Perm Fund cuts

Alaska Gov. Walker, right, seen in this screenshot from Wednesday's news conference, with Lt. Gov. Byron Mallott, says restructuring the Permanent Fund would grow lifelong earnings of an Alaskan to $18,000 with a plan versus $8,000 without. Matt Buxton/News-Miner

FAIRBANKS—Gov. Bill Walker has capped the Alaska Permanent Fund dividend at $1,000 following the Legislature's inaction on measures to significantly close the state’s multibillion-dollar deficit.

Walker, at an Anchorage news conference Wednesday, announced some $1.29 billion of vetoes that touched numerous areas, including K-12 education, the University of Alaska, substance abuse treatment, public broadcasting and transportation.

"You won't see a single cut that anybody celebrated," Walker said in a somber tone that resonated through the 40-minute event that warned of the consequences of legislative inaction. "But it's a matter of not having a choice."

He used his line item veto authority to reduce the amount of money available for this year's dividend by about $700 million, which reduces the dividend to less than half of last year's payout.

In total, just $190 million of the $1.29 billion is a direct cut to government, largely focused on education and the University of Alaska.

Walker is a leading proponent of restructuring the permanent fund to pay for state government, and his plan had proposed a three-year guarantee of a $1,000 dividend. Legislators balked at the proposal during the last special session, complaining about the political consequences of restructuring the dividend to patch part of the state's $3.5 billion deficit.

Walker said the veto of the dividend funding means legislators won't have any excuse to avoid the plan when they return to special session on July 11.

“There shouldn’t be any more excuses,” he said. “I've tried to take away from them the risk they might suffer at the polls, so that's off the table. Any excuses now are just politics. I have absolutely no patience for that.”

Others, mostly Democrats and moderate Republicans in the House, also opposed the permanent fund measure because the budget contained hundreds of millions of dollars in oil and gas tax credits. Walker vetoed $430 million of those credits, though he said they will eventually need to be paid in later years.

The bulk of responses from Republican legislative leaders focused on the cut to the tax credits as opposed to the dividend. The Senate approved Walker's bill to restructure the dividend, but the House failed to hold a vote on the bill even though it altered the bill to guarantee a $1,500 dividend for two years.

House Democrats appeared unswayed by the changes, and House Minority Leader Rep. Chris Tuck, D-Anchorage, released a statement saying the special session wouldn't change votes.

Fairbanks Democratic Rep. David Guttenberg agreed that the vetoes, including the veto of oil tax credits, don't do enough to make a "structural" change to fairly pay for government. Guttenberg is a member of the House Finance Committee.

"We're still supporting a fiscal plan that's fair to all Alaskans," he said. "(Walker) seems to have dropped everything but the permanent fund, and that's problematic."

Unless the Legislature takes significant action, the state will have to dip into the permanent fund earnings account to pay for the budget next year anyway, though to a much greater degree than if a restructuring of the fund is adopted. Walker said the only thing that inaction will accomplish is ensuring that the state's savings, including the permanent fund earnings account, will run out in the next few years.

"If we don’t make a change on the dividend program, it goes away in under four years,” he said.

At the news conference, Walker unveiled a poster to show that a person born today will accumulate $18,000 in dividends by age 18 under the permanent fund restructuring plan but just $8,000 without it.

The veto can be overridden with a three-quarter vote of the entire Legislature. That's something Senate Majority Leader Sen. John Coghill, R-North Pole, believes is unlikely.

Coghill noted there were just five votes against restructuring the permanent fund in the Senate, which means reaching the 45-vote threshold to override Walker would require the entire 40-member House to vote in favor of an override.

"Probably not likely," he said. "That's a high hurdle."

But Coghill, who voted in favor of restructuring the permanent fund, said he appreciated the governor's willingness to "put action behind his words," though he added he's not sure the move will change the House's mind on the bill.

"Does it get his expected goal? I don't know," he said. "He's doing it in an election cycle that everyone is already waist-deep into. ... I can tell you a lot of the House members have carved out their position already."

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Key vetoes

$666.3 million from Alaska Permanent Fund dividends, reducing the payout to $1,000

$430 million of oil and gas tax credits

$58.3 million from K-12 education

$10 million from the University of Alaska

$3.5 million from Department of Corrections, likely leading to the closure of one facility

$911,000 to close DOT maintenance stations in Central and Chitina

$750,000 from public radio

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Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.