Legislators to meet for long-shot special session on PFD’s future, new revenues

Hope y’all had a great weekend are ready for up to 30 days of pointless-to-somewhat-interesting legislative action. That’s right! The Legislature’s third special session of 2021 is set to start today with the focus on the future of the PFD and the revenues needed to close the gap created by a larger dividend.

To put it simply, it’s just about the most uncertainty-laden special sessions in recent memory given just how much is on the line. Let’s break down what’s on the agenda, what’s not and what that means for Gov. Mike Dunleavy’s promise of a mega PFD.

First, the basics. The third 30-day special session is set to begin today with the House and Senate scheduled to gavel in at 2 p.m. Though there’s a ton that legislators would like to be able to work on (and quite a bit that they wouldn’t), they’ll be limited to what Gov. Mike Dunleavy puts on the call. They don’t have the power to add items, so the task list is as currently follows:

  • A constitutional spending limit that would be pretty strict (which is why its found little traction with the Legislature).
  • A constitutional amendment to guarantee a dividend with half of the spendable income of the Alaska Permanent Fund (this is the 50-50 plan) that would also formally transform the Alaska Permanent Fund into an endowment model (something that the managers have been long requesting, which would also, in effect, set a spending limit on the Alaska Permanent Fund) as well as constitutionalizing the Power Cost Equalization program (though unlike the dividend, the size and scope of the program would be left up to the Legislature to decide, which hasn’t engendered much confidence that it’s really a guarantee).
  • An act or acts relating to revenue measures. According to Department of Revenue Commissioner Lucinda Mahoney, the administration will have several revenue bills on the agenda like legalized gambling and casinos, revisions to the corporate income tax structure to close gaps in the state’s oil and gas tax structure (specifically, it’d go after oil and gas S corps like Hilcorp) and a few others. Notably, Mahoney said the state is working on a 4% sales tax proposal but said it likely won’t be ready for this special session, which doesn’t seem to matter anyways as Gov. Dunleavy later pledged to block it unless he gets his way on the constitutional amendments (including one that isn’t even on the call).

Legislators can work within those bounds, which means they could potentially put forward their own revenue measure or alternatives to the PFD amendments. There are already several legislator-authored proposals on both fronts, but the governor’s hardline stance against any new broad-based taxes, which was re-upped last week when he announced he was seeking re-election, has likely chilled much of the appetite for taking on what would be a politically costly endeavor (and that’s supposing there was the appetite in the first place).

That also leaves quite a bit of uncertainty around the Legislature’s fiscal policy working group, the eight-member bicameral group that has been meeting during the interim for what have largely been basic overviews of the state’s budget. They’ve been working behind the scenes on an agreement, but we’ve yet to hear anything publicly on this. It was always a long shot for this group to come up with something that could be swiftly passed (especially with its high concentration of far-right Republicans who were never likely to play ball), but it’s worth pointing out that some conservatives signaled tepid support for a sales tax as an acknowledgement that something needs to be done to balance the books.

No PFD, for now

What’s most notably not on the special session call is the appropriations bill required to pay out a PFD, salvage the several other programs affected by the failure of the reverse sweep or restore vetoes (well, there’s another way to get at these that I’ll talk about below).

We’re likely to hear a presentation at some point during the special session on the impact of Superior Court Judge Josie Garton’s ruling that found the Power Cost Equalization program was not subject to the sweep and should be funded that will cover all the other funds that should be spared from the sweep, but it’s critical to note that Garton’s ruling doesn’t explicitly affect anything beyond the PCE fund. So, for now, that leaves no funding for the state’s college scholarship program, the state’s medical education program or spill response to name a few.

Dunleavy could introduce a new appropriations bill but he wants the Legislature to first sign off on his constitutional amendments, a tall order given the lack of traction those measures have.

As for the vetoes, which includes the PFD vetoed by Gov. Dunleavy, the Legislature has five days to hold a joint session in an attempt to override them. This would be the easiest way to get some kind of dividend back on the books for this year, but it’s an incredibly long shot with it requiring the approval of 45 of the 60 legislators in a joint session (and I’ve heard no talk of holding a joint session). Pro-PFD folks are not likely to support restoring the dividend, which would sit at $525 (or $1,100 if they also approve the reverse sweep), because they’re still shooting for something higher.

It’s a big bet. Let’s see how it pays off.

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