Daily Sitka Sentinel

Stedman Skeptical On Gov’s PFD Plan

By SHANNON HAUGLAND

Sentinel Staff Writer

Sen. Bert Stedman, co-chairman of the Senate Finance Committee, says Gov. Dunleavy’s proposed $3,800 permanent fund dividend in 2023 would mean “starting the year underwater.”

“It’s not a prudent way to administer the state’s financial resources.” Stedman said, reacting to his first review of Dunleavy’s fiscal year 2024 budget. “Revenues would not meet recurring expenditures. We’d be talking about going into the hole by about $300 million.”

Stedman was elected November 8 to a sixth term in the Senate representing southern Southeast communities, including Sitka, Wrangell, Petersburg, Ketchikan and smaller communities. He also has been selected to another term as co-chair of Senate Finance in charge of the operating budget.

The governor released his FY24 budget last week, which included following through on his campaign promise of a full “statutory” dividend. “Statutory” is shorthand for computing the dividend amount under a system that has not been used by the Legislature in recent years in order to make more funds available for government operations.

Stedman said Legislative Finance is analyzing Dunleavy’s budget, and looking for areas that were left out, and already has some reactions to the governor’s plan.

He said Dunleavy’s pledge for a $3,800 dividend not only means a $300 million draw on the constitutional budget reserve, but also result in failing to address other sundry problems in the state.

“It leaves you with no money, no ability to address issues we have: in our schools, our capital budget, our shrinking population and our stagnant economy,” Stedman said. 

He was also skeptical that oil would be as high as the $81 per barrel price that the governor used in creating a budget.

“You have to have a billion for cash flow, and there’s $2.3 billion in there, so you have no cushion for any oil price fluctuations when you start eroding $300 million a year,” Stedman said. “You’re just playing with fire.”

Oil today was around $78 a barrel; Stedman said a drop to $70 would pop the $300 million estimate for a statutory dividend to closer to $1 billion. He added that cutting $300 million out of operations to balance the budget isn’t possible.

Stedman said the statutory PFD promised by Dunleavy on his way to re-election by a sizable majority, should not come at the cost of ignoring transportation, social problems, schools and the economy.

“We need to start having that conversation,” he said. “If we implement this budget, it will be a continual erosion of our economic position relative to all our adjoining states in the region, and we’re at the bottom of the economic barrel in the country, in terms of GDP growth, population exodus. We’re at the bottom for school reading and math, and we’ve got some social issues.”

Stedman said he is eager for the dividend conversations and discussions around the budget, but knows he won’t have a clear picture until late February, after the legislative office review, and amendments that the governor will make to his budget draft.

Stedman said the Legislature will face additional challenges in making ends meet because of high inflation. He said the effects will be felt everywhere, including in capital projects and schools.

“We have to have a conversation on the base student allocation, the per capita distributed to schools, because it’s been flat for several years,” he said.

Stedman said he would also like to see additional resources put toward fisheries. 

“We’ve got concerns that the Yukon river drainage is going to collapse,” he said. “And not far behind it’s the Kuskokwim, and Bering Sea crab. We haven’t seen as many impacts in Southeast, relatively speaking, but you certainly see it in the news. We can ignore all that stuff and pay a statutory dividend – that’s a policy call – but we need to have more discussions on the economy.”

The governor’s budget includes $285,000 to restore Yukon-Kuskokwim Region Fisheries Management and Assessment programs, and $800,000 to restore and maintain Bristol Bay Science and Research Institute Watershed projects.

Stedman cited statewide population loss as another area that needs to be addressed through job creation, education and job training.

He said he hears regularly from larger and smaller communities about the disappointing ferry schedule in Southeast, but the cost of replacing the ships has become increasingly expensive. The governor’s budget has $13.6 million for the ferry system operations, but provides no information on how those dollars would be spent.

But Stedman said he does feel optimistic about being in a position to have some one-on-one conversations and negotiations with the governor about his concerns, and those of fellow legislators, as the final budget takes shape.