As of now this year’s Permanent Fund Dividend would be somewhere between $1,000 and $3,900 depending on which of several proposals being considered by the Alaska State Legislature become reality. Lawmakers seeking less than the biggest checks possible are hoping recent statewide struggles might get residents to support something besides the biggest dividend.
“Wisdom is seeping out,” said state Rep. Cliff Groh, an Anchorage Democrat leading one of the less-than-maximum dividend efforts. “People are learning.”
People will get a chance to learn a lot more Saturday when five of the proposals are heard during a House Ways and Means meeting scheduled to start at 9 a.m., which will be livestreamed for those unable to listen and/or offer testimony at the Capitol. Most of the proposals are duplicates or variations of legislation introduced during past sessions.
Two of the proposals are bills that set the maximum PFD at $1,000, and split Permanent Fund earnings 75-25 between state spending and dividends after inflation proofing is deducted (resulting in an expected dividend of about $1,300 this year). The other three are proposed constitutional amendments affecting the fund — such as guaranteeing annual dividends and how they are calculated — that would required a two-thirds majority by both the House and Senate, and then a majority vote of the public, but not the approval of the governor.
The classic fervor of residents favoring maximum dividends is reflected by Gov. Mike Dunleavy, who made high PFDs a primary campaign issue and, following a record dividend last year that was due in part to unusual circumstance, won in a landslide over two opponents who split the vote with policies likely to result in smaller dividends. His proposed budget for next year includes a PFD of about $3,900.
But the estimated $2.5 billion total cost of such dividends — and a deficit nearing $500 million in his budget — have numerous other lawmakers seeking smaller payouts as they prioritize funds to boost education funding and pay costs such as matching funds for major federal infrastructure grants.
A stern admonition was issued by U.S. Sen. Lisa Murkowski, a Republican, when she visited the Capitol last month, urging state lawmakers to take maximum advantage of the long-term potential of the federal funds she helped secure.
“I’ll just say it: if this Legislature spends the whole 33rd legislative agenda focusing on how much Alaskans are going to be getting for a Permanent Fund dividend we miss everything,” she said.
Groh said he’s also encouraged by a legislative town hall in Anchorage last weekend where the dominant focus of the audience — suspiciously so, for some cynics who noted many were wearing similar shirts — was increasing education spending even if it means smaller dividends.
Taking five on a Saturday
Among the legislation being considered Saturday, perhaps the easiest to understand is the $1,000 maximum dividend in House Bill 90 by Rep. Zack Fields, an Anchorage Democrat. During an overview of the bill at a Ways and Means Committee meeting Monday he said the amount is based on the original legislative intent when dividends were established in 1982 that envisioned payments of that size.
“At current oil prices we can fund all existing state services, reverse the last six years of cuts to education, pay a $1,000 PFD…and that would leave us with an approximately $550 million surplus,” he said.
Every other proposal requires new taxes and/or insufficient funds of state services, unless oil prices skyrocket in some scenarios, Fields said. He said the state budget and $1,000 PFDs can be funded with oil in the low $60s per barrel during at least the next few years without any new taxes, compared to the $87 a barrel state needs this year to break even.
The other bill (HB 72) is the so-called 75-25 split introduced by Dan Ortiz, a Ketchikan independent. In a sponsor statement, he noted the state now relies more on Permanent Fund earnings than oil revenue to balance its budget, and his legislation would allow that to continue while guaranteeing dividends.
“Over the next ten years, if we pass and follow HB 72, and if resource revenue remains stable and our state budget grows as anticipated, we won’t have a budget deficit and we will have a PFD,” he wrote.
Dividends would be about $1,300 in fiscal 2024, $1,377 in 2025, $1,428 in 2026 and $1,653 in 2032, according to a Legislative Finance Division projection.
Among the three constitutional amendments, two are companion proposals introduced by the House Ways and Means Committee. One (House Joint Resolution 7) guarantees annual dividends that would be paid according to a formula to be defined in state law, and ensure dividends get priority over state spending in the distribution of annual Permanent Fund earnings.
The second (HJR 8) makes a fundamental change in the way earnings are distributed by putting the balance of the Earnings Reserve Account, which currently holds the Permanent Fund’s investment earnings, back into the fund’s principal. Annual payouts would then be 5% of the fund’s average value during the past five years, with at least 50% of those payouts used for dividends (essentially a modification of a “50-50 plan” considered in past years).
“In this way, the people will always receive first call on the earnings of the Fund, ahead of government,” the committee’s sponsor statement notes.
The size of the dividends would be somewhere between the 75-25 split and the full “statutory” payouts sought by Dunleavy. But some lawmakers including Groh are concerned such dividends would still be too much without new revenues or other measures to ensure the state could fund its budget.
“When you have a 50-50 plan you have to have a way to pay for it,” he said.
Groh is the primary sponsor of the fifth proposal being heard Saturday (HJR 9), which essentially is a simpler version of HJR 8 that doesn’t specify dividend payment provisions.
Instead it allows up to 5% of the Permanent Fund’s average value during “the first five of the preceding six fiscal years” to be appropriated by the Legislature. Originally recommended 20 years ago by the Permanent Fund’s board trustees, the resolution introduced by Groh has backing from other members of the House Minority Caucus.
Groh, who as a legislative assistant in 1982 was a key participant in creating the dividend program, said his current proposal is part of what he calls a more responsible and sustainable long-range plan, including collecting a higher percentage of oil taxes and a stricter cap on state spending. He said a cap of sorts will be created by eliminating the Earnings Reserve Account, since it can be spent with a majority vote of the Legislature while the fund itself is constitutionally protected.
“We need this constitutional amendment to prevent the Legislature from blowing a critical part of the Permanent Fund in a spree,” he said.
• Contact reporter Mark Sabbatini at mark.sabbatini@juneauempire.com
