Alaska Legislature

Support lacking in Alaska Senate for constitutional amendment for Permanent Fund dividend

JUNEAU — Gov. Mike Dunleavy’s proposal to enshrine the Permanent Fund dividend in the Alaska Constitution appears to lack the support it needs to pass the Alaska Senate, lawmakers say.

“The Senate majority — I wouldn’t say everyone, but I would say a large number of folks — are uncomfortable with the idea of constitutionalizing the PFD,” Senate President Cathy Giessel told reporters in a meeting Friday morning.

“That’s my sense," agreed Senate Rules Chairman John Coghill, R-North Pole, later Friday. “The barrier is pretty high.”

Amending the constitution requires 14 votes in the Senate, 27 votes in the House, then a majority vote at the next statewide general election. Only two amendments have passed the legislative hurdle since 2010, and no amendment has passed muster with voters since 2004. Five of the past six amendments put to voters have failed.

As part of a broader fiscal plan for the state, Dunleavy has proposed three constitutional amendments: One would require voters to approve tax increases. A second would tighten the state’s existing spending limit. The third would constitutionally enshrine the traditional payout formula of the Alaska Permanent Fund dividend.

As he travels the state this week in a roadshow sponsored in part by the group Americans for Prosperity, the governor is promoting all three amendments.

“It’s really a major focal point of his message,” said the governor’s press secretary, Matt Shuckerow.

[Here’s your annual reminder, Alaskans: The PFD filing deadline is this weekend]

Thus far, the Alaska Senate has taken the lead in considering the governor’s proposals, and both the spending cap and tax-approval amendments have advanced to the Senate Judiciary Committee for consideration. The constitutional PFD amendment will follow suit next Tuesday, said Sen. Mike Shower, R-Wasilla and chairman of the Senate State Affairs Committee, which has been considering the idea.

While Shower supports constitutional protections for the dividend — hence his willingness to advance the idea — he acknowledges that “there is less support, my read, for the Permanent Fund dividend enshrinement in the constitution” than for the spending cap.

Senators said there are two principal arguments at play with the dividend, one in favor of the constitutional guarantee and the other against.

[Alaska House committee proposes flat budget as starting alternative to governor’s plan]

Sen. Lyman Hoffman, D-Bethel, outlined the main argument in favor of the amendment during a Wednesday hearing of the Senate Finance Committee: Enough Alaskans support the dividend that unless there is a protected formula, arguments over the amount of the dividend will occur year after year in the Legislature, soaking up time and effort and distracting from other issues.

“If we do not resolve the issue on a permanent basis and let the people of Alaska decide what that might be, we are setting ourselves up for decades to come, making the dividend a political discussion for everyone’s election,” Hoffman said.

“Senator Hoffman, I think, hit the nail on the head the other day in finance. You’ve got to figure out what you’re going to do with the PFD, otherwise it’s going to be an issue until you figure it out,” said Sen. Bill Wielechowski, D-Anchorage.

The principal argument against a constitutional dividend, one used by Coghill and Sen. Natasha von Imhof, R-Anchorage, is that constitutionalizing the dividend forces the Legislature to give up budgetary flexibility.

If the dividend is in the constitution, as Coghill explained, it’s a mandate on par with the requirement that state government not restrict residents’ speech.

If the dividend is constitutionally required, lawmakers in a tight budget will be forced to pay it while foregoing other things, such as health care, which is not constitutionally mandated. The alternative is to raise taxes in order to pay a required dividend.

“I am dead set against putting it in the constitution,” Coghill said.

Though senators say there is not enough support right now for a dividend amendment, that could change if the idea is packaged as part of a larger deal, perhaps one that permanently limits transfers from the Alaska Permanent Fund.

Currently, lawmakers can spend as much as they want from the Permanent Fund’s $18 billion earnings reserve with a simple majority vote. (The fund’s principal is already protected by the constitution.)

Last year, lawmakers approved Senate Bill 26, a measure that calls for regular transfers from the earnings reserve to the state treasury. At the time, lawmakers argued that the measure would deter unsustainable spending from the earnings reserve, which has traditionally paid dividends. In reality, SB 26 could be changed or ignored at any time by lawmakers, just like the dividend formula.

Coghill said “many of us agree” that the transfer limits “could and probably should be put in the constitution.”

But if a transfer is to be enshrined in the constitution, getting enough support could require part of that transfer be reserved for a dividend.

“There’s a lot of talk in conservative circles about a 50/50 split,” Wielechowski said.

As a state senator, the governor proposed such a split.

“There could be support for that,” Wielechowski said. “I mean, it’s compromise.”

Correction: The initial version of this story misstated the number of votes needed in the Senate to approve a constitutional amendment. It is 14, not 17.