Daily Sitka Sentinel

Dunleavy Proposes PFD, Plan Formula

By BECKY BOHRER
The Associated Press

JUNEAU (AP) — Alaska Gov. Mike Dunleavy proposed Wednesday what he called a step toward a broader fiscal plan that includes placing in the state constitution a new formula for the annual check residents receive from Alaska’s oil-wealth fund.

The proposal, released a week before the scheduled end of the legislative session, also would restructure the Permanent Fund, rolling its spendable earnings reserve into the fund’s constitutionally protected principal, and place in the principal an endowment used to help communities with high electricity costs. 

Dunleavy said the multibillion-dollar earnings reserve and the Power Cost Equalization endowment are “at risk” of being spent down and that the proposal would help settle long-running debates over issues that have become political footballs.

“Imagine a world where we’re not wrestling over the Permanent Fund again. Imagine a world where we’re not wrestling over the PFD or the earnings reserve or PCE. Imagine what that will do in terms of conversations moving forward,” he said. “In my opinion ... it’s unlimited what we can do once we get these heavy lifts out of the way.” PFD refers to the annual Permanent Fund Dividends paid to residents.

Debate over the size of the checks has overshadowed other issues in recent years, with lawmakers setting an amount to pay rather than following a longstanding formula in law amid an ongoing budget deficit. Lawmakers began in 2018 using the earnings reserve, long used to pay dividends, to also help pay for state government.

Dunleavy is proposing a Permanent Fund draw limit, with half the draw going toward dividends. The proposal also would move $3 billion from earnings to a budget reserve fund that administration officials said could be used while work is done on a broader fiscal plan.

The plan offered Wednesday is a revision of an earlier constitutional amendment Dunleavy proposed. It would need to be approved by two-thirds of each the House and Senate to qualify for the ballot in November 2022.

Dunleavy said there is time this session to act. House Speaker Louise Stutes said the chances were “slim to none” the proposal would pass this session, set to expire May 19, but said she believed lawmakers would work with Dunleavy for a special session.

Stutes called Dunleavy’s proposal a “starting point.” She told reporters she believes there is a “general consensus amongst all legislators we need to address” the dividend and the dividend formula in some way.

“Even though there’s not a solution yet, there’s an optimism that we’re at least talking about a solution,” the Kodiak Republican said. Communication between Dunleavy’s office and the Legislature has improved this year, she said.

Dunleavy was joined at a news conference Wednesday by more than 20 legislators, mostly fellow Republicans. Many of them stood around him as he spoke, and a number spoke about the need to find resolution on the issue.

Senate Majority Leader Shelley Hughes, a Palmer Republican, said compromise is needed. Legislators who dug in on their positions are “now willing to pull their heels out of the mud. That’s a good thing.”

She said reaching resolution on the dividend is key to addressing the state’s deficit. “Because until this matter is settled, you cannot figure out how to close the rest of the gap,” she said. Discussions on spending and revenue will follow, she said.

Sen. Jesse Kiehl, a Juneau Democrat who serves on a committee that heard the proposal Wednesday, called the proposed transfer of $3 billion to a budget reserve fund a “raid” on Permanent Fund earnings. He said that while he supports putting a dividend of some kind in the constitution, it needs to be “reasonable” and sustainable. 

He said the proposed approach would “get us to broad-based taxes faster than anything I’ve seen yet.”

Sen. Bill Wielechowski, an Anchorage Democrat, said in an interview that he would look at Dunleavy’s proposal and listen to public testimony. But he said it is a departure from what Dunleavy campaigned on and in a Facebook post said the state needs to stop “giving away our oil.” 

Dunleavy has said the state should follow the dividend formula until it is changed and said the public should be involved in any changes. The formula was last used in 2015. Dunleavy, who took office in 2018, has so far failed to persuade lawmakers to use the existing formula.

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This story is corrected to show Dunleavy is proposing a Permanent Fund draw limit, instead of a limit from fund earnings.