Legislature finalizes $1,100 PFD after nearly fumbling it away

To put it lightly, the Legislature has been stumbling through the final days of the special session as sides dug in and dashed what little hope there had been for a tidy resolution. On Monday, the House spiked a covid-19 bill after it picked up a counterproductive change, and the Legislature looked poised to fumble away this year’s PFD.

With the third special session set to expire tonight at midnight, time was fast running out for the Senate to make any last-minute changes to the $1,100 PFD approved by the House earlier in the session. The House effectively closed that door when it canceled the day’s floor session, meaning any changes to the bill would effectively kill the bill because a concurrence vote would no longer be possible.

Make any changes, the House warned, and the bill dies.

And for a moment today, that looked like a real possibility when the Senate approved an amendment that would increase the payout to $2,350, roughly inline with the proposal dedicate half of the spendable earnings of the Alaska Permanent Fund to the cash payouts.

But upon further review, Fairbanks Sen. Scott Kawasaki said a $1,100 dividend is better than none at all and asked to reopen the vote.

“I heard that we’ve been playing chicken with the House. You’ve got two immovable bodies, this one wants a large PFD myself included,” he said. “I’ve been very consistent with my votes every time, but we are not playing chicken with another immovable body. We’re playing chicken with the wall.”

The Senate did and on a second try, the amendment to pay out a $2,350 PFD failed by a vote. It killed the larger dividend but kept alive the $1,100 payout.

Debate following that was largely kept to a minimum with even the pro-PFD legislators marking only perfunctory opposition to the budget bill—Sen. Lora Reinbold summed it up as “Big government, little PFD” and others complained that they had been pushed into a corner by the House and Senate Finance Committee—that also includes plans to expend federal funding on a variety of programs, including on covid-19 mitigation. It also restores $1.25 million to the state’s public health nursing program, which Gov. Mike Dunleavy vetoed earlier this year.

What’s next

The bill now heads to the governor for consideration. Dunleavy could potentially veto the dividend and call a fourth special session, something that he has entertained during appearances on conservative talk radio. Whether that would change anything, though, is unclear. The biggest sticking point with paying a larger dividend is how to pay for the gap it would create and who should pay.

While some pro-PFD legislators have conceded that new revenues in the form of taxes are needed, a move that would win over progressives concerned that larger dividends would fuel cuts to core services like K-12 education, much of it all has run into staunch opposition from Republicans who’ve opposed any new taxes as long as those taxes would be linked to a larger dividend. Legislation that would have sought to do precisely that by stepping up the size of the dividend with a trigger to switch over to a 50-50 PFD in the even that the Legislature finally agrees to more revenue was brought to the Senate after the vote but was ultimately tabled amid a mix of pushback over paying taxes for PFDs and over waiting for the larger PFDs to be enacted.

While those are the big picture questions, there’s still a key hurdle before the $1,100 PFD becomes certain.

That’s because there’s differing opinions on the dividend’s funding source. A little more than half of the money—equaling about $600 PFDs—is available from the state’s general fund revenue but it’s the remaining money that is uncertain. That money would come from the Statutory Budget Reserve, which has either more than $320 million in it or is empty depending on who you ask.

It’s one of the several funds affected by the Constitutional Budget Reserve’s sweep, which was the subject of a recent landmark lawsuit. While that lawsuit was about a different account, a footnote in the judge’s ruling indicates that the Statutory Budget Reserve is not part of the sweep and therefore should be available to spend. Her ruling, however, didn’t explicitly order the Dunleavy administration to back off emptying it according to their original plan.

On the floor today, Sen. Bert Stedman said he was confident that the money was available to go to dividends and said a lawsuit could be in order if the governor’s administration doesn’t relent.

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