Daily Sitka Sentinel

Stedman: Conflict Remains Over PFD

By SHANNON HAUGLAND
Sentinel Staff Writer
    Sen. Bert Stedman expects budget discussions next year will be “the same situation or worse” if legislators and Gov. Mike Dunleavy can’t resolve statutory conflicts related to the Alaska Permanent Fund before the 2020 legislative session opens next January.
    “But the chance of us doing it is less than 50-50,” Stedman said, in an interview with the Sentinel today from Haines. Stedman, a Republican who represents Sitka and other Southeast communities, is Senate Finance co-chair.
    After Dunleavy vetoed more than $300 million from the operating budget submitted by the Legislature, the lawmakers put most of the money back in a bill they passed in a special session.
    Dunleavy is once again making line item vetoes on that budget, while reversing his position on some items, sparing the Head Start and Senior Benefits programs and cutting University of Alaska funding for fiscal year 2020 by $25 million instead of the $136 million he originally proposed.
    But Stedman said the Legislature needs to resolve a discrepancy with statutes related to the Permanent Fund.
    On one hand, the state statutory formula for the PFD calls for a payout of $3,000, based on earnings, which is the dividend Dunleavy called for.
    But the Legislature is also limited to a draw-down of 5.25 percent of the market value of the fund, based on a five-year rolling average. Giving $3,000 to every Alaskan would have required cutting the budget by $1.2 billion or drawing that same amount from savings or the Earnings Reserve Account of the permanent fund, Stedman said.
    “There are repercussions in not following that payout,” he noted.
    (He added that another problem is that one of the figures was skewed by one-time land sale revenue, another problem that needs to be addressed.)
    Legislators reached a compromise in the last special session between those favoring the $3,000 payout and those in support of one that was lower, with three-quarters agreeing to the $1,600 dividend payout. The three-fourths majority was needed in order to draw funds out of the Constitutional Budget Reserve to balance the budget.
    Stedman and other lawmakers are talking about having another special session this fall to try to address the statutory discrepancy on the PFD, which had turned out to be a key issue in this session.
    “We’ve got the appropriation limitation in there, and we need to rewrite the formula structure to fit in the percent of market value approach,” Stedman said. “If we don’t come to an agreement on the formula we’ll probably have the same situation or worse.”
    The second budget presented to the governor was pretty much the same as the first one, with $5 million added for the ferries, and a cut of $25 million for the university system, Stedman noted. Dunleavy has accepted the Legislature’s figure for the university, but is attempting to couple it with a “compact” with the Board of Regents that will cut $45 million more over the next two years.
    Stedman said he expects the governor to leave funding for the Mt. Edgecumbe High School aquatic center in place, but expects him to follow through with his plans to veto funding for public radio and the Alaska State Council on the Arts.
    “I would be more surprised if he left them in than if he vetoed them,” Stedman said of the public radio and arts council.
    Stedman said he expects the major impact of the university cuts will fall on the Anchorage and Fairbanks campuses, and not on rural ones like UAS-Sitka.
    The governor’s vetoes ended up creating more budget problems than they solved, he added.
    “The Senate ended up agreeing with the House in the end to go ahead and basically add all the vetoed items into the operating budget and give it back to the governor again,” Stedman said. “The Senate felt the budget we produced (had) reasonable budget reductions and were achievable. We’ll see what the governor does. We don’t know what he will do.”
    That decision is expected to come on Monday, he said.
    Stedman commented that the governor’s vetoes can compound the state’s problems, particularly as they relate to federal programs such as Medicaid and Head Start. Dunleavy has already backed off on his threat to defund Head Start.
    “Virtually all the data we’ve ever seen on pre-K funding is it’s a net gain,” Stedman said. “It’s the social impacts you have to take into account, it’s not strictly monetary. One of our most fundamental obligations is education – it’s constitutionally obligated.”
    The governor had proposed eliminating all funding for the Alaska Marine Highway System, but legislators and the governor compromised on 33 percent cut going into the session, Stedman said.