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Republican bill would pay bigger PFDs, pull more cash from state savings

  • Author: Nathaniel Herz
  • Updated: March 23, 2017
  • Published March 22, 2017

JUNEAU — A new deficit-reduction plan from the Alaska House Republican minority would largely spare residents' Permanent Fund dividend checks by instead relying on withdrawals from state savings and steep budget cuts.

House Bill 192 is largely aligned with the Permanent Fund restructuring bill approved by the Senate's Republican-led majority last week, with one big distinction: It would pay dividends of nearly $2,000 this year, compared to $1,000 under the Senate's plan.

The legislation would still use Permanent Fund earnings to help pay government expenses, but only two-thirds as much as proposed by the Senate. That would leave a budget hole of nearly $1.5 billion next year, compared to $800 million under the Senate's proposal — down from a current deficit of $2.7 billion.

Rep. Lance Pruitt, R-Anchorage.

The new House legislation, sponsored by Anchorage Republican Rep. Lance Pruitt, would preserve the dividend payments by relying on bigger withdrawals from state savings and a proposed $600 million cut in state spending over four years — a 14 percent reduction.

That's less than under the Senate's deficit-reduction package, which calls for $750 million in cuts over three years.

Another piece of Pruitt's bill caps spending at roughly its current level, but the cap is instituted as a law — not a constitutional amendment. That means the cap could be superseded by the annual state budget bill, which is also a law.

The Senate's legislation has identical language.

Pruitt's legislation has nine co-sponsors, all from his GOP minority.

The largely Democratic House majority coalition has its own deficit-reduction bill that, in its current form, would set PFDs at $1,250 and levy a state income tax. Majority members have generally opposed budget cuts beyond those put in place in the past two years.

House Finance Committee co-chair Paul Seaton of Homer — one of three Republicans in the majority — said he would hold hearings on Pruitt's legislation, though, he added, it would take time before it could fit into the committee's busy schedule.

"It's great to have other ideas on the table," he said.

Seaton said he hadn't read Pruitt's nine-page bill closely. But Anchorage Democratic Sen. Tom Begich quickly questioned its viability, referring to it as a "magic wand" plan that was too good to be true because of the way it claims to fix the state's budget problem without taxes or substantial dividend reductions.

"It all pencils out in some kind of fantasy world," Begich said.

Neither Pruitt nor a spokeswoman for his GOP minority would release financial projections of the effects of his proposal Wednesday. In an interview, he called his bill a "compromise" because it still slightly reduces dividends from their size under the current payment scheme, and forces deeper spending cuts.

The 2015 PFD was $2,072, and last year's would have been a similar amount if Gov. Bill Walker hadn't vetoed half the money lawmakers set aside for checks.

Pruitt suggested the Constitutional Budget Reserve — the state's primary savings account, with a projected $4.4 billion left at the end of the state's fiscal year in June — exists to be spent, not to be socked away for emergencies.

But rating agencies that still give Alaska bonds good marks — saving the state millions of dollars in interest payments — say balances across the state's savings accounts are an important reason for the grades.

"Is the goal here that we don't ever want to touch the CBR? We just want to have this $5 billion sitting over there just because we want to feel good?" Pruitt asked. "Or do we want it to be part of an overall solution?"

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