JUNEAU — This week, the Alaska Senate will vote on the amount of this year’s Permanent Fund dividend. For the 20 members of the Senate, the question is one of priorities: Should the state follow the traditional distribution formula in state law, or should lawmakers pay a smaller dividend in order to avoid overdrawing the Alaska Permanent Fund?
The Senate’s 14-member majority is split right down the middle, 7-7, which means the decision may be decided by the six-member Democratic minority.
According to those familiar with the draft legislation, lawmakers are expected to pick between a $1,600 dividend and a $3,000 dividend. A $1,600 dividend has the support of the House majority and — depending on the funding source — may not overdraw the Alaska Permanent Fund. A $3,000 dividend is supported by the governor but, under present rates of spending, likely would require violating Permanent Fund spending limits approved last year.
This year’s dividend isn’t the only issue, however. Lawmakers are also considering whether to change the traditional formula and whether to guarantee a dividend in the state constitution. The governor has said any change to the traditional formula should be approved by voters, which isn’t possible in time for this year’s dividend.
Over the past week, all 20 senators were asked four key questions at the heart of the debate: How much should the dividend be this year? Should the dividend formula be changed moving forward? If yes, what should it be changed to? And should that change be in the constitution, or in state law?
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These were the responses, but it’s worth noting that some lawmakers could adjust their positions and vote in different ways based on the circumstances of the upcoming votes and how the debate evolves in coming days (as Sen. Gary Stevens, R-Kodiak, describes below).
Seeking ‘sustainable’ amount this year
Sen. Chris Birch
Birch, a freshman Republican senator from Anchorage, said the state should not follow the traditional formula for dividends because doing so would create a deficit under present levels of spending.
“In my view, the dividend should be available to be paid for out of the net difference between the revenues minus expenditures,” he said. This year, that would be between $1,000 and $1,200, depending on the estimate used.
“In my view, I would treat it as a line item in the budget,” he said when asked whether he supports an alternative formula for calculating the dividend. “I am personally comfortable with having the dividend be whatever’s available with what remains after meeting our budgeted obligations.”
He said the existing formula in state law can be bypassed just like the statute requiring a 90-day legislative session.
“There’s a number of statutory obligations that the state has that we routinely — I shouldn’t say ignore — but we move past,” he said.
Sen. Click Bishop
Bishop, a Republican from Fairbanks, did not respond to requests for an interview — he was away from the Capitol and his staff said he was out of cellphone range, awaiting a shipment of heavy equipment. Bishop owns a small gold-mining operation.
His staff pointed to two interviews with the Fairbanks Daily News-Miner to answer the survey questions. On Feb. 13, Bishop told the News-Miner he does not support a traditional dividend amid significant budget cuts. He compared the state to a corporation.
“I have no problem paying a statutorily driven dividend if the company is making money, but when the company is deficit spending I don’t support paying the full dividend,” he said.
In an article published May 1, Bishop expressed support for Senate Bill 103, which would rewrite the dividend formula in state law to take into account the annual appropriation from the Permanent Fund to the state treasury.
Sen. John Coghill
Coghill, a Republican from North Pole, is the son of one of the authors of the state constitution. He is one of the longest-serving members of the Legislature, having been elected to the House in 1998. He said this year’s dividend “has to be within the realm of a sustainable draw from the Permanent Fund. That means less than the statutory limitation, unfortunately.”
After this year, he said, “Yes, we should do a statutory formula change, and no, we should not put it in the constitution.”
He said he is flexible on the look of that new formula but that it should provide between $1,000 and $1,800 per dividend.
Sen. Cathy Giessel
Senate President Giessel, a Republican from Anchorage, declined to answer the survey questions, saying it is inappropriate to do so in her position as Senate president.
In a May 29 interview, she questioned the affordability of a $3,000 dividend. “We would love to give a $3,000 dividend to every child, teenager and adult,” she said. “The question is how we pay for it.”
In the same interview, she referred to the dividend as a “classic defined benefit that grows unless we adjust that formula to a more reasonable level.”
She said her concern is to avoid the need to levy taxes while paying a dividend. Paying checks “with one hand” while collecting taxes “with the other hand” would be the “ultimate in redistribution,” she said.
