A field for Permanent Fund dividend ideas became even more so on Friday when Members from the Alaska Senate Finance Committee suggested an entirely new method of formulating the value of an annual Permanent Fund dividend.
Within the initial 60 days during the legislative session 2023, Alaska lawmakers have introduced six distinct plans to establish an entirely new dividend formula within states law or in the constitution.
Other resolutions or bills could significantly alter the amount of cash available to dividends, without specifically establishing the new dividend formula.
Legislators believe that no plan is likely to be passed this year, but one of the options currently being debated could be the model next year in order to address the issue that has plagued the Legislature and the state for the past seven years.
“I believe we all recognize that solving this fiscal issue, including issues with the Permanent Fund dividend, is vital,” said Senate President Gary Stevens, R-Kodiak. “We have the opportunity this year to accomplish this with the help of the governor, as well as the House. I hope we can reach that point.”
What’s the reason?
The state was relying on a formula for distribution of dividends that was in use since the 1980s and that was based on the net income from Alaska Permanent Fund. Alaska Permanent Fund.
As oil prices as well as the Permanent Fund boomed in the 2010s, it caused an odd situation: The state was running massive deficits yet was paying massive dividends.
Lawmakers were concerned about the uncontrollable expenditure on the Permanent Fund, and in the year 2018 they voted to establish an annual transfer of multibillion dollars to the Permanent Fund to the state Treasury, effectively setting the withdrawal limit.
The transfer, which is worth more than $3 billion is the largest source of general-purpose revenues, more important than oil tax for government budgets.
Most of the proposals for a brand fresh Permanent Fund dividend formula involve splitting the transfer in a certain method, keeping part to pay dividends, and the rest for services.
In 2021 the governor. Mike Dunleavy proposed a 50-50 split, half for dividends and the other half for services The current budget is based on an outdated formula from the 1980s to determine the dividend.
This formula is based on the Permanent Fund’s total revenue If applied now, it would absorb approximately 71% from the total transfer during the fiscal year which begins July 1.
The budget balance in this scenario will require drastic budget reductions, savings or sudden tax increases. Governor Scott Brown has proposed spending money from savings. However, lawmakers have stated they’re not ready to go that route because of the drastic decrease in savings in the last decade.
Fiscal working group creates the guidelines
In the last seven years, since the then-Gov. Bill Walker vetoed half the dividend stipulated according to the formula of the past, lawmakers and governors have decided the dividend through fiat.
Uncertainties over the right amount have caused delays in the annual budget process of the state and sometimes brought states to the edge of a shutdown of the government.
These same disputes have hindered attempts to establish an entirely new formula.
A bipartisan bipartisan group of legislators put together the framework of a strategy to settle the issue.
They determined it was recommended that the Legislature should consider the 50-50 split, a guarantee of a constitutionally-protected dividend. or adopt the term “a general-based measure of revenue” which is commonly used as a synonym for tax increases, pursue budget reductions and increase the state’s spending limit.
“There is an issue with fiscal or financial we’re working to resolve as well as an ongoing political issue on top of that,” said Rep. Ben Carpenter, a Nikiski Republican. “So the working group’s report on fiscal policy is an attempt to fix both of them.”
It’s sensible to imagine a viable solution as akin to an socket wrench Carpenter said. It’ll comprise a fiscal program (the socket driver) and a socket that’s the formula for dividends.
“It’s hard, you know. I think that everything has to be the whole,” said Speaker of the House Cathy Tilton, R-Wasilla.
Within the House Ways and Means Committee that Carpenter is chairman the committee, lawmakers have been discussing various ideas for a possible new formula.
- Rep. Zack Fields, D-Anchorage has proposed setting the dividend to less than $1,000 that would leave plenty of cash available for other services even at the low prices for oil.
- It is the Senate Finance proposal and an identical proposal that comes from Rep. Dan Ortiz, I-Ketchikan The proposal would create the split at 75-25, with 25 percent from the annually scheduled Permanent Fund transfer for dividends. The amount this year will be around $1,350 for each recipient. The advocates believe it will yield solid dividends with current estimates of oil prices, production rates and inflation in the budget.
- Although Dunleavy hasn’t introduced a 50-50 dividend for this year however, Senator. Bill Wielechowski, D-Anchorage, has proposed one as an amendment to the constitution. A 50-50 dividend could be around $2,700 for each recipient this year, and could result in a deficit at present levels of spending as well as expected revenue.
- A number of legislators as well as lawmakers and the House Ways and Means Committee have independently suggested amending the constitution that guarantee a dividend according to a formula that is not yet written in the state law. The inclusion of the guarantee in the constitution would force lawmakers to adhere to the formula, no matter what it is, but they can alter the formula should it prove not to be effective.
- The House Ways and Means Committee also introduced an amendment that guarantees either a 50-50 dividend, or a dividend calculated using the old formula or the traditional formula, whichever is greater.
The Senate hasn’t even discussed a brand new formula yet in committee this year and the House has been working on its own from the rest of the Legislature.
“They’re taking their time,” Tilton said.
Certain factors can alter the chances of the success
To allow public participation to encourage public testimony, the methods and strategies committee has held meetings at weekends and nights the unusual timeframe for Alaska legislators.
They’ve also had an intense schedule, working for many hours discussing the subject. Carpenter who was a part of the group that dealt with fiscal issues previously stated that he was unhappy with the lack of action from the former leadership caucus of the House that was a majority Democratic coalition.
This year it appears that the House is under the hands of a largely Republican coalition. Although the majority of lawmakers do not agree regarding what the dividend should have to be Carpenter stated that the House’s members have put forward a long-term plan for fiscal policy as one of their top priorities.
The change in leadership gives him the opportunity to believe that this Legislature will succeed with an entirely new approach where other legislatures have been unsuccessful.
There’s a tiny chance — perhaps 1percent — that a new formula will become the law in this calendar year but the likelihood increases the following year.
The changing attitudes and the new interests can be seen in a different image. In the most last Anchorage Town Hall meeting, nobody in the auditorium with a standing room-only seating capacity said that the dividend was the top priority.
“It’s very important to know where we are headed in the future of our state and the public wants to hear about something more than the amount of yield,” said House Minority Leader Calvin Schrage, I-Anchorage.
Rep. Cliff Groh, D-Anchorage has been a minority member on the committee on ways and means and has been involved in its debates.
The 17 new members joining the House this year will be the result of a “helpful influence” on dividend debates and could end the long-running impasse on the issue.
“I’m happy that we’re having an honest and open conversation,” Groh said.
It is expected that the Senate Finance Committee is scheduled to have a hearing about its plans in the morning at 9:00 a.m. on Tuesday. A hearing on dividends for the House Ways and Means Committee is scheduled at 9:00 House Ways and Means Committee has not yet set a date for its next hearing on dividends.
The story first appeared within the Alaska Beacon and is republished here with permission.
