All seven members of the powerful state Senate Finance Committee on Feb. 24 proposed rewriting the payment formula in state law for the annual Permanent Fund dividend, renewing the Senate’s effort to replace an obsolete, 43-year-old law that hasn’t been followed since 2015.
If signed into law, Senate Bill 109 would split the annual earnings transfer from the Alaska Permanent Fund to the state treasury: 75% of that transfer would be reserved for state services, and 25% would be used for dividends.
This year, the PFD would be about $1,420 per recipient, according to estimates by the Legislative Finance Division. The dividend cost to the state treasury would be close to $1 billion.
Sen. Lyman Hoffman, a Bethel Democrat and co-chair of the Senate Finance Committee, said he already has the support of all seven of the committee’s members, including two members who are part of the Senate’s Republican minority.
“From my perspective, that is the minimum amount that’s required in sharing our wealth with the people of Alaska,” Hoffman said last month.
The effort to rewrite the formula faces long odds. Members of the Alaska Senate have supported the “75-25 split” proposal since at least 2017, the year before lawmakers enacted the annual Permanent Fund transfer into the state general fund to help pay for public services and the dividend.
At that time, legislators said the dividend formula would be addressed at a later date, but no new formula has garnered sufficient support to become law, and in the meantime, the dividend has been set by negotiation each year, becoming the Capitol’s biggest annual budget issue.
For the past two years, the dividend has been based on the 75-25 split, even though the new formula has failed to become law. The 2024 dividend of $1,403.83 was boosted by an additional one-time energy relief payment of $298.17.
This year, barring tax increases or new taxes, there isn’t expected to be enough state revenue to pay for both a 75-25 dividend and the public school funding increase that is advancing through the state House.
A 75-25 split “is not sustainable without a broad-based tax,” said Anchorage Democratic Rep. Andy Josephson, who manages the state operating budget in the House Finance Committee.
Members of the Democrat-dominated House majority have discussed shrinking this year’s dividend to around $1,000 to pay for a larger school funding boost.
School districts across Alaska are pushing hard for an increase in the state’s per-pupil funding formula, which has remained largely flat the past eight years.
Estimates by the Legislative Finance Division, which performs fiscal analysis on behalf of the Legislature, show a deficit of near $500 million in the next fiscal year with a 75-25 dividend and the proposed public school funding increase.
Paying for both a large school funding increase and the 75-25 Permanent Fund split would require more revenues.
The Legislature and Gov. Mike Dunleavy could approve a change in the state’s corporate income tax law to collect from Hilcorp, a privately held oil company that bought up BP’s Alaska North Slope assets in 2020. Under state law, privately held corporations do not pay income tax.
Extending the tax to Hilcorp Alaska could raise more than $100 million per year.
Legislation has been introduced in the Senate to make that change in tax law.
In addition, as legislators look for new revenues, it’s expected that one or more lawmakers will introduce a bill in the coming weeks that would raise more revenue by reducing or eliminating a tax credit that’s part of the state oil production tax system.
That change could raise more than $400 million annually.
The two tax changes on the oil industry — if passed by both the House and Senate and signed by the governor — could produce enough additional revenue for the state treasury to pay both the 75-25 dividend and a large boost in school funding.
Hoffman, who manages the Senate’s operating budget, cautioned last month that “the state of Alaska is probably facing its largest fiscal problem in 30 years.” He acknowledged new revenue measures need to be considered.
Juneau Sen. Jesse Kiehl said that without action, he believes legislators will continue to cut the Permanent Fund dividend in order to meet rising costs.
“We need something that we can afford and that Alaskans can count on, so that the argument about how much the (PFD) check should be this year doesn’t drive the end of every legislative session,” he said. “And to be quite frank, so we don’t end up at zero, because that’s the path.”
The Anchorage Daily News contributed reporting for this story. The Alaska Beacon is an independent, donor-funded news organization. Alaskabeacon.com.
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