With tax time encroaching on my reporting time the last few days, this article will stand in as today’s Akleg Recap for day 57. The House Majority Coalition’s sudden insistence that the Legislature consider constitutionalizing the dividend and a percent of market value draw from the Alaska Permanent Fund is the biggest legislative story of the day, too. Otherwise a lot of Tuesday meetings were cancelled and a few bills advanced from committee.
Just 33 days to go. (Thanks everyone who reached out to point out the earlier typo. That definitely was there to just make sure everyone was paying attention.)
More than two hours of critical—often derisive—public testimony against a proposal to add the permanent fund dividend to the constitution wasn’t enough to scare off its backers.
The scathing testimony certainly wasn’t what the House Majority Coalition had hoped to hear after seizing on the issue of adding the dividend to the constitution in the last few weeks, but its members stood by House Joint Resolution 23 during its news conference Tuesday. It’s still the best way to protect the dividend, they said, when the Senate refuses to look beyond the permanent fund for new revenue to balance the budget.
Some members suggested testifiers had simply missed the point of the bill or had been misled on what the legislation does.
“We’re trying all efforts that we can to ensure that the dividend for the people is protected and is stable,” said House Finance Co-Chair Rep. Paul Seaton, R-Homer, at the coalition’s Tuesday news conference. “Our goal is exactly what they were testifying to, but they were responding to social media or an email list. I don’t think they understood the bill because the what the resolution is trying to do is what they were wanting.”
Seaton and other House Majority Coalition members tried to play damage control and address many of the concerns raised during the Monday night testimony session during the Tuesday news conference. The House Finance Coalition also released a fact sheet on House Joint Resolution 23 that seeks to dispel what they say are misunderstanding about the bill.
The main concerns raised by testifiers roughly fell into three main categories: people concerned about the split between dividends and government spending, people concerned that the amendment doesn’t actually guarantee a dividend (it doesn’t) and people who don’t want the government touching the dividend at all.
The resolution, which requires a ⅔ vote of each chamber, doesn’t amend the constitution itself. Instead it would put the issue up to voters at the November general election. As it stands, House Joint Resolution 23 proposes a 67-33 split between government spending and PFDs based on a 4.75 percent percent of market value draw. Anything beyond that would require a 3/4 vote of the Legislature to spend, raising the bar for tapping the earnings reserve account of the permanent fund from current the majority vote.
Here’s what it would do to dividends and the state budget, according to a presentation on the resolution:
Many testifiers called for the amendment to be changed to a 50-50 split between dividends and government spending. It’d leave dividends largely unchanged from the state statute, but leave government with roughly $400 million less in annual revenue.
Seaton said he would have rather diversified revenue with either an income tax or higher oil taxes, but without that the direction has leaned toward a higher government share of the earnings reserve draw. The Senate’s vision for a statutory split would be a 70-30 split between government spending and dividends. The House amended the operating budget to a 67-33 split, which would boost dividends by about $54, over the objections of minority Republicans who said it was just a ploy to support an income tax.
“The reason we’re in this problem is because we don’t have any balance between our revenues and our expenditures,” Seaton said.
But the House Majority Coalition leadership stopped short of saying they would support a 50-50 split.
“We’re going to try get to 27 votes,” Majority Leader Chris Tuck said. “HJR 23 requires 27 votes. We’re not married to how it is today.”
What HRJ 23 doesn’t do is guarantee a dividend.
Based on the advice of Legislative Legal Services Director Doug Gardner, the amendment says the Legislature “may” use the 33 percent of the permanent fund draw to pay for dividends. Gardner argued that a “shall” would infringe upon the power of the Legislature to appropriate and the power of the governor to veto spending established by prior legal challenges to constitutional amendments.
It’s a point that many testifiers called out during their public testimony. During additional public testimony on Tuesday callers asked the language to be changed from a may to a shall.
It’s advice that some members of the Legislature don’t appear to be buying, and the House could come to ignore it. It wouldn’t be the first time the Legislature has ignored legal advice on the constitutionality of a measure.
Seaton said the House will be open to changes to the resolution, acknowledging that it will need buy-in from some minority Republicans to pass the House. The House Finance Committee set a 5 p.m. Tuesday deadline for amendments to the legislation.
After testimony, there’s a fair chance that we’ll see amendments to shift the balance to a 50-50 split and an effort to change the dividend language from the “may” to a “shall.” Both would satisfy a sizable portion of the testifiers.
The legislation is expected to continue to eat up the attention of the House Finance Committee, which has still yet to finish work on the operating budget.
It faces an unlikely future if it reaches the Senate, where Senate President Pete Kelly said adding the right to a “government check” to the constitution would be problematic.