JUNEAU — The Alaska Senate Finance Committee is continuing work to rewrite the traditional formula for calculating the Permanent Fund dividend, but a session of public testimony Monday morning indicated lawmakers will have to overcome public skepticism.
“I’m telling you, the people are not in line with what you guys are trying to do here. We’re in line with Gov. Dunleavy’s plan,” said Cris Eichenlaub of Eagle River.
From 1982 to 2016, the dividend was paid using a formula based upon the average investment returns of the Alaska Permanent Fund Corp. over several years. The new approach under consideration by the finance committee would be based upon the average value of the fund over several years.
Support for the idea was not evident in a session of public testimony Monday: Of the seven people who provided their opinions, none were supportive.
In the draft proposal under consideration by the finance committee, half that value would be reserved for dividends; the other half would pay for government expenses.
The proposal doesn’t call for the new formula to begin until next year, but if it were applied to this year’s budget, the dividend would be about $2,300 per person and the state’s deficit would be about $861 million, according to figures from Sen. Natasha von Imhof, R-Anchorage. Under the traditional formula, the dividend would be about $3,000 this year, and the deficit would be about $1.2 billion, according to figures from the Legislative Finance Division. That deficit figure is based upon draft budgets from the House and Senate.
Sen. Bert Stedman, R-Sitka, explained Monday that the value of the corporation’s assets in 1982 was less than $1 billion. As of March 31, it has more than $66 billion, according to corporation figures, and is the 17th largest sovereign wealth fund on Earth.
“As time has advanced and the portfolio has substantially increased … it would be difficult to imagine a dividend formulation put together on a $65 billion portfolio that would be the same as one that’s $500 million,” Stedman.
The finance committee is being driven to rewrite the formula by last year’s passage of Senate Bill 26, which transfers money annually from the Permanent Fund to the state treasury and sets limits on future transfers. With oil revenue fallen, savings accounts running low and a reluctance among lawmakers to further cut state services, lawmakers used SB 26 to resolve much of the Alaska’s endemic budget deficit.
At the time, lawmakers did not say how much of that annual transfer should be used for dividends and how much should be used on government services. Last year, the transfer was $2.7 billion. This year, the transfer will be $2.9 billion.
Gov. Mike Dunleavy has repeatedly said he supports the traditional dividend formula and believes voters must be allowed to decide whether the dividend formula changes. He has proposed constitutional protections for the traditional dividend formula, and his press secretary confirmed Monday he has not changed his mind.
If the traditional formula is kept in place, it would consume about two-thirds of the SB 26 transfer.
Many lawmakers are reluctant to cut state services beyond the reductions of the past five years and say that traditional formula is now incompatible with the new SB 26 system. Since 2016, lawmakers have ignored the formula, setting dividend amounts by vote each year.
In a Thursday meeting of the finance committee, von Imhof called the traditional formula “fiscal insanity, irrational, irresponsible.”
Debates about the new formula may continue Tuesday morning in the finance committee, Von Imhof and Stedman said.