Gov. Mike Dunleavy introduced a budget bill that would provide up to $2,350 for the Permanent Fund dividend (PFD) and restore a University of Alaska scholarship program not funded in an acrimonious legislative session.
The Alaska Legislature reconvened in August for a third special session to consider long-term fiscal policy recommendations that may include identifying new revenue sources through taxes.
Dunleavy, meanwhile, added to the agenda a spending bill for lawmakers to consider in special session that assures a PFD payment for residents and continues college scholarships for high-achieving high school seniors.
“Alaskans are still in recovery mode from the economic impacts of the pandemic,” Dunleavy said in a prepared statement.
“With this in mind, and following recent encouraging conversations with legislators, my administration has put forth a vehicle for the Legislature to fund the PFD and student scholarships — two critical programs that directly impact Alaskans,” Dunleavy said.
The governor’s budget bill includes:
• $1.53 billion for the 2021 PFD, providing an estimated $2,350 per eligible Alaskan.
• $11.7 million for Alaska performance scholarship awards.
• $6.4 million for Alaska education grants.
• $3.3 million for the so-called WWAMI Medical Education program, which is the University of Washington’s School of Medicine’s multi-state program that includes Alaska.
• $1.47 billion transfer from the earnings reserve account to the constitutional budget reserve. The reserve funds Power Cost Equalization, a subsidy for rural ratepayers who have among the highest electricity bills in the state.
A recent superior court ruling determined that the subsidy program is not subject to annual funding approvals through the constitutional budget reserve, which the Legislature did not approve for fiscal 2022.
“With clarity from the court, Gov. Dunleavy immediately authorized the funding to be distributed to the utilities that provide electricity to the 90,000 residents in rural Alaska,” the governor’s office said in a press statement.
The governor also is proposing to permanently protect the Permanent Fund Dividend Program within the state Constitution, which would require approval from the Legislature and a vote by statewide ballot.
Republican Rep. Mike Prax said in an email that he agrees with the governor’s idea for permanent constitutional protections.
“Yes, the Legislature has simply ignored PFD eligibility and distribution statutes ... As a result, Alaskans are legally entitled to several thousands of dollars of PFD ‘back payments’ that the Legislature apparently has no intention of paying,” Prax said.
Fiscal group makes recommendations
A fiscal policy working group of lawmakers meeting in August just released a report recommending constitutional protections for the Permanent Fund Dividend (PFD) and a new percent of market value formula for the PFD.
The bipartisan group recommended that the Legislature advance a “constitutional single-account Permanent Fund with payments limited by the percent of market value.”
The group supports a five-year average for figuring payouts that are no more than 5% of percent of market value. The fiscal working group also agreed that the Legislature should consider, among other issues:
• New revenue sources
• “Healthy” capital budget
• Spending cap reform
• Budget reductions
New revenues through taxes?
The group recommended that the Legislature consider finding new revenues of $500 million to $775 million, as part of a comprehensive fiscal solution.
Republican Rep. Bart LeBon, a member of the House Finance Committee, said: “New revenue means a change in state taxing policy ... Could be a variety of changes to existing policies plus a new broad based tax such as a sales tax, income tax or employment tax.”
Prax, a member of the fiscal policy working group, was asked if new revenues would involve imposing a statewide tax.
The North Pole lawmaker responded: “The working group recognized that political pressure exerted by those who want to maintain government programs at the expense of their neighbors causes elected officials to ignore the principle proclaimed in Article 1, Section 1 of Alaska’s Constitution that ‘All persons have a right to … the enjoyment of the rewards of their own industry.’ ”
“Therefore, on the order of $500 million-$775 million of ‘new revenues’ — including broad based taxes — probably would be required to close the budget gap.”
The working group “declined to recommend a specific tax measure in light of the Senate President’s and House Speaker’s comments to Alaska Common Ground that the Senate wouldn’t agree to a sales tax and the House wouldn’t agree to an income tax,” Prax said.