One month until state government shutdown, Alaska Legislature remains deadlocked on dividend

JUNEAU — With 33 days until a statewide government shutdown, the offices of most legislators in Alaska’s sun-dappled Capitol were locked and dark Wednesday. As Gov. Mike Dunleavy’s office sent an email to state employees saying a shutdown is possible, only a handful of key legislators, negotiators in an ongoing impasse over the dividend, remained in Juneau.

Two weeks into the special session, lawmakers remain far apart on the issue of the Permanent Fund dividend, but Senate President Cathy Giessel, R-Anchorage, said legislators in the Senate are preparing to offer a budget proposal that could avert a shutdown when the state’s fiscal year begins July 1.

Doing so could allow lawmakers to reach agreement on most of the items in their special-session agenda while leaving the dividend to be decided later.

“We’ve got a boulder under us, we’ve got to throw a piece of dynamite under it and see if we can break it open,” Giessel said.

Alaska’s state government has never shut down, but the effects of a shutdown would be much more significant than any of the federal shutdowns, history indicates. In 2017, the state government was within eight days of a shutdown, and the possible effects included the closure of the state ferry system and the suspension of commercial fisheries and road construction. Most state employees would be furloughed or temporarily laid off.

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On Wednesday, the governor and lawmakers downplayed the likelihood of a shutdown, in part because of possible solutions like the Senate’s.

“I’m hopeful that next week we’ll pass a budget,” the governor said in a Wednesday meeting with reporters.

“A real government shutdown is exceedingly unlikely,” Giessel said.

“I don’t see a government shutdown happening. The legislature can always send an operating budget without a Permanent Fund dividend to the governor,” House Speaker Bryce Edgmon said.

At the start of the special session, the governor put the state’s three unfinished budgets — operating, capital and mental health — on the agenda. The House and Senate are close to a compromise on those budgets but are divided on the amount of this year’s Permanent Fund dividend.

Under Giessel’s proposal, the Senate will split the dividend from its proposed state operating budget and consider the dividend under separate legislation. The split would take place next week.

Doing so would be a step sideways for the Senate, which has included a dividend proposal in its draft operating budget and would have to discard that proposal.

“I have approached the governor with the request, the idea, that we put forward a bill that only contains the Permanent Fund dividend in it,” Giessel said.

At first noncommittal, the governor spoke on the Michael Dukes radio show Wednesday morning in favor of the concept.

“I think if the PFD is just allowed to go on the floor unfettered for an up and down vote, I think we get through this issue pretty quick,” he said on the show.

Talking to reporters later in the day, he was more measured in his response, saying that he wants to see the Legislature “follow the law” and pass a traditional statutory dividend, which would be worth about $3,000 this year.

He remains opposed to any changes to the traditional formula for dividends unless those changes are approved by voters.

“I’ve said the people of Alaska should be part of changes to the Permanent Fund dividend calculation,” the governor said.

Giessel and the governor each suggested that lawmakers could discuss future changes to the dividend formula in a special session to take place later in the summer or in the fall.

“If people are serious about wanting to change the calculations, we could do it this summer, this fall or next year and make the case to the people of Alaska,” the governor said.

The coalition House majority may be reluctant to accept that timeline, Edgmon said.

Several other items are on the special-session agenda:

• Crime legislation has passed the House and Senate and is on its way to the desk of the governor, who has said he will sign it.

• Education funding appears to be a dead issue in the special session and bound for a legal fight. The House and Senate majorities say they have already funded schools with legislation passed last year; the governor says the Legislature’s decision is unconstitutional and leaves education unfunded.

• The mental health budget is uncontroversial and awaits approval by the House and Senate.

• The capital budget is uncontroversial, but the House is considering adding funding for drug addiction treatment, a change the Senate would have to approve. “Any differences in the capital budget should be easily resolvable. We don’t see the capital budget or any outstanding items in the operating budget as an obstacle — except the dividend,” Edgmon said.