Negotiations broke down between the bipartisan House Majority and the Dunleavy-aligned minority Republicans on Wednesday, prompting the passage of a PFD-less bill that seeks to restore roughly three quarters of the governor’s line-item vetoes.
To watch the House Floor session, the move came as a blindside surprise to the 10 minority Republicans who cared to show up for the vote. Negotiations had finally been underway, they said. Negotiations were going well, they said. Just give it a little bit more time, they said.
“Those of you who are contending that we can’t buy the roads and the schools with the individual dividend. You’re right, but we didn’t see the reality of how bad our financial situation is,” said Rep. Sarah Vance, R-Homer, pleading for one last full dividend before reopening the formula that hasn’t been followed since 2015 to changes.
We mostly got hints and not specifics about the negotiations, but the closest to a specific came from Rep. Gabrielle LeDoux, R-Anchorage.
“I suspected that that the deal would probably mean following the law with respect to a statutory PFD,” she said.
In other words, a $3,000 PFD.
The same thing they’ve been promising to constituents since the election, the same thing they’ve been demanding since day 1 of session and the same thing that was the motivator for the 22 Wasilla holdouts to skip out on Juneau and let hundreds of millions of dollars of vetoes stand.
Now they’re using the leverage that Dunleavy gave them—the elimination of funding for the Senior Benefits Program, funding for shelters for the homeless and victims of domestic violence, funding for the University of Alaska—and offering to help restore some of those in return for a $3,000 PFD.
But let’s be clear, demanding a $3,000 PFD isn’t compromise.
Compromise requires both sides to meet somewhere in the middle, giving up some priorities in return for others. The minority Republicans offering to restore services that they ostensibly support in order to get what they’ve wanted all along isn’t compromise, it’s holding those services ransom for an increasingly distant political promise.
And it runs up against the majority’s desire to balance the state’s budget and not draw on the state’s savings accounts beyond the spending limits set last year.
The House Majority understands this. It agreed to let roughly $90 million in the governor’s vetoes stand—a $26 million cut to the University of Alaska and a $50 million cut to school bond debt reimbursement that will raise local property taxes—to boost the surplus dividend concept from about $900 to $1,300. They’ve agreed to boost it further to $1,605 if the minority Republicans help with the reverse sweep, which would draw a few hundred million dollars from savings.
It’s a little bit of everything bad that the majority has attempted to avoid the whole session.
“If we want a larger PFD, then we’ve got to do one of a number of things. We’ve got to either overdraw the earnings reserve, we’ve got to go into savings, or we’ve got to make additional cuts,” said Rep. Neal Foster, D-Nome. “We decided we wanted to meet folks somewhere in the middle with those cuts. In order to get a larger PFD in this bill, we accepted $84 million of the governor’s vetoes and that’s in addition to the $190 million in cuts we made in our operating budget.”
And what’s the response been?
$3,000 or bust. Just the same as it was six months ago.
The only difference now is the state is hanging in a precarious position, pushed to the ledge by a governor intent on either strong-arming the Legislature into signing off on a $3,000 PFD or dismantling government under the guise of strong-arming the Legislature into signing off on a $3,000 PFD.
Have the negotiations been flawless on the part of the House Majority? No. Many of these debates should have happened earlier in the year but with the stubborn allegiance to the $3,000 PFD, we’d have to wonder if negotiations had ever been possible.
The real product of this refusal to meaningful compromise is that here at the edge the cliff the options have been reduced to state government services versus the dividend. It’s a false choice but it’s one that the Legislature is now boxed into thanks to the refusal for anyone to meaningfully consider the alternatives when alternatives were possible.
Foster talked about cuts, dipping into savings and overdrawing the earnings reserve account as options to pay out the $3,000 PFD, but he left out the fourth option that would protect savings, protect spending and protect the PFD: New revenue.
The state can reopen its oil taxes, tackle the per-barrel credits that Democrats have latched onto or propose some kind of broad-based tax ranging from a sales tax to a variety of income taxes.
The House Majority also seemed to, at one point, entertain a $3,000 PFD as long as it was tied to reworking the formula for the PFD because, yes, there are laws that conflict and the Alaska Legislature should have and needs to reworked the laws they didn’t like long ago.
Both of those ideas—new revenue and a reworked PFD formula—have been thoroughly rejected and as long as they’re off the table there’s no reasonable path to a supersized dividend that doesn’t require the state to dip into savings and put its future at risk.
Remember, even Dunleavy’s $444 million in vetoes doesn’t get us to a $3,000 PFD.
All the pain, the uncertainty and the jobs lost get Alaska maybe halfway to a $3,000 PFD. Alaska would still need to dip into its savings. And so, what about next year? And the year after that? Will the cuts need to get deeper—remember K-12 funding will be on the table—and will the draws on savings continue to grow?
It should come as no surprise, then, that some in the majority are saying enough is enough.
Rep. Gary Knopp, the Soldotna Republican who was the first Republican to splinter from the original organization and lead to the bipartisan House Majority, laid out his counteroffer.
Restore the vetoes or live without a PFD.
“I don’t believe anybody in this room is comfortable with no PFD, but I can speak for myself that it would be pretty hard for me to support any size PFD and live with these cuts as well,” he said. “If our administration will consider reinstating a reasonable amount of these vetoes and not decimate our economy and our communities, I’m glad to support an affordable PFD, but my conscience doesn’t hardly allow me to do that and live with these cuts as well.”
It’s a line that has long been in the works, a fatalistic reasoning borne in the face of the governor’s draconian cuts and the Dunleavy-aligned legislators’ obstinance: If the state can’t afford to follow the law on the Senior Benefits Program or the Ocean Ranger Program, which by the way pays for itself and its elimination didn’t do anything to boost the dividend, then can it really afford a PFD at all?
It’s a statement that Knopp probably didn’t celebrate making, but the road is running out and the minority Republicans’ hands are still on the wheel, pulling Alaska toward the cliff. Is there any other choice than to hit the brakes?
The blind adherence to a campaign promise has painted the minority Republican legislators into a corner— it’s painted everyone into a corner—and their only strategy for escaping it is to stand by and allow Alaska to burn. All while calling their dogged demands of a $3,000 PFD with no plan to pay for it, no new revenue and no real promise to set Alaska’s future on a reasonable path forward a “compromise.”