Governor proposes Permanent Fund reforms, would put new PFD process in the Constitution

One Anchorage Democrat says the governor’s proposal wouldn’t fix the PFD problem
Published: Jan. 23, 2021 at 7:31 PM AKST
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Gov. Mike Dunleavy wants to reform the Permanent Fund and put a new process to calculate the annual Permanent Fund dividend in the Alaska Constitution.

The new PFD formula would see a now annual draw from the Permanent Fund’s earnings to be split in half; 50% would go to state services and the other 50% would go to dividends.

If the formula is changed, Alaskans would receive a roughly $2,300 dividend in 2022. That’s less than the $3,000 dividend that would be paid under the current statutory formula, but that formula hasn’t been followed by the Legislature since 2015 due to the state’s fiscal crisis.

The governor wants an additional PFD during the pandemic and for Alaskans to approve of a new dividend formula through an advisory vote before it’s enacted. “We do that because we want to involve the people of Alaska upfront in the process,” he said.

Any future changes to the PFD formula would also need to be approved by voters.

Sen. Bill Wielechowski, D-Anchorage, is an attorney who sued the state of Alaska in 2016 after then-Gov. Bill Walker vetoed half of that year’s dividend. The Alaska Supreme Court ruled that the dividend is effectively an appropriation like any other and that the Legislature can choose its size.

Wielechowski has proposed putting the current dividend formula in the Constitution and is skeptical that the governor’s proposal will end the dividend debates. That’s because it says the Legislature “may” appropriate funds for the PFD and state services.

“I think it’s confusing. In my opinion, it leaves huge loopholes for the Legislature to continue to do what they’re currently doing, playing games with what the people’s dividends are. I don’t think this fixes the problem,” Wielechowski said.

Senate President Peter Micciche, R-Soldotna, said the dividend question that has long-divided the Legislature should be resolved this year and that the governor’s proposal will be well-vetted.

“I think those are imperative discussions that have to occur. The Permanent Fund dividend issue must be solved to move forward with a comprehensive fiscal plan in the future,” he said.

But some lawmakers question whether the dividend should be in the Constitution at all and whether an advisory vote is necessary.

Sen. Bert Stedman, R-Sitka, said the Legislature is elected to make tough fiscal decisions. “We have to balance all expenditures each year against each other and figure out what we’re going to spend money on and what we’re not,” he added.

Stedman, the chair of the Senate Finance Committee, is also skeptical about the size of the dividend proposed by the governor because it would squeeze out revenue for state services. He believes the Percent of Market Value draw is currently too high and leaves the Legislature with no room for error.

The governor’s constitutional amendment was introduced on Friday. The accompanying legislation is set to be introduced into the Senate on Monday.

Two-thirds of legislators in both the Senate and the House of Representatives would need to approve of the constitutional amendment. The amendment would then need to be approved by Alaskans at the general election in November of 2022.

The package would also fold the Earnings Reserve Account, which can be spent by a simple majority vote of the Legislature into the constitutionally protected portion of the fund. That would mean lawmakers could only spend what is drawn annually from the Permanent Fund’s earnings.

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