PFD will be delayed as legislators, governor angle for leverage

The Alaska Capitol Building.

There’s very little anyone can say for sure about the Legislature’s current special session. Will they overcome the differences and makes strides towards a fiscal plan? Probably not, but stranger things have happened. How big will the dividend be? Who knows! Will the Legislature muster the votes to restore some key vetoes? It’s possible! Will there even be a dividend? Maybe!

But the one thing we know for sure is that IF there’s going to be a dividend, then it will be late.

Following a walk out of House minority Republicans last week that left the House unable to conduct business, the special session’s budget bill cannot logistically be passed in time to meet the Sept. 1 deadline for dividends to be paid on time in early October. Just how late the PFD will be paid depends on how long the gridlock continues.

At the heart of the issue is the size of the dividend and how to pay for it.

The House had been moving forward with a budget bill that would pay a $1,100 PFD out of the state’s general fund surplus and statutory budget reserve, a figure they say is affordable without additional draws on state savings. The Dunleavy administration and his allies are fighting for a dividend more than twice that size, arguing that it can be paid for out of the strong returns on the state’s investments even though it would break the spending rule.

Dunleavy has tried to corral leverage behind the Republican House minority with mixed success. He attempted to drain the Power Cost Equalization endowment fund, an investment fund that drives programs important to the House Majority Coalition, as part of the annual budgeting procedure known as the sweep, which would have required appeasing the Republican House minority to reverse through a three-quarter vote. The move drew a lawsuit that resulted in a significant court ruling found that the PCE endowment fund was not, in fact, subject to the sweep.

That hasn’t stopped the governor from weaponizing the sweep in an effort to maintain some leverage over the building.

Pressure was building for the Legislature to approve funds for scholarships and the state’s medical education exchange program, WWAMI, through the special session budget ahead of Sept. 1 because the lawsuit’s ruling made pretty clear that the Higher Education Investment Fund was, in fact, subject to the sweep. Dunleavy eased that pressure on the minority, though, by releasing the funds even though it seemed to run contrary to the plain reading of the lawsuit.

Now, his administration is arguing that the statutory budget reserve, which contains half of the funds for the $1,100 PFD, is subject to the sweep. It’s a tenuous position given that the fund is specifically called out in a footnote of the PCE lawsuit ruling as an example of a fund that would not be subject to the sweep.

The combination of those moves would mean that for a dividend larger than about $500, the Legislature would need to negotiate with the Republican House minority to reach the three-quarter vote needed to tap the Constitutional Budget Reserve or for the majority to break the rules on overspending the state’s investment accounts, which takes a majority.

Meanwhile, members of the Senate Finance Committee and House Majority Coalition have been adamantly opposed to overspending the state’s savings without any guarantee for balance on the rest of the state’s fiscal plan. Many have pointed out that the governor has yet to introduce or even signal tepid support for the new revenue they say is required to balance the payment of larger dividends.

It’s likely that this whole thing could end up in the court again while Alaskans are left waiting for resolution.

The House is set to return to session with enough members to hold a floor session regardless of the House Republican minority’s participation. On the agenda is the special session budget that currently contains a $1,100 dividend with half of its funding sitting in question due to the governor’s legally shaky interpretation of the sweep rule. The bill can be amended.

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