Alaska House votes to restructure Permanent Fund and slice dividends

JUNEAU — The Alaska House on Wednesday approved legislation restructuring the Alaska Permanent Fund and reducing dividends — the next step in its end-of-session dance with the state Senate.

The House approved its substitute version of Senate Bill 26 in a 22-18 vote, with all members of the largely-Democratic majority in favor and the full Republican minority opposed.

The legislation would set dividends at $1,250 for the next two years, up from $1,000 in the version of SB 26 passed by the Senate last month.

That and other differences between the House and Senate versions of the bill will most likely be taken up in negotiations between the two chambers. The Senate hasn't voted on the House version of its bill, but if it doesn't accept the changes — a likely outcome — the bill would be negotiated by a House-Senate conference committee.

There appears to be effectively no chance that such talks will finish by Sunday, the 90th day of the session and the deadline for lawmakers to adjourn as set by a 2006 citizens initiative.

The Legislature has authority to continue through 121 days as set by the Alaska Constitution. And after the Senate moved Wednesday to postpone confirmation votes on Gov. Bill Walker's political appointees that were scheduled for Thursday, lawmakers are now effectively guaranteed to use at least some of the extra time.

The Permanent Fund legislation will be just one piece in the complex adjournment talks between the House and Senate, which will also have to resolve sharp ideological divides over divergent budget proposals and a House plan to raise oil taxes and levy a state income tax.

"It's all tied together. But that'll be worked out through the process — we'll see what kind of negotiating skills people have," said Nikiski Republican Rep. Mike Chenault, the House speaker last year. He added: "We're not even halfway done yet, unfortunately."

The $1,250 dividend proposed by the House version of SB 26 is close to last year's $1,022, which came after Gov. Bill Walker vetoed about half the money set aside for the payments by the Legislature.

But the House's proposed payment is down from recent dividends of roughly $2,000 in 2014 and 2015.

Majority members described the $58 billion Permanent Fund as the most important tool lawmakers have to fill the state's deficit of nearly $3 billion. They also said that relying on the fund alone wouldn't be fair to poor Alaskans who would be hit harder by reduced dividends than rich residents because it's a larger portion of their total income.

That's why they've tied their version of SB 26 to lawmakers' approval of oil tax legislation and a broad-based tax; unless the Legislature passes those measures as well, the Permanent Fund bill won't take effect.

"I can't vote for a Permanent Fund-only plan," said Anchorage Democratic Rep. Ivy Spohnholz, during her speech in support of the bill. "A Permanent Fund-only plan is incredibly regressive."

Walker watched the floor debate from the House gallery, issuing a statement after the vote praising members for "taking a significant step toward building a more stable future for Alaska."

"Their courageous actions show we are making progress toward a complete solution," the statement quoted Walker as saying. "I look forward to working with legislators in both chambers to reach the finish line on fixing Alaska this year."

Republican minority members said they weren't opposed to the idea of using Permanent Fund investment earnings to help pay for government, though they wanted tighter controls on spending to be included in the bill.

They also panned the "conditional language" in SB 26 that stops it from taking effect without the broad-based tax and oil-tax measures.

GOP minority members have stridently opposed the majority's income tax proposal and argue that the oil-tax bill approved by the House this week goes too far — positions echoed by members of the Senate's Republican-led majority.

"I think we could have gotten to a point of consensus," said Anchorage Republican Rep. Lance Pruitt. "There's a lot of things that could have been done if we hadn't decided that we were going to weaken the control on government and that we were going to add other little add-ons to this."