Alaska Legislature narrowly passes an incomplete budget with a $525 dividend, for now

JUNEAU, Alaska (KTUU) - The Alaska Legislature has narrowly passed an incomplete budget that would currently pay out a Permanent Fund dividend of roughly $525.

The passage of an operating budget should avert a state government shutdown that would have started on July 1, but questions remain if state funds can go out on time.

The House of Representatives narrowly passed the same incomplete budget late on Tuesday night. A crucial three-quarter vote then failed to pass, meaning dozens of state accounts are set to be emptied in July, including one that helps reduce power bills in rural Alaska and another that funds scholarships for college students.

The failure of the three-quarter vote also means that the Permanent Fund dividend drops from roughly $1,100 to $525. Construction projects in the Matanuska-Susitna Borough were also tied to that failed vote, including a replacement Houston Middle School.

On the Senate floor, two days out from the end of the special session, there was a fiery debate about the budget and dividend agreement that was hammered out last Sunday.

“This budget bill is a dumpster fire,” said Sen. Roger Holland, R-Anchorage.

Republican Sen. Robert Myers of North Pole was frustrated by the dividend bargain that compelled legislators to pass the intricate three-quarter vote package.

“The government serves the people, not the other way around,” he said about the size of the dividend.

Other legislators, including Sen. Bert Stedman, R-Sitka, said the Legislature had maxed out cash available to pay a PFD without overdrawing the Permanent Fund. Stedman suggested the $525 dividend could be increased up to $1,100 if the three-quarter vote passes during an August special session.

Sen. Shelley Hughes, R-Palmer, was not convinced, saying there was no guarantee that would happen. She, and other Republican senators, wanted a budget committee to reconvene and hammer out a new deal.

“The greed and the entitlement is astounding to me,” said Sen. Natasha von Imhof, R-Anchorage, arguing that pushing for a larger PFD to shutdown state government is irresponsible. “My father is at home dying of cancer and I’m here listening to the biggest crock of crap.”

The budget contains a $4 billion transfer from the Permanent Fund’s Earnings Reserve Account to the constitutionally protected part of the fund. It also disburses federal COVID-19 relief:

A state government shutdown, unprecedented in Alaska, would have dozens of far-reaching consequences, including closures of commercial fisheries and the Alaska Marine Highway System until a budget passes.

The vote on the operating budget required a simple majority of 11 senators and initially failed. A revote saw it pass by one vote, the same margin that it passed through the House of Representatives.

Another potential complication is the failure in the House to change “the effective date clause” on the budget bill.

Once a bill is signed, it becomes effective 90 days later. To clearly avert a state government shutdown, two-thirds of legislators in both the House and Senate would need to change that so funds can go out on July 1, the start of the next fiscal year.

That vote failed in the House but succeeded in the Senate. The House can hold revote. Some legislative staff have suggested the budget was written in a way that state government could be funded without that change.

The governor’s office is watching closely.

“We need to see what is finally passed by the legislature before speculating on legal consequences,” said Corey Young, a spokesperson for the governor, about the issue of the effective date clause. “At that point, we will consult with the Department of Law and determine next steps.”