The Alaska House Finance committee introduced a bill Tuesday that would allow a multibillion-dollar draw from the Permanent Fund earnings reserve as a stepping stone to a complete operating budget.
The earnings reserve is where Permanent Fund Dividend checks come from. A deputy commissioner of the Department of Revenue said last week PFD checks will likely not be impacted by a draw unless the stock market takes a drastic turn for the worse.
House Bill 2002, introduced on the House floor Tuesday afternoon, says that if a three-quarters vote of the Legislature to access the Constitutional Budget Reserve cannot be reached, a draw from the Permanent Fund earnings reserve will be made June 30, the last day of the current fiscal year. A three-quarters vote demands 30 “yeas” in the House and 15 in the Senate.
The mechanics of the draw are complicated: The Legislature wouldn’t actually spend the money from the earnings reserve. Instead, it would shift $4.9 billion from the earnings reserve to the Permanent Fund’s principal. The principal account cannot be touched unless the state is given approval through a vote of the people.
With less earnings reserve money available to spend, a quirk in state law kicks in: If the Legislature has less money available in its usable accounts (the earnings reserve is one of several that could be tapped) than was spent by the state last year, the Republican-led House and Senate majorities would be allowed to tap the $10 billion CBR with just a simple majority vote, or 32 of 60 legislators.
The legislation also calls for a second transfer of $1.5 billion from the earnings reserve to the Permanent Fund principal account on June 30, 2016, in anticipation of next year’s budget. There is about $7 billion in the earnings reserve today.
The House has stalled on finalizing an operating budget because the majority and minority have been unable to come to an agreement on spending. The House majority needs some votes of the House minority to access the CBR, and Democrat-led minority wants some additional spending as the price of its votes. Negotiations between the two sides have taken place in private since mid-April.
House Minority Leader Chris Tuck, D-Anchorage, said he wasn’t surprised by the bill dropping Tuesday because “it’s nothing new.”
“It doesn’t change anything,” he said by phone Tuesday afternoon. “But there’s definitely got to be a change (in the way we’re negotiating). We definitely have to come up with a new way through this gridlock.”
He said he would meet with House Speaker Rep. Mike Chenault, R-Nikiski, Tuesday evening to “explore ideas on how to improve the process. ... We don’t have much time and we don’t want to have pink slips go out (to state employees).”
“Hopefully we come up with something, even if it’s a coin toss,” he added jokingly.
Gov. Bill Walker announced earlier this month that he will have to notify about 15,000 state workers of potential layoffs June 1 if a budget deal is not forged by then.
Tuck said he’d like to take Walker up on an original offer to mediate conversations between the House minority and majority and the Senate.
Last week, six members of the House majority sent a letter to Chenault voicing opposition to meddling in the Permanent Fund accounts. House Finance committee member Rep. Cathy Munoz, R-Juneau, said as HB 2002 stands now, those members would likely not support it.
The majority is made up of 26 members. Without those six members’ votes, it’s unclear how the majority would be able to pass the bill on the floor.
Reps. Jim Colver, R-Palmer; Gabrielle LeDoux, R-Anchorage; and Neal Foster, D-Nome, three of the six who signed the letter, did not return requests for comment. The other signers were Reps. Bryce Edgmon, D-Dillingham; Louise Stutes, R-Kodiak; and Paul Seaton, R-Homer.
Munoz said she’s not sure how she would vote on the bill.
“I have to get some more questions answered and those will come out tomorrow (in House Finance),” she said. “I don’t want government to shut down (so the earnings reserve draw is) an option that has merit. I have an open mind and I will definitely give it consideration. ... The concern I have with that approach is it locks up $4.9 billion into the Permanent Fund in these times when revenues are really uncertain.
“My first priority is I don’t want people to lose their jobs, I don’t want people to get pink slips.”
Sen. Dennis Egan, D-Juneau, has resisted leaving Juneau for Anchorage to attend the second special session but said he might do it Thursday.
He said he’s worried about drawing large sums from the Permanent Fund earnings reserve, even if it’s a longshot that it’ll hurt PFD checks.
“I’m still worried about if the stock market tanks, we’re in trouble,” he said. “Probably it won’t happen ... but it’s still volatile.”
The House is expected to hear the bill at 9 a.m. today. It will be streamed in Room 106 of the Capitol.
• Contact reporter Katie Moritz at 523-2294 or at firstname.lastname@example.org. Follow her on Twitter @katecmoritz.