Alaska Senate budget leaders consider ‘shock absorber’ dividend plan

JUNEAU — The co-chairs of the Alaska Senate Finance Committee told reporters Monday afternoon that they are considering using the Alaska Permanent Fund dividend as a means to gradually implement budget cuts. The move would be an alternative to the one-year proposal from Gov. Mike Dunleavy.

“Generally where we’re at will be a modification of what the governor submitted, to look at a more of a step-down approach over the next two or three years to allow private enterprise to adjust, the municipalities and the general populace, to the changes,” said Sen. Bert Stedman, R-Sitka and co-chairman of the Senate Finance Committee.

“We’re going to be talking about potentially using the dividend as some sort of a shock absorber,” he said.

As he explained later, the idea is that the dividend would dip only as long as other spending remains high. If the Legislature agrees to cuts in this year or next, or has more revenue, the state would pay a larger dividend.

Dunleavy has proposed extensive budget cuts and other measures to pay a Permanent Fund dividend using the traditional formula while erasing a $1.6 billion deficit without new taxes or spending from the Constitutional Budget Reserve.

Lawmakers in the House and Senate are generally unwilling to immediately cut the budget to the extent that Dunleavy has proposed, and it is not yet clear what amount of spending will be acceptable in the Legislature.

In a Friday press conference, Dunleavy said he is “ready and waiting” to see what the Legislature comes up with.

While the governor is required under state law to propose a spending plan, the Legislature has the final word — except for the governor’s ability to veto specific spending items in the budget. (The Legislature may override that veto if three-quarters of its 60 members agree.)

Already, two key components of the governor’s budget plan are unlikely to pass. Those two proposals would divert $448 million in shared taxes from local governments to the state, shrinking the deficit.

Given an unwillingness by the governor or a majority of lawmakers to raise taxes or spend from savings, Stedman said the Legislature doesn’t have many options beyond a dividend reduction if Alaskans are unwilling to accept cuts to programs like education, health care and senior services.

“We’re running out of maneuverability,” he said.

Stedman said the governor may have run for election on a promise of paying a statutory Permanent Fund dividend and paying back past cuts to the dividend, but “I don’t see a lot of support in the building for that.”

Rep. Lance Pruitt, R-Anchorage and the House minority leader, said Stedman’s assessment is “probably a good assessment of the overall tenor in the building, as of right now. Mind you, the tenor in this building can change.”

There will certainly be legislative opposition to any dividend cuts.

“I don’t know of any scenarios where I would go for anything less than a full dividend,” said Sen. Donny Olson, D-Golovin.

Neither the House nor the Senate yet have a complete budget counterproposal to present. Lawmakers in each body are meeting in subcommittees to craft budgets for each state department, then the finance committee in each body will combine those subcommittee budgets into a broader state budget.

Sen. Natasha von Imhof, R-Anchorage and the Senate’s other finance co-chair, said lawmakers are still trying to figure out exactly how much money the state will have to work with and are still hearing from constituents about their priorities.

Sen. Scott Kawasaki, D-Fairbanks, said an important report will come in two weeks when the Alaska Department of Revenue releases its spring oil price and production forecast.

Crafting a new budget takes time, and lawmakers are expected to work until at least mid-May, when the Legislature will reach its constitutional limit. They could work longer: The state’s fiscal year doesn’t begin until July 1, and that’s the true drop-dead deadline. If the state still lacks a budget, state government could shut down.

“We’re only on day 56. We’ve got like another 100 days,” Kawasaki said, half-kidding.

Correction: An earlier version of this story incorrectly reported that Lance Pruitt is the House majority leader. He is the House minority leader.