Alaska Supreme Court upholds Gov. Walker’s veto of half the 2016 PFD

Walker announces the cut to the 2016 dividend during a news conference on June 29, 2016.

A legal challenge to restore the portion of the 2016 dividend vetoed by Gov. Bill Walker has failed.

The Alaska Supreme Court today ruled that Gov. Bill Walker’s veto of a portion of the permanent fund dividend was permitted by the constitution and state law, upholding the decision of Anchorage Superior Court Judge William Morse.

[PDF: Alaska Supreme Court decision in Wielechowski vs. State of Alaska]

The case was brought by Sen. Bill Wielechowski, D-Anchorage. He argued that a combination of laws and the Alaska Constitution protected the dividend as an automatic, dedicated payment that couldn’t be vetoed.

A key argument was the 1976 constitutional amendment that created the permanent fund and exempted it from a constitutional prohibition on dedicated funds also exempted the dividend program created six years later. Wielechowski hoped to restore the dividend to its full size, which would have cost the state about $700 million.

The Supreme Court was less than convinced by Wielechowski’s arguments, finding they misread the law and misinterpreted the constitutional framers’ intent.

“The narrow question before us is whether the 1976 amendment to the Alaska Constitution exempted the Legislature’s use of permanent fund income from the constitution’s anti-dedication clause,” the court explained in today’s opinion. “The answer cannot be found by weighing the merits of the dividend program or by examining the statutory dividend formula. The answer is found only in the language of the Alaska Constitution. And, as we explain below, the answer is no. … The Legislature’s use of permanent fund income is subject to normal appropriation and veto budgetary processes.”

The court also struck down other parts of Wielechowski’s argument, including a point that Walker can only veto numbers in the bill and not budget language. The court ruled that Walker was within his rights to change budget language surrounding the dividend formula because it conformed with a change to a number and didn’t change the purpose of the appropriation.

Oral arguments

Background

In 2016, facing legislative inaction on addressing the state’s multibillion-dollar deficit Walker vetoed half of the money for dividends. The move reduced them from an estimated $2,052 to $1,022.

The move was in line with a proposal to restructure the permanent fund’s earnings to allow a portion of the earnings to be used to close the budget gap. The move, which is still being considered today, would have reduced dividends by about half.

A restructure of the permanent fund found more traction during this year’s legislative session, but disagreements between the House and Senate on other issues has ultimately tabled the issue for the time being.

Walker didn’t need to veto the dividend funding this year because the Legislature only appropriated half of the money in anticipation of the restructure passing.

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