As the House has spent this week grappling with crime, the Senate Finance Committee has had the unenviable task of trying to figure out what to do with the Alaska Permanent Fund dividend.
There’s little appetite for the full $3,000 dividend proposed by Gov. Michael J. Dunleavy when it means making politically disastrous cuts to state spending, but just where the dividend should fall has been the topic of debate this week in the Senate Finance Committee.
“What’s painfully obvious is how easy this would be if it was just a math problem, right? It’s not. The math is easy, the problem is the 735,000 others out there that some of them think something differently. That’s why it’s such a painful decision on which way to go,” said Sen. Peter Micciche, R-Soldotna, giving an overview of the opposite ends of the spectrum. “They both have very significant impacts and unintended consequences. … It turns it from a very simple solution to a very difficult one.”
The problem, too, is that there seems to be about 10 different opinions on the nine-member committee.
Thursday’s meeting provided a particularly clear snapshot of some of the crystalizing attitudes about the PFD, so here’s a quick rundown of some of the significant proposed approaches.
Sen. Natasha von Imhof – The what’s left over approach
The Anchorage co-chair of the Senate Finance Committee has so far been pleased with the direction in both the House and Senate budgets because they don’t make calls on the state’s savings accounts, maintain most state services and, at least for von Imhof, don’t require the use of new revenues outside the dividend reductions. She’s said she has no interest in taxing to pay for a dividend.
As far as the split under last year’s plan to allow the Alaska Permanent Fund to fund government, both the House and Senate budgets essentially assume that whatever’s leftover would go to the dividend. The House hasn’t officially adopted this approach, but a bigger dividend would require additional spending from savings and that’s unacceptable to von Imhof.
“By raiding the permanent fund and by taking extra draws on the earnings reserve account, just so we can pay a full dividend on the statute that was made 30 years ago, 40 years ago, is fiscal insanity and irrational and irresponsible,” she said.
Von Imhof also happens to represent one of the most wealthy districts in the state, where dividend reductions will have a smaller impact on household finances than other districts, but she said she has her supporters for this fight.
“The public is all over the map. There’s different groups of the public that feel different things just like there’s 60 legislators here that will have 60 different opinions on how we move in the next few weeks,” she said. “I’ve been stating for the last three months the words ‘Rationale, reasonable, balanced and long-term sustainable,’ and I believe there’s a good portion of the public that believes in that as well.”
Sen. Lyman Hoffman – The let’s be done with it approach
The Legislature’s longest serving legislator warns the nebulous approach envisioned by von Imhof and the current budgets will only serve to draw out the issue, distract the Legislature and serve as a “political football” for opportunistic politicians.
He argued that there’s a need for something to be done regarding the size of the dividend—noting that he supported the early version of Senate Bill 26 that changed the formula (the final version didn’t touch the formula)—but said the decision should ultimately rest with the public through a constitutional amendment.
“I think the statute is way too high for us to consider further but I also believe it needs to be changed and we need to decide as a state the split,” he said. “If we do not resolve the split long-term it’s going to be a political football in each statewide election and all of our elections, and that issue is going to suck the oxygen out of the air and continue to be debated for decades to come. That’s why I think the split needs to be decided, people say we should decide that through statute, but we also have to realize what happened to that statute. We walked right over that statute as a Legislature and the courts did nothing about that.”
Dunleavy has currently proposed an amendment putting the current formula into the constitution, an idea that’s run up against opponents in both chambers and both political parties.
“We should not be afraid of the public,” Hoffman said.
Sen. Bill Wielechowski – The new revenue approach
The Senate Finance Committee finally got a look at a world where the per-barrel oil tax credit was removed, a key issue for Anchorage Democratic Sen. Bill Wielechwoski. Wielechowski has long been a thorn in the side of the oil industry, arguing that the companies aren’t paying their fair share and that they’re getting preferential treatment in the state’s budget.
He said the projections of his proposal speak themselves (showing higher dividends under the same future projections of the Legislature’s budget).
When it comes to the dividend, he’s been an advocate of following the amount set out by state law—bringing a lawsuit on that very matter (as well as one about oil tax credits). He said if there’s unwillingness to follow that formula, then it should be changed.
“There’s a lot of laws on the books that the people of Alaska would think are insane or irrational, and there’s a way that we deal with that. We come together as a Legislature, we propose legislation to change it, we debate it and the we vote it up or down. The permanent fund dividend is no different,” he said. “I think we should follow the formula. If there’s a proposal to change it, let’s change it.”
He also threw his support behind putting it in the constitution.
“I do agree with Sen. Hoffman, this is something that’s so important to the people of Alaska, we’ve seen that in recent elections, I think this has to be decided by the people,” he said. “It has to be decided by a vote whether to put it in the constitution.”
Sen. Donny Olson – The stair-stepped approach
Let’s be clear first that Sen. Donny Olson, D-Golovin, supports a full PFD, but he’s also pushed for an exploration of a stepped approach to the dividend that would slowly ratchet up the size of the split from the percent of market value draw that goes to dividends, raising it from 25 percent to 50 percent over the next eight years.
But he ultimately agreed that this is the year to do something.
“I’m still in favor of a full permanent fund dividend because it’s so important to the people that I represent out there and this is one of the years that we need to make some decisions on because next year being an election year people are going to be very sensitive to those kind of issues,” he said. “We need to make some decisions and take some action on it this year. Next year we will not be able to get anything through the other body.”
Sen. Click Bishop – The let’s be honest with the risks approach
In light of all the talk about the putting the PFD into the constitution, Fairbanks Republican Sen. Click Bishop said the Legislature will need to be very clear with the public about the potential risks of putting cash payouts into the state’s constitution.
“Before that happens there would need to be a very comprehensive roadshow across the state of Alaska to show the potential implications of what that might cost future generations of Alaska,” he said. “You would need to model that seven different ways from Sunday because what you’re doing is potentially creating the biggest defined benefit plan in the state’s history.”
Through the labor-friendly Republican has frequently floated the needs to return the state’s retirement system to a defined benefit system, it’s not likely a positive when it comes to the dividend. His comments should be considered against the backdrop of the multi-billion-dollar unfunded liability created when the state’s defined benefit system ran out of control.
The permanent fund is currently performing well, but some legislators have pointed out there could easily be a time when the formula would conflict with the state’s ability to pay out dividends.
Sen. Bert Stedman – The statutory approach
All the talk doesn’t amount to much without a plan. Senate Finance Committee co-chair Sen. Bert Stedman, R-Sitka, attempted to pull things together by suggesting that they revisit a change to the statutory change to permanent fund with an opening for future talks about a constitutional amendment.
“Just gauging from the committee members, it looks like we need to bring back the split bill. We have a committee bill that we’ve introduced here at the table that would take the percent of market value draw and we could decide how we can share that between dividends and state services,” he said. “I think we need to bring that back and have a discussion on that and see if we can’t move that particular issue forward, which would partially answer the concerns of several members.”
He said there’s not significant urgency with the constitutional amendment because the first election it could appear on isn’t until next year.
“We can’t get it to the public until the next election anyway,” he said. “(A statute change) would give us the opportunity to put it in statute—assuming the House and Senate agree and the governor signs it of course—and then people can decide, but clearly action needs to be taken. Kicking the can down the road for several more years is not going to work.”