The Alaska Senate could vote this week on a new formula to calculate the annual Permanent Fund dividend, though proposed amendments and lengthy debate are expected and passage of the bill is uncertain.
The bill that passed the Senate Finance Committee last Thursday would set this fall’s dividend at about $2,600 per person, putting the same cash in Alaskans’ pockets as the House plan to pay out half that amount as a dividend and half as a one-time energy relief check to help Alaskans paying the price of higher heating fuel, gasoline and diesel bills.
The Senate Finance Committee version of the state operating budget bill for the fiscal year that starts July 1 does not include an energy relief check.
The separate Senate Finance bill to change the 40-year-old dividend formula in state law could — if it passes the full Senate, the House and wins concurrence from the governor — end years of debates over the size of the Permanent Fund dividend.
Senate President Peter Micciche said a vote could take place as soon as this week. “It is very important. Depending on any amendments that happen in that bill, this is the cornerstone of a fiscal plan,” he said. “It (the dividend) has been the great divider in this building for years now,” the Soldotna legislator said.
The Senate Finance plan would divide the annual draw from the Permanent Fund 50-50 between dividends and public services for the next fiscal year, producing about a $2,600 PFD. But after that one year, the formula would revert to 25% for dividends and 75% for public services for several years — until legislators can agree on at least $800 million per year in new or increased taxes and other revenues to keep the budget balanced.
Without new revenues, legislative fiscal analysts have said, diverting so much money to dividends would put the state into a deep budget deficit, though the actual deficit would depend in great part on future oil prices.
The Senate Finance bill would restore the 50-50 split of Permanent Fund earnings in 2027, if lawmakers can find new revenues to cover the budget. If not, the PFD would remain at 25% of the annual earnings draw.
Based on Permanent Fund Corp. projections, after a $2,600 PFD this fall, the payment would drop back to about $1,400 next year if set at 25% of the annual draw on the fund’s earnings.
The Alaska Legislature voted in 2018 to establish a recurring transfer from the Permanent Fund to the state treasury, set at 5% of the fund’s five-year average market value. The 5% limit was adopted to ensure that the fund could spin off money for public services and dividends, and still continue to grow over time on the expectation that the savings account long term would earn better than a 5% return on its investments.
Gov. Mike Dunleavy has proposed a permanent 50-50 split of the annual draw to ensure large dividends and has published budget projections that show it is sustainable. Many lawmakers, along with the Legislature’s finance analysts, are skeptical of the governor’s revenue projections, doubtful that high oil prices will hold long term, and believe the cost of public services could rise faster than projected by the Dunleavy administration.
The combination of less revenue than projected and larger dividends could create deep holes in the state budget.
In an unusual move, Senate Finance Committee members advanced the PFD formula bill without a guarantee that it has enough support to pass the full Senate. That means the formula could change substantially before it advances out of the Senate.
One alternative, discussed by Senate Minority Leader Tom Begich, of Anchorage, would reverse the committee’s approach and start with 25% of the Permanent Fund draw for dividends, gradually stepping it up to 50% over multiple years.
“We’ll have a lot of discussion, I’m sure, on the floor,” said Sen. Bill Wielechowski, of Anchorage, who opposes the Finance Committee version.
Some lawmakers and members of the public have advocated for a constitutionally guaranteed dividend. The Senate committee bill would put the new formula into state law, not the constitution.
Previous dividend votes in the Senate have taken place with tight margins, and the same is expected when lawmakers debate the formula change.
“One thing I can guarantee you is it will be an exciting day — or so — on the Senate floor,” Micciche said.
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