JUNEAU — A proposal to rewrite the traditional formula for the Permanent Fund dividend is advancing from committee to the full Senate, and lawmakers say it could be part of a grand compromise on long-term protections for the fund.
On Tuesday morning, the Senate Finance Committee voted 5-1 to send a rewritten dividend formula to the Senate floor for consideration. As drafted, the new formula would take the annual transfer from the Alaska Permanent Fund to the state treasury and split it 50-50: Half would be reserved for dividends, the other half for government services.
The dividend formula in existing law would pay about $3,000 per person this year. A 50-50 split formula would result in a payment of about $2,300 per person. The change would not happen until next year.
[Alaska Senate to vote Wednesday on state budget with $3,000 PFD]
Speaking in committee, members were skeptical of the rewrite but said they wanted to advance the discussion and were open to the idea of further revisions.
Sen. Peter Micciche, R-Soldotna and a member of the finance committee, said he wants to see voters chime in on the rewrite.
“I think it’s important that the people of Alaska have a chance to weigh in if we’re changing the statutory calculation,” he said.
Gov. Mike Dunleavy has consistently said that any change should be approved by voters before becoming effective.
Sen. Bill Wielechowski, D-Anchorage, cast the lone vote against advancing the bill.
“I think if we’re going to make a change of this magnitude, it should be in the Constitution,” he said. Constitutional changes require approval from voters statewide.
Sen. David Wilson, R-Wasilla, said he agrees with Wielechowski but advanced the bill in hopes that it will be amended.
Sen. Natasha von Imhof, R-Anchorage and one of the yes votes, is opposed to the 50-50 plan but voted to advance it anyway, saying afterward that she believes the House will adjust the split.
“Realistically, I can’t get it out of my committee with anything other than 50-50. I personally don’t support 50-50, but there are others that do, and we have to at least allow the bill to move forward,” she said.
Lawmakers are advancing the rewrite because the state lacks the revenue to pay a traditional dividend without extensive budget cuts, spending from savings or tax increases. Lawmakers are proposing some budget cuts this year, but not enough to make ends meet.
A 50-50 split would result in a deficit of $860 million. A dividend using the traditional formula would create a deficit of $1.2 billion, according to figures from von Imhof and the Legislative Finance Division. Von Imhof supports a split closer to 25-75, with the smaller share reserved for dividends. At levels of spending proposed by the House and Senate this year, that proposal would eliminate the state deficit.
Sen. Donny Olson, D-Golovin, was absent from Tuesday’s discussion but said in an interview that he opposed to the rewrite because his constituents are opposed. They worry that changes in the formula will reduce the payout, and that a reduction is the first step toward elimination.
“They are very uncomfortable it’ll erode away where the PFD will become nonexistent,” he said.
Given the reluctant support in the finance committee, does the rewrite have enough votes to pass the Senate?
“Yes,” said Senate Majority Leader Mia Costello, R-Anchorage.
On Friday, von Imhof referred to a “grand bargain” afoot in the Legislature: In exchange for a $3,000 statutory dividend this year, lawmakers advance future changes to the dividend while locking up $13 billion in the Permanent Fund’s constitutionally protected accounts.
Costello alluded to that concept and said lawmakers want to come up with a long-term fix for a dividend formula that may not be sustainable any longer.
“We all want to settle that issue so it’s sustainable,” she said. “It’s kind of a package.”