Alaska Gov. Mike Dunleavy vetoed the 2021 Permanent Fund dividend plus another $215 million in spending, he said Thursday.
The dividend was set at $1,100 by lawmakers, but Republican opposition to that amount meant that the dividend was not fully funded and was reduced to $525 per recipient.
Dunleavy called that figure “a joke” and said the state needs to have a reliable dividend formula rather than have the annual amount set by lawmakers.
“We need to have a PFD that is going to follow a formula, not just picked out of the air, but actually follow a formula. This $500 is really picked out of the air. It doesn’t follow any formula at all,” he said.
In addition to vetoing the dividend, Dunleavy canceled funding for trail projects envisioned as the first pieces of the Long Trail, a path connecting Seward and Fairbanks. Dunleavy had proposed those projects himself in a separate piece of legislation.
Dunleavy cut Medicaid funding by $17.5 million, vetoed $42 million in maintenance projects at the University of Alaska and cut state support for social workers, including a new $1.2 million program intended to keep social workers on staff.
The governor vetoed all state funding for public radio and TV, as well as funding for the state’s public broadcasting commission. The state will still fund satellite transmission equipment used in part by public broadcasters for emergency messages.
He explained his decision by saying that “we want to keep the budget tight, we want to keep a downward pressure on the budget.”
“You’ll see that there aren’t going to be massive reductions, but there are reductions in our state agencies that continue to drive the size of government down,” he said.
The location of those cuts, which fell heavily on social services, incensed Democratic legislators.
“The governor vetoed funds for kids, the sick, the poor — basically anyone who couldn’t afford to hire a lobbyist,” said Sen. Bill Wielechowski, D-Anchorage.
“Today’s vetoes feel like a political attack, where the welfare of Alaskans is being wielded like a weapon with no regard for the families and businesses affected,” said Rep. Liz Snyder, D-Anchorage, in a message on social media.
The Alaska Municipal League denounced the governor’s veto of millions for the state’s community assistance program, which provides money to cities and boroughs.
The governor said federal economic aid authorized by Congress would compensate for that loss, but Nils Andreassen, director of the municipal league, said that money is “to respond to the crisis created by COVID, not that manufactured by the state.”
Dunleavy’s action on the dividend increases the pressure on state legislators to come up with a long-term formula for the dividend, which some legislators say is a necessary precondition for a larger amount this year. State legislators are already scheduled to meet in a special session later this year.
Rep. DeLena Johnson, R-Palmer, said the prospect of no dividend “may move the conversation to a higher level than during the ‘hurry up, git ‘er done’ pressure of budget negotiations.”
But Rep. Andy Josephson, D-Anchorage, said vetoing this year’s dividend means there’s now significant risk attached to the special session. What happens if lawmakers can’t agree?
“The governor runs a substantial risk that there will be zero PFD and he will be the cause of that,” he said.
“I suppose there’s always a risk in every decision that we make,” said House Minority Leader Cathy Tilton, R-Wasilla. “I would hope that for Alaskans that the Legislature would come together and recognize that is not a solution.”
“I do not believe the public will allow the Legislature to leave a session without a decision made on a dividend amount,” she said.
Dunleavy himself said he thinks a new dividend will be set.
“You’ve got to fight for what you think is right, to be honest,” he said.
Legislators will need to figure out how to reconcile Alaskans’ desire for a large Permanent Fund dividend with the need to provide constitutionally mandated services like education. Several legislators have proposed plans, but none have advanced to a vote on the floor of the House or Senate. Some lawmakers, including the governor, have proposed constitutionally mandating the dividend, an act that would eliminate annual arguments over its amount.
Rep. Ivy Spohnholz, D-Anchorage, said she supports constitutionalizing the dividend but feels the governor took a step backwards on Thursday.
One of his vetoes was $2 million from the account used to pay lawmakers’ per diem expense payments.
“I thought it was interesting that the governor was imploring us to set aside pettiness to solve the problems of the state ... vetoing per diem, it didn’t really seem like he was setting aside pettiness. It didn’t set the stage for very constructive negotiations,” she said.
Sen. Bert Stedman, R-Sitka, said there is an “unwritten rule where you try to stay out of the administration’s budget and they try to stay out of the Legislature’s budget. If we’re going to play by no rules, then we’ll play by no rules.”
Dunleavy’s new plan for the dividend calls for as much as $500 million in new revenue or spending cuts, but some lawmakers say even that figure is too low. On Thursday, the governor said he intends to release updated projections in the coming days that show how the state’s fiscal situation has improved and how his new dividend is affordable.
Alaska’s state services are now primarily funded by the earnings of the Alaska Permanent Fund, but most Alaskans don’t know that.
A survey commissioned by the House majority found in early June that two-thirds of Alaskans either don’t know how state services are funded or incorrectly believe that oil revenue provides the majority of state funding. That hasn’t been the case since 2018.
Legislators have created a bicameral, nonpartisan working group ordered to come up with a plan that can be discussed in the special session later this year.
“It’s going to take some work some effort, certainly. It’s going to take some time over the interim with this working group to work together and educate the public,” said Speaker of the House Louise Stutes, R-Kodiak, last week. “It can be done. But we have to work together.”