Try as they might during Monday’s floor session, supporters of a large PFD in the House were unable to find the 21 votes necessary to increase the payout by drawing down state reserves.
The House made it through amendments on the special session operating budget, narrowly rejecting several amendments aimed at boosting dividend payments either by paying the statutory formula (roughly $3,800), paying 50% of the spendable investment earnings of the Alaska Permanent Fund ($2,350), paying back past PFDs (more than $6,000) and even non-binding intent language calling on the Legislature to pass a balanced fiscal plan alongside a larger dividend. The budget then passed today on a 24-16 vote.
The Monday and Tuesday sessions were some of the most rancorous floor sessions of the bitterly divided House, during which minority House Republicans abandoned any pretext of willingness to work on a balanced fiscal plan as their last best shot at securing a large dividend for this year’s payout passed. They blamed the bipartisan House Majority Coalition for moving too fast on the budget bill without having first passed Gov. Mike Dunleavy’s proposed constitutional amendments.
Anchorage Republican Rep. Tom McKay accused the House Majority Coalition of not keeping its word to come up with a fiscal plan in return for the a handful of House Republicans voting to avoid a government shutdown earlier this year.
“I’d just like to remind you that we did that vote to not shut down government. We could’ve. It seems like people in the room have forgotten that,” he said. “So, please, let’s vote for a permanent fund dividend for the folks. And I’d like to see some action on the fiscal plan components that you promised to do.”
All of the defeated dividend proposals would have drawn down the Alaska Permanent Fund’s spendable investment income, stored in an account known as the Earnings Reserve Account. While the governor and his allies have argued the strong investment performance of the Alaska Permanent Fund warrant overspending the account, opponents argue that it would only make the state’s long-term fiscal picture worse and could undermine the health of the state’s investments.
“I’ve been raised with values to respect the elders who come before me, the generations that come after me,” said Rep. Tiffany Zulkosky, D-Bethel. “I simply cannot mortgage payment of a future dividend to future generations of Alaskans and support programs that keep rural Alaska communities together at the expense of a one-time dividend without any sort of revenue source.”
The House Majority Coalition has signaled willingness to consider an overdraw but only in the context of balanced fiscal plan that includes a plan for new revenues, a measure that Republicans once seemed open to before Gov. Dunleavy renewed his blanket opposition to taxes when he announced his bid for re-election. Republicans have since changed their tune, arguing that paying out a $2,350 PFD is a compromise and should be the first step.
In today’s debate on the bill itself, members of the House Majority Coalition argued that the work on the fiscal plan is not over and said that reducing the ask on the dividend is not, by itself, a fiscal plan. They noted the lack of any new revenue measures offered by the House Republicans or by Gov. Dunleavy.
“Something is not a compromise merely because one says it’s a compromise,” said Rep. Andy Josephson, D-Anchorage. He noted that no one has asked him if the 50-50 PFD is acceptable, adding that, “I don’t believe it is. However, and this is where I think in this building there is too much oblique talking and not coming right to the point, if folks want to get me to be a 50-50 acolyte, the most conservative members of this chamber will need to take to a podium with a live mic and say, ‘I’m sponsoring a $700 million income tax bill.’ That would get my attention.”
None of the most conservative members did. Instead, some reiterated their animosity towards government spending and called for deeper cuts to state spending.
Of course, there’s a wrinkle with the whole plan to pay out a $1,100 dividend. About half of the money is set to come out of the Statutory Budget Reserve, an account that Gov. Dunleavy’s administration claims is subject to the Constitutional Budget Reserve’s sweep provisions despite it being clearly outlined in a recent ruling as not subject to the sweep. But because Dunleavy’s administration has the authority over the sweep, it may be conducted anyways and that would bring the dividend back down to $525, a figure that Dunleavy vetoed earlier this year.
The status of the account was the subject of a hearing of the Senate Finance Committee on Monday, where members questioned the legal justification and Sen. Bert Stedman noted that “there seems to be some political expediency for that.”
On the floor today, there seemed to be some confusion about the status of the account. Wasilla Republican Rep. David Eastman seemed to suggest that the governor may end up holding the statutory budget reserve from the sweep in order to settle the dividend. Rep. Adam Wool, D-Fairbanks, noted that the governor and Legislature are at odds over the account and “I guess another court case could be had.”
‘How are we going to move forward?’
After two weeks that saw little action in the Legislature, both the House and Senate have scheduled several meetings to review components of the fiscal plan that include constitutional amendments on spending limits, the Alaska Permanent Fund and dividends as well as advisory votes and other reforms. No one realistically believes that any significant pieces of the fiscal plan will be passed in the remaining two weeks of the special session and legislators are still having a debate on just how to proceed. One of the big concerns cited by the minority House Republicans was trust with the House Majority Coalition, who have trust issues of their own.
“How are we going to move forward?” asked Anchorage Democratic Rep. Andy Josephson during a House Ways and Means Committee on Monday morning.
Wasilla Republican Sen. Mike Shower, a fiscal policy working group member who once suggested a sales tax to help bridge the budget gap created by paying out larger dividends, said they shouldn’t sweat the details and just focus on what can get passed. Josephson said it’s not easy for the House to trust that Gov. Dunleavy and his allies will follow through on a fiscal plan if they get what they want.
“I don’t agree,” he replied to Shower. “I think I’m tethered to the math. And the reason I don’t agree is I have an administration that came in and wanted to cut $1 billion from the operating budget, including $250 million from K-12. That’s the real world, also. I’m tethered to that world also. It strikes me that new revenue could just be repealed.”
Rep. Jonathan Kriess-Tomkins, the Sitka Democrat who helped run the fiscal policy working group, acknowledged that the governor’s attempted draconian cuts have made legislators wary.
“Quite frankly, what happened a couple years ago has been a massive disservice to solving these problems because of the extreme risk aversion that it’s engendered in legislators like you and, frankly, like me as well,” he said.