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Alaska Legislature

Veto error causes uncertainty around $4 billion Alaska Permanent Fund transfer

JUNEAU — An error in the handling of Gov. Mike Dunleavy’s budget vetoes this week could seal away $4 billion that the governor intended to leave available for future spending.

House Democrats said the mistake is a good thing, but Dunleavy has labeled it a simple error that should be corrected quickly. The issue is expected to stay unresolved through the Fourth of July holiday weekend and may lead to legal action.

The error involves a major transfer in the accounts of the $80 billion Alaska Permanent Fund. In the just-passed state budget, legislators voted to move $4 billion from a spendable account into a constitutionally protected, non-spendable account.

Talking to reporters on Thursday, Dunleavy said he would veto that transfer, keeping the money available for future spending on dividends or services. He has proposed a long-term Permanent Fund dividend plan that relies on increased spending from the fund.

Dunleavy signed the budget Wednesday but, in an unusual move, didn’t release his vetoes or a preliminary draft of his approved budget until the following day. On Friday, lawmakers were surprised when the final budget document, which was transmitted to the House and Senate as the final step in the legislative process, didn’t match the draft from a day earlier: The $4 billion transfer wasn’t crossed out, conflicting with what Dunleavy had said he’d do.

“The Governor did not forget to veto the $4 billion transfer to the corpus to the Permanent Fund,” said Corey Young, a spokesman for the governor.

Young attributed the mistake to a “scrivener’s error” that occurred as the governor’s office and legislative aides hurried to approve the budget in time to avert a government shutdown.

Lawmakers frequently correct minor mistakes in legislation — such as typos or missing articles — but legislative clerks weren’t willing on Friday afternoon to accept a correction to the veto error, saying that it went beyond a minor mistake.

A few hours later, Dunleavy sent a letter to House Speaker Louise Stutes, R-Kodiak, saying that it was his intent to veto the transfer.

Stutes leads the coalition majority in charge of the House of Representatives, and in a Saturday morning meeting, the coalition’s members decided against accepting the correction. Those who attended the meeting said the Legislature’s attorneys are drafting a legal opinion on the issue.

“We are going to let it stand,” said Rep. Ivy Spohnholz, D-Anchorage.

The House majority coalition and Dunleavy have different views on the future of the Alaska Permanent Fund, whose earnings provide two-thirds of the money needed to fund state services.

Under his new plan for the Permanent Fund dividend, Dunleavy has urged lawmakers to break — at least temporarily — a limit on Permanent Fund spending that was put in place in 2018. To pay a large dividend this year and to allow legislators time to come up with a way to pay for a dividend that would be constitutionally mandated, he has proposed taking more from the fund as a stopgap measure.

Many lawmakers are skeptical of that approach, citing the way the state spent more than $16 billion from other savings accounts and failed to create a sustainable long-term fiscal plan. The House majority coalition has supported efforts to limit the Legislature’s ability to spend from the Permanent Fund.

“Someone screwed up, and I believe it’s for the benefit of Alaskans,” said Rep. Andy Josephson, D-Anchorage.

Sen. Bert Stedman, R-Sitka, has repeatedly encouraged legislators to protect the Permanent Fund from excessive spending. He wrote the $4 billion transfer clause.

“I’m sure they didn’t do it on purpose. But that’s just the way it is. The rules are set up and the structure set up intentionally to have a fair political process, and this is the process you have to follow. You can’t just modify things ... after everything, and your documents are signed and stamped and done,” he said. “That’s not how it works.”

Stedman said a similar situation occurred in the administration of Gov. Sean Parnell, but he couldn’t immediately recall the precise veto. In that case, he said, the veto was not accepted either.

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