Senate Finance advances its 50-50 PFD split, releases reworked spending limit

Something might be going on in there.The Alaska State Capitol building as photographed in 2010. (Photo by Kimberly Vardeman/Creative Commons)

The Senate Finance Committee today advanced Senate Bill 103, a bill setting the split for the annual draw from the Alaska Permanent Fund at 50-50 between dividends and state spending.

The Legislature approved draws from the Alaska Permanent Fund to pay for state government in last year’s session but left the formula determining the size of the dividend untouched. Much of the discussion around the Senate Finance Committee table this year has been what, if anything, to do with the dividend.

The 50-50 split would put the 2020 dividend in the range of $2,300 according to a presentation earlier this month. It would, however, leave the state with an anticipated deficit of around $800 million that would need to be filled with cuts, draws from savings or new revenue.

“(The budget for the Fiscal Year) 2021 would have about an $800 million deficit,” said Sen. Natasha von Imhof, the Anchorage Republican who co-chairs the committee. “I just want to state for the record that there is a financial implication for this.”

Senate Bill 103 has a 2020 effective date, meaning it would not apply to this year’s dividend. The Senate Finance Committee advanced a $3,000 dividend in its version of the operating budget last week, which is generally seen as positioning for negotiations with the House.

The measure ran into opposition from Sen. Bill Wielechowski, the Anchorage Democrat who took former Gov. Bill Walker to court over his PFD veto. He argued that the Legislature has already ignored the existing statutory formula for the dividend and the only way to hold the Legislature to it is for a public vote on a constitutional amendment.

“I think if we’re going to make a change of this magnitude, it should be in the constitution,” he said.

Sen. David Wilson, R-Wasilla, agreed with Wielechowski’s argument for a constitutional amendment, but said he would ultimately support the measure if it meant getting closer to that vote.

The measure advanced from committee on a 5-1 vote.

Yeas: Sens. Wilson, Bishop, Hoffman, Stedman, von Imhof

Nays: Wielechowski

Raising the spending limit

That wasn’t the only action for the Senate Finance Committee, which also rolled out an updated version of its statutory spending limit contained in Senate Bill 104 to reflect the proposed 50-50 PFD split.

The previous version of the spending limit would have capped state spending at about $5 billion annually with inflation proofing for future years. It didn’t count the dividend spending toward the cap.

The new version does include the dividend in light of the changes in Senate Bill 103 and raises the cap to $6 billion. A legislative aide said putting the PFD under a $5 billion cap would have left about $50 million of breathing room.

The measure didn’t move on Tuesday when objections were raised by multiple senators about the impact of putting the dividend under the cap.

Wilson argued against adding it, saying there’s still a lot of political division over the size of the dividend. If the dividend is altered or ultimately removed from the spending limit, he said the $6 billion cap would be far too lenient.

Sen. Peter Micciche, R-Soldotna, argued in favor of the change, saying the Legislature needs to be honest with what it’s spending and where.

“The PFD being inside of the cap takes no position on the PFD, whether it’s a full PFD or something else. It’s just highlighting the total amount you’re going to have to account for,” he said. “Without it, you have a tendency not to remember that $1.9 billion or less spend (on the dividend) is not part of the equation. I don’t have a problem with it being inside of it. … Wherever you put your priority on the PFD, I think it’s important to remember we have to take away from somewhere else.”

Sen. Lyman Hoffman, D-Bethel, was deeply opposed to the change. He said it does nothing to settle the political fight over the size of the PFD and will only encourage future legislators to continue to ignore the statutes.

“For us to put it into the spending limit, I think, weakens the spending limit,” he said. “It will be more likely ignored because the dividend is going to continue to be the number one issue that the people of Alaska continue to focus upon. If you include it in, it’s more likely that—and I’ve stated this at many stages—the statute will be ignored. The courts will not second guess future legislators when they ignore that statute. … By putting it in there you’re not going to look for additional cuts.”

Hoffman has also argued for putting the dividend in the constitution.

“When it comes down to the dividend, the dividend is going to be king,” he said.

The updated bill also adds an additional measure that would allow for additional capital spending outside the cap. The additional capital spending would itself be capped at 5 percent of the total allowable spending limit.

The change comes after legislators raised concerns about how the stagnating capital projects budget is impacting the state’s infrastructure and public projects.

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