I'm lucky enough to have family visiting. Oh, the joys of hosting a dear cousin, then screaming about how insane our state lawmakers are. Stop being jealous; at least I can cook. "Oh, we're borrowing money so we can pay banks and oil companies." Try explaining that to someone who was under the impression that Alaska owned its oil and even pays out dividend checks yearly. Why would we jeopardize that?
The Legislature broke its budget stalemate as time ticked down to the end of the session. For the first time in Alaska's history, earnings from the Alaska Permanent Fund will be used to pay for government — well more than a billion dollars this year. The Legislature passed Senate Bill 26, which capped the amount of funds that can be taken out of the earnings reserve at 5.25 percent (dropping to 5 percent in three years). While several legislators and the governor proclaimed how "monumental" this bill was, and that it was the panacea for our fiscal ills, it doesn't actually bind the Legislature or prohibit it from exceeding that 5.25 percent draw. While a cap on funds taken from the earnings reserve is fiscally responsible, the Legislature could decide to take 10 percent or 20 percent of the value of the earnings reserve next year, and this statute would not stop them.
The statute also creates a conflict in our dividend laws. There are still statutes on the books that require the Permanent Fund to calculate the full value of Alaskans' PFDs and then other statutes order that they "shall transfer" those funds to a special dividend fund, where the Commissioner of Revenue "shall" pay those funds to Alaskans in the form of a dividend. But the Supreme Court has ruled that "shall" really means "may" here, and these statutes don't have to be followed. This means that instead of following the statutory formula for the PFD, the Legislature can set the amount of the dividend at whatever amount it chooses. This year, for example, the statutory formula mandates that the PFD be approximately $2,650. But the Legislature instead ignored the statute and set the dividend at $1,600.
Here is how SB 26 played out this year. The statutory formula — still on the books — required the Permanent Fund Corp. to transfer about $1.7 billion to pay full $2,650 dividends to Alaskans. However, under SB 26, the Alaska Permanent Fund Corp. is now required to calculate 5.25 percent of the value of the fund (averaged over the past five years) — and that comes to about $2.7 billion. This is the total amount of funds available to be drawn from the Earnings Reserve. If the Legislature wanted to limit the total draw from the Permanent Fund to 5.25 percent and still follow the statutory dividend formula, they could have done so. Government would have had access to about $1 billion — still a significant amount. But this was not enough to balance the budget. Instead, they chose to violate one of those statutes — the one requiring a full PFD — so they could stay within their new 5.25 percent draw limit.
The Legislature cut the amount transferred for PFDs by $700 million — and gave that money to themselves to spend. In the end, government got $1.7 billion (about 63 percent) and the people got $1 billion (about 37 percent). $700 million equates to almost $1,000 for every man, woman and child in Alaska.
Recent versions of SB 26 eliminated the requirement to pay a full PFD, and stated the PFDs "may" be paid. That would have been a more intellectually honest way of dealing with this. Instead, the Legislature took the more politically expedient (although some might use some other choice words) method of simply slapping a new, conflicting statute on the books — then ignoring the PFD statute. This gives them the cover to go back to their constituents and say they fought to keep the PFD statute on the books.
It will be interesting to see how the electorate responds when they see how this plays out. I suppose it's time to climb out of the weeds of state law to go see what's blooming and crawling in the tide pools. It won't take a decade for Alaskans to start saying, "I remember the Permanent Fund dividend." Remember who wrecked it. Remember who tried to save it.
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