Senate President Kelly says adding PFD to constitution is ‘problematic’ and goes against Founding Fathers

Senate President Pete Kelly on the final day of the regular 121-day session. (Photo by the Senate Majority press office)

Last week, without explanation the Republican-led Senate Majority killed a motion that would have moved a proposal to put the permanent fund dividend in the Alaska Constitution closer to the ballot. It was a largely expected move–most majorities oppose skipping bills out of committee–but it has given new life to the battle over the PFD.

On Monday, Senate President Pete Kelly said the decision to move SJR 1 should rest with the chairman of the Senate Judiciary Committee, Sen. John Coghill, but went on to say he had problems with putting a “government check” in Alaska’s constitution.

“Strangely enough, we are getting information from different districts that favor that, but right now that’s purely a chairman’s priority to bring that up or not,” he said during Monday’s Senate Majority news conference. “It isn’t as if we haven’t discussed it among ourselves. But I think one of the biggest roadblocks it has is it enshrines a government check in the constitution. That is problematic from a number of standpoints, but for anyone who has studied history that certainly wasn’t the idea of the Founding Fathers that we would ever make payments and that would be a constitutional right.”

House Majority Coalition members seized on the comments today, adding them to a growing pile of evidence that they say proves the Senate Republicans’ opposition to all forms of taxes will lead to eliminating the PFD entirely.

“That’s what has been said a number of times on the Senate side, ‘We’re not going to pass any tax until there’s no checks going out from the government or there’s no dividend of the people’s royalty money,'” said House Finance co-chair Rep. Paul Seaton, R-Homer.

Both House Majority Leader Chris Tuck, D-Anchorage, and Seaton said the House Majority Coalition is considering support of a resolution to enshrine some form of the PFD in the Alaska constitution. The measure, they said, would still utilize earnings from the permanent fund to pay for government, which would reduce the overall dividend, but would ultimately guarantee a dividend into the future.

They’ve cast the decision as either implementing a tax and keeping a dividend (albeit a smaller one) or avoid paying taxes and lose the dividend entirely.

Kelly has said he outright opposes any new taxes because he says the state’s fiscal situation has improved enough that one isn’t needed, saying any new suggestions of taxes would be met with “mocking laughter” in the Senate.

While some senators are pushing for deep, continued cuts to state government while maintaining their opposition to a tax, Tuck said the people have had enough of cuts.

“We’ve come up with option after option after option. Now we’re looking at potentially trying to do something with oil again only because we’re out of options,” Tuck said. “I think it’s wrong that every time we come up with an idea Senator Pete Kelly–President Pete–says we’re going to put it in the trash can or mockingly laugh at that. Mocking laugh at solutions? Solutions for public education? Solutions for public safety?”

He said a constitutional amendment gives people an opportunity to sound off on the plan to pay for state government.

“In many ways, a constitutional amendment is a compact. It’s an agreement between the people and the government on how it should be spent and what it should be spent on,” he said. “We had constituent meetings over the last couple weekends. I’ve been hearing that people want essential services, they want public education, they want public safety, they want their streets plowed.”

While the House Majority Coalition’s fiscal plan also includes using the earnings reserve from the Alaska Permanent Fund (which cuts dividends), it’s sought to balance the cuts with an income tax or some other form of a tax. The diversified revenue, they argue, would stave off efforts to cut the dividend further in the future.

A growing record

Kelly’s comments are the latest in a growing argument put forward by Republican legislators that seem to favor cuts to the PFD over implementing an income tax. Here’s a few recent comments:

  • “There is very little interest in seeing an income tax to sustain or perpetuate a dividend,” said Rep. Chris Birch, R-Anchorage, at a news conference a few weeks ago.
  • Republicans on the House Finance Committee opposed a smaller draw on the earnings reserve of the Alaska Permanent Fund, which would have boosted dividends by $54, calling it a move to back an income tax.

Why it matters

This discussion should matter to anyone who cares about the dividend and its size, but its implications for the 2018 election could be particularly significant. Republicans outside the Legislature are currently building a message against Gov. Bill Walker that focuses on his decision to veto half of the dividend in 2016 while the Republican-led Senate is seeking to formalize such cuts in state law. Republican campaigns and Republican legislating will be at odds.

Former Sen. Mike Dunleavy quit the Senate Majority over the dividend before ultimately leaving to pursue the Republican nomination for governor. He’s pitched a vision of a fully funded dividend, no taxes and well-funded public safety.

Meanwhile, the House Majority Coalition seems to be doing its damndest to capitalize on the pro-PFD movement with its policies. It passed a haphazard budget last year that would have fully funded the PFD, and this year has cast its backing of an income tax as a way to protect the dividend into the future. Adding a pro-PFD constitutional amendment to their priorities would be the coalition’s hardest stance on the issue to date.

Who knows just how all of this will play out come election time. None of this is particularly easy to distill into a 30-second campaign ad. Will voters favor an plan that puts cuts to the PFD before an income tax, a plan that combines a PFD cut with an income tax or a promise of none of the above?

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