plan and to debate the size of the dividend.
Alaska has been taking money out of various savings accounts for most of the past 30 years to cover public services and the dividend and, other than the Permanent Fund itself, those other accounts are near empty, forcing legislators and their constituents to confront the choices: Smaller PFDs, more budget cuts, taxes, or a combination of all three.
Dunleavy has proposed a constitutional amendment to set a spending limit; a constitutional amendment to prohibit new state taxes without voter approval; an amendment to put the PFD into the constitution and dedicate half of the annual withdrawal to dividends; and “potential measures to increase state revenues,” though he has offered no specific tax proposals.
The governor’s 10-year budget plan assumes almost $500 million in additional spending cuts over the next several years — equal to more than 10% of general fund spending on public services — though he has provided no specifics on what should be cut.
Without deep spending cuts, and depending on oil prices, the state budget would be short about $1 billion a year if lawmakers adopt the governor’s overall plan, which would generate a PFD of close to $2,400 a year, more than double the average of the past 10 years.
The size of the dividend has become an annual political hot-button, particularly among lawmakers who would prefer to cut the budget for services in favor of a larger dividend.
To help prepare for the August special session, the House on Monday voted to call for creation of a House-Senate working group to make recommendations on a “comprehensive fiscal plan” for the special session.
Senate President Peter Micciche said considerable work still remains this year and that “very few” in the Legislature are satisfied with the lower dividend amount.
Legislative leaders have indicated they share Dunleavy’s stated interest in finding a long-term solution to the dividend. But what that may look like and what other pieces of a fiscal plan might go with that are yet to be decided.
The Associated Press contributed to this report.
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