Sen. Bert Stedman
The Sitka Republican and co-chair of the Senate Finance Committee said he is “real hesitant to overdraw” from the Permanent Fund this year, and for that reason, “that dividend (this year) is up for discussion.”
He said the traditional formula was created when the Permanent Fund had about $1 billion in assets. Now that it has more than $65 billion, “The dividend calculation does need to be updated to reflect the size of the fund at $65 billion.”
He added that any change should be linked to the annual 5% transfer from the Permanent Fund to the state treasury and take into account the eventual growth of the Permanent Fund.
He said that before any constitutional change, lawmakers should put the idea into state law as a test to make sure it works.
Sen. Gary Stevens
A Kodiak Republican, Stevens said he is “not in favor of a $3,000 dividend. I think that’s really shortsighted. I hope the public can see that; they may not.”
“I’m comfortable with a $1,600 dividend,” he said.
He is in favor of changing the traditional formula and might be willing to vote for a traditional statutory dividend this year as part of a compromise that makes those changes.
“I would not be in favor of a $3,000 dividend, but if that’s the only way we can get it through I might support it,” he said.
He said he does not support putting a changed formula in the constitution. Doing so could harm the state in the event of problems with the trans-Alaska pipeline system or in a major market crash, he said.
Sen. Natasha von Imhof
An Anchorage Republican, von Imhof said she believes "the dividend this year is going to be a negotiated amount.”
She said she would like the dividend to be what the state can afford after paying other expenses, and without spending from savings, levying new taxes or overdrawing from the Permanent Fund.
“My whole thing is a balanced budget with what we can afford,” she said.
She supports a change to the dividend moving forward and is opposed to including a changed formula in the constitution.
“I feel that it’s very dangerous to commit to a guaranteed payment every year because we don’t know what the future is going to hold, and we may not be able to afford it,” she said.
Seeking a ‘full PFD’ this year
Sen. Mia Costello
Costello, the Senate Majority Leader and an Anchorage Republican, said she believes lawmakers need to follow the traditional formula. “I’m supporting a full dividend," she said.
She said she believes lawmakers “do have to look at the formula” moving forward, and she would like the Legislature to adopt a formula based on legislation approved last year that calls for an annual transfer from the Permanent Fund to the state treasury.
“I believe that the dividend should be at least 50% of (that) draw on an annual basis, and I believe that we should put the dividend in the constitution,” she said.
She said she is “not necessarily sure” that a dividend formula should be in there — she may approve of a simple guarantee, with a formula in state statute — but “I do share the governor’s belief that the Alaska public should have a voice in that.”
Sen. Lyman Hoffman
Hoffman, of Bethel, is the only Democrat in the 14-member Senate majority. Through the past week, his office repeatedly said he was unavailable for interviews when asked on multiple days. Several senators said Hoffman has told them he is in favor of a dividend under the traditional formula this year.
In April, Hoffman asked for fiscal analysis of a $1,600 dividend for four years before a new dividend formula takes effect.
In March, Hoffman expressed support for putting a dividend formula in the constitution.
“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,” he said.
Sen. Shelley Hughes
Of this year’s dividend, the Palmer Republican said, “We need to follow the law, so statutory is $3,000.”
She said the formula should be changed in the future “if the people agree that it should be. I think it is an important decision to have.”
Regardless of the change, “it should be in the constitution,” she said, because of a 2017 Alaska Supreme Court ruling that found the dividend is subject to the Legislature’s annual budget appropriations, regardless of the formula in state law.
“The Legislature’s ability to appropriate without following the statute … does not work for the people of Alaska,” she said.
She could support a 50-50 proposal or the constitutional amendment proposed by the governor.
Sen. Peter Micciche
Soldotna’s Republican senator offered a straightforward answer to the survey questions: “I think this year’s dividend should be a full statutory dividend because that is what is currently on the books. I believe that paying a full dividend in the future is potentially going to be problematic, and we need to have an honest and transparent discussion with the people of Alaska so that they can vote about the choices on the dividend going forward."
He said any changed formula should be in the constitution.
“Anything else is not going to solve this annual fight we’ve been having for the past four years now," he said.
Asked about his preference for a new formula, he said, “I believe that the split that would be successful with the people of Alaska … is 50-50 so that it’s an equal split between people and government.”
Sen. Lora Reinbold
Reinbold, a Republican from Eagle River, is one of the Senate’s traditionalists and said she supports a “full PFD for sure this year.”
