Governor’s cuts would eliminate payouts that protect public assistance after PFDs issued

Gov. Mike Dunleavy has proposed ending Alaska’s longstanding practice of providing payments so people don’t lose food stamps and other benefits after Permanent Fund dividends arrive, fueling criticism from lawmakers who call it another swipe at rural and poor residents.

The proposed $17.7 million elimination of the so-called hold-harmless provision, requiring a change in law, would end the state support that prevents many Alaskans from exceeding income limits for welfare programs when the state distributes the oil-wealth checks each October.

The plan is part of Dunleavy’s sweeping proposal to close a $1.6 billion budget deficit, presenting changes that he has said will impact all Alaskans but that some argue is falling heaviest on remote or struggling populations.

State budget director Donna Arduin said last week the budget cuts will affect residents statewide.

“As the governor has said, as I have said, we have been overspending for years, writing checks that we can’t cash,” Arduin said Wednesday. “So there’s going to be an impact (on) everyone that receives state funds or relies on state funds.”

“We would say there’d be a lesser impact of getting this fiscal situation straightened out and beginning to grow our economy,” she said.

On Friday, the Alaska Federation of Natives, representing 140,000 people including many in rural areas, denounced the proposed budget as “contentious and ill-conceived” in a written statement.

“The governor’s budget appears divisive by design, pitting Alaskans against each other and against industry at a time when just the opposite is needed," said Julie Kitka, president of AFN. “This is not the solution for a fiscally stable future for our state.”

Removing the payment will affect 36,000 “duplicated beneficiaries," a reference to people who in some cases benefit from multiple assistance programs, said Shawnda O’Brien, director of the state Division of Public Assistance.

It’s possible that fewer than 36,000 individuals would be affected, she said. She could not immediately provide the exact number late Friday.

The hold-harmless payments each year ensure people don’t lose food stamps or benefits paid to the elderly, blind or disabled under the Adult Public Assistance and Supplemental Security Income programs.

The payments also replace benefits that would be lost under the Alaska Temporary Assistance program, helping people with children at home who perhaps lost a job and need help, O’Brien said.

The governor’s proposals attempt to responsibly resolve the state’s fiscal crisis, said Laura Cramer, deputy director at OMB. His plan to issue full dividend checks will help counter the budget reductions by putting more money in Alaskans’ hands.

“There’s a broader picture that needs to be looked at,” Cramer said. “It’s the position of Gov. Dunleavy that an individual can spend money better than the government.”

The governor in January proposed a plan calling for dividend payments exceeding $4,000 this year, next year and in 2021. That’s the amount of the annual payment under state law plus a supplemental payment equal to the amount reduced by Gov. Bill Walker and legislators the last three years.

Those big checks would come with a bite for many Alaskans if the hold-harmless provision is stripped, reducing or eliminating public-assistance benefits for months after incomes are pushed too high, critics of the proposed repeal said.

The hold-harmless benefit provides an important safety net for people and families, said Rep. Tiffany Zulkosky, D-Bethel, in a prepared statement.

“Cutting the PFD hold-harmless program, alongside the unprecedented level of cuts proposed this week, will compound harm and have devastating impacts for vulnerable Alaskans across the state who rely on public assistance to put food on the table and make ends meet,” Zulkosky said.

The state has made the payments annually for decades from the earnings of the $60 billion Alaska Permanent Fund. It’s part of the administrative costs listed on the annual checks Alaskans receive, said Neil Steininger, chief budget analyst at OMB.

State officials are in the process of drafting legislation that would eliminate the hold-harmless provision, he said.

Also underway is an effort to reduce the impact on people if the state support ends, Steininger said.

One idea being explored would allow people to receive their full dividend in monthly installments, rather than the current lump-sum payment, to reduce the chance that eligibility requirements will be exceeded.

Sen. Donny Olson, D-Golovin, opposes eliminating the hold-harmless payments, said Denise Liccioli, his chief of staff.

Even if the PFD payments are made monthly, the extra income will still trigger the loss of critical benefits for many people, she said.

Olson believes that proposal and others will hit rural regions especially hard, Liccioli said.

Olson also opposes Dunleavy’s proposal to move the money in the $1.1 billion Power Cost Equalization Endowment Fund -- created years ago to bring enormous rural energy costs in line with lower prices paid in cities -- into the general fund, where the power payments must compete with other programs for approval.

Dunleavy proposes funding the PCE payments at $32 million in the upcoming fiscal year.

But ending the endowment fund will put future PCE payments at risk, said Liccioli.

Olson also opposes Dunleavy’s idea to shift property-tax income from municipalities to the state, boosting state revenues by $400 million after repealing local governments’ ability to levy taxes on oilfield infrastructure. The remote North Slope Borough would lose $372 million.

“This is an attack on rural Alaska and the needy,” Liccioli said.

Jeremy Price, deputy chief of staff to the governor, said in an email on Monday that the tax on oil-related property should benefit people across Alaska.

“Let me be clear, the governor is proposing to end a sweetheart deal where less than 10,000 of Sen. Olson’s constituents receive over $370 million every year,” said Price. “Those oil tax funds should be shared with the majority of Alaskans throughout the state, not just select communities with highly paid lobbyists.”

Editor’s note: This story was updated to include a response from the governor’s office regarding his budget proposal that would shift oil-related property tax revenue from some local governments to the state.