Despite fireworks at the end, the 2023 legislative session was reasonably productive. I’m now optimistic we can gradually tamp down the contentious annual Permanent Fund Dividend fight that is very distracting at the end of sessions, this year being a prime example.
The fight was between legislators who wanted a high $2,700 Permanent Fund dividend, which is unaffordable this year, and those willing to accept a more modest one of $1,300, which is affordable.
What’s puzzling was that the higher dividend was pushed by Republican legislators in the state House led by (fiscal?) conservatives. It would have created big deficit this year. The moderate dividend was promoted by a state Senate led by a coalition of moderate Republicans and Democrats. It creates no deficit and perhaps even a small surplus.
I’m happy that in the end, conservative-led House Republicans recognized financial reality. We just don’t have the money this year to pay the high PFD.
To legislators’ credit, no one wanted to overdraw on the Permanent Fund earnings account or to run the state’s main savings account, the Constitutional Budget Reserve, to dangerously low levels.
New taxes could have paid for the higher dividend, but no one has appetite for those either.
Have we turned a corner on PFD expectation? Maybe. The public has long accepted financial reality — we can all see the lower oil prices — but as usual it makes the politicians a while to catch up.
Here are some other positives:
First sessions of a two-year Legislature are usually slow because bills that don’t pass in the first year are still alive in the second year. It typically takes two years to develop and pass complex legislation, too. A case in point is the proposed return to a traditional “defined benefits” pension option for public employees. Alaska is the only state without such an option. We now have what’s called “defined contribution,” or a 401(k)-type pension, and some studies show this approach is underperforming. We need to be careful — so, to their credit, legislators are taking time to make sure they do this right.
The governor’s carbon credits package is innovative but complex, and although the Legislature has passed part of this, the forest carbon credit sales program, the more important part that sets a regulatory framework for carbon dioxide injection underground, with permanent storage, waits until next year.
Conceptually this is simple: We pump CO2 down special injection wells and store it in sealed geologic reservoirs deep down. Injection and storage of gas is actually done all the time, and we do it now in Cook Inlet to store natural gas for winter. CO2 injection is done routinely in the Lower 48.
However, there are some complexities for Alaska. To manage this properly, the state has to have ownership of unused reservoir space, and the pending bill will clarify that and the management authority. Carbon storage and carbon offsets are huge emerging industries and these bills will allow Alaska to have the largest underground CO2 storage and carbon offset sales (from forests) programs in the nation under single ownership and control.
That is important for industries who will buy credits or lease underground space for C02 storage. In other states the ownership is fragmented and diverse, making it difficult for companies to put deals together.
A few other things:
Sometimes a low-revenue year is helpful, because legislators focus on practical things that don’t cost much money. Here’s a shout out to freshman Sen. Jesse Bjorkman, R-Kenai, and freshman Rep. Jesse Sumner, R-Wasilla, for getting a bill through the House and Senate to allow lumber from trees harvested in Alaska to be used in residential home construction.
Most residential buildings funded conventionally have requirements to use lumber bearing a quality and grade stamp from national associations. In practice, this means only lumber from the Lower 48 can be used. This legislation would allow the Alaska Department of Natural Resources to develop an accepted state lumber certification program.
Since Alaska white spruce, Sitka spruce and Western hemlock have long been known to have a strength similar to Douglas fir that is shipped into Alaska, this is one of those changes we should have done years ago. It is not only good for local economic development but will particularly help rural communities where housing is costly and often financed by federal funds with the Lower 48 lumber grade stamp requirement. That means this lumber must be shipped into places where there is ample local forest.
A shout-out should also go to another freshman House member, Republican Rep. Stanley Wright of Anchorage. Though new, Wright took an interest in environmental protection and pushed House Bill 51, which deals with hydrofluorocarbon chemicals used in industrial and residential refrigeration systems. These are big contributors to global warming. There’s a national transition to chemicals less harmful to the atmosphere, and HB 51 provides the regulatory framework for this to happen in Alaska.
In the Senate, Wright agreed to merge his bill with Senate Bill 67, long promoted by Sen. Jesse Kiehl, D-Juneau, that controls the use of per- and polyfluoroalkyl substances, a group of “forever” chemicals used in firefighting foams that are very harmful to human health. When compounds containing PFAS seep into drinking water, the toxic effects linger for years. Wright is a freshman and not part of the House Republican leadership, and he appears to have gotten HB 51, on a complex subject, through the House through simple persuasion. Give Wright (and Kiehl) gold stars for this.
Let’s also call out new Sen. Loki Tobin, D-Anch., for leadership in boosting education funding through an increase in the Base Student Allocation to school districts. Her bill didn’t pass but it is far along in the Legislature. This is a big deal. Tobin, who chairs the Senate Education Committee, sponsored the BSA increase (it has since been modified) and, as part of the Senate Majority, got the bill through the Senate and through House committees to the House Rules Committee, at a very advanced stage.
Meanwhile, House Republicans did approve a one-time boost of $175 million for schools, which is now in the budget and awaiting Gov. Mike Dunleavy’s approval. The BSA increase would be better because it would be part of the state’s ongoing support and money school districts can count on in making long-term decisions, like paying teachers more.
All in all, not a bad year. Not continuing money for schools was disappointing, but a lot of good work was done. Sometimes years that are lean financially focus our attention.
Tim Bradner is publisher of the Alaska Legislative Digest and Alaska Economic Report
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