When it comes to future changes, she is in favor of the 50-50 plan, if necessary.
“I think the statute has worked for 40 years, but the great compromise, to me — if we have to compromise — is a 50-50 split with government and the PFD,” she said.
Any change should first be done in statute, making it effective in 2020, then ratified with a constitutional amendment or an advisory vote of the people, she said.
“I’m not afraid of a vote of the people because the constitution belongs to them, but I do think we need to do the statutory change,” she said.
Sen. Mike Shower
Shower, one of the Senate’s Republicans from Wasilla, said he is firmly behind the governor’s position on this year’s dividend and wants to see it paid using the traditional formula.
About changes in the formula, he said, “I think it is reasonable to put that on the table for discussion.”
Of what change he would like to see, he said, “I won’t personally go below 50-50. I think that is a fair and equitable split … between the government and the people.”
Any change should be in the constitution, not just state law, he said.
“I think it has to be in the constitution, because that’s the only thing that’s going to be trusted,” he said.
Sen. David Wilson
Wilson, the other Republican from Wasilla, also said a “full PFD” should be paid this year, and he could support a switch to a 50-50 system afterward, but only if Alaskans approve of it at the ballot box.
He would like to see any change put into the constitution.
“We just need to be done with this question. Everyone was fine when we didn’t change the formula for 40 years,” he said.
Senate Democratic minority
Sen. Tom Begich
Begich, the Senate minority leader, represents a district in downtown Anchorage. He said he’s flexible on the amount of this year’s dividend. “I think right now, I guess my answer would be if (a traditional dividend is) what the majorities are moving toward, I’d be inclined to support it. But I’m also open to $1,600,” he said.
He said he’s in favor of a new dividend formula. “We can’t sustain the current formula,” he said.
Asked if he supports putting a new formula into law or the constitution, he pointed out that he has proposed a constitutional amendment to preserve a dividend amount.
Sen. Elvi Gray-Jackson
Gray-Jackson, a freshman lawmaker from downtown Anchorage, said she has not made a decision about supporting a traditional dividend or a changed amount, either now or moving forward.
She did confirm that she wants to see a constitutionally guaranteed dividend, adding that such a guarantee was a key part of her campaign for office.
“I’ve always said I wanted it to be protected in the constitution. Always,” she said.
Sen. Scott Kawasaki
Kawasaki, a Democratic senator from Fairbanks, did not respond to numerous calls and texts seeking his responses to the survey. His staff said Friday that he was attending a family event.
In May, he wrote in a district newsletter, “While some members look at the (dividend) amount as a negotiating tool with the House, many members, including myself ... believe legislators should follow the law on the books. I believe any cuts to the PFD are a regressive tax that hurts low-income Alaskans, the disabled, fixed-income seniors and children.”
In an interview with the Fairbanks Daily News-Miner last year, Kawasaki said he supports putting the dividend in the constitution.
Sen. Jesse Kiehl
Kiehl is one of three senators who voted in favor of a less-than-statutory dividend during previous Senate floor debates on the budget. He said this year’s dividend “should be an amount that we can sustain” without overdrawing from the Permanent Fund “and without devastating the services Alaskans need.”
He supports putting the dividend in the state constitution, but wants a flexible formula that pays more if the state sees a surge in oil prices and has extra money available.
“There should always be a dividend Alaskans can count on. The Permanent Fund was created to fund state services when the oil money ran low,” he said.
Sen. Donny Olson
Olson, representing rural western and northern Alaska, is the only senator who did not express any interest in changing the traditional formula, now or in the future.
“I think we should get the full amount of the Permanent Fund dividend. I don’t think the formula should be changed, and I haven’t made my mind up about the constitutionality,” he said in a phone call Friday.
Sen. Bill Wielechowski
The Anchorage Democrat is known as one of the people who sued Gov. Bill Walker in an attempt to override the former governor’s vetoes of a part of the Permanent Fund dividend. Wielechowski lost that lawsuit in 2017, but he maintains his position: “I think the dividend should be based on the statutory formula. I think we have an obligation to follow the statutory formula,” he said Friday.
Wielechowski does not believe the traditional formula should be changed in state law; any changes should be in the constitution, he said.
“I think that’s open to discussion” as to what the change should be, he said.