Alaska Senate approves state budget with $2,300 dividend, but critics say it’s a ‘raid’ on the Permanent Fund

JUNEAU — Alaskans could receive a Permanent Fund dividend of between $2,300 and $2,400 per person this year under a state budget approved Wednesday by the Senate. But that amount is not yet certain and comes with controversy because it requires the state to violate limits on sustainable spending from the Alaska Permanent Fund.

The Alaska Legislature ended its 2021 regular session in the last minute of Wednesday, though its work isn’t finished. Lawmakers still have to achieve a compromise between the Senate’s proposed $6.2 billion budget and a different plan approved by the House earlier this month.

In a 30-day special session beginning Thursday, three negotiators from the House and three from the Senate will write a compromise bill that picks construction projects across Alaska, decides services and sets the final amount of the dividend.

Entering the day, the dividend had been set at $1,000 by members of the Senate Finance Committee. But in an amendment from Sen. Mike Shower, R-Wasilla, senators voted 12-8 to increase it.

Shower initially argued in favor of a $3,400 dividend called for by a disused formula in state law, but after that was defeated he suggested an amount similar to one called for by a new, smaller formula proposed by Gov. Mike Dunleavy.

For years, Shower said, Alaska has balanced its budget by reducing the dividend from the traditional formula, an approach that amounts to a regressive tax because the dividend represents a larger share of the income of poorer Alaskans.

“Right now, we’re putting the burden on the poorest Alaskans and the middle class. That’s the burden of reducing the dividend,” he said.

The Alaska Permanent Fund stood at $78.6 billion as of Tuesday evening and has more than enough money to cover the cost of a larger dividend. But spending more from the fund now means less money to invest and lower earnings in the future.

The Senate-approved amount also violates a legal limit on spending from the Permanent Fund. In the fiscal year that starts July 1, the limit is $3.1 billion. The Senate budget calls for spending more than $4.6 billion.

“You can call it a run on the fund. You can call it raiding the fund, whatever you want to call it,” said Sen. Natasha von Imhof, R-Anchorage.

Sen. Jesse Kiehl, D-Juneau, compared the decision to the pillaging of Rome by Visigothic barbarians in the year 410.

The key votes on the higher dividend came from two Anchorage Democrats, Sens. Tom Begich and Elvi Gray-Jackson, who had voted against a $3,400 dividend.

Begich said afterward that his switch was part of a deal to ensure the passage of the state budget Wednesday night. He said nothing is final until the compromise version of the budget passes out of the Legislature.

Shower and Sen. Bill Wielechowski, D-Anchorage, argued that the state doesn’t have to overspend from the Permanent Fund to pay a larger dividend.

In a blistering speech, Wielechowski urged the Senate to approve higher oil taxes, saying the state has “allowed the oil industry to back their trucks up to the state treasury and cart away millions.”

Wielechowski, who supported a 2020 ballot measure calling for higher oil taxes, mockingly held up a sign published by opponents that said “Save the PFD, vote No on 1.” Because the measure failed and because the Legislature has failed act on oil taxes, the dividend has been punished, he said.

Shower passed out charts to fellow senators outlining scenarios in which a statewide sales tax and an increase in oil taxes could balance the budget — even with an increased dividend — in two years. (Neither proposal has been heard in the Senate to date.)

Speaking to an earlier amendment, Sen. Lyman Hoffman, D-Bethel, said the problem with that line of thinking is that he’s heard it before. Since 2014, the state has spent billions from savings without fixing the imbalance between spending and revenue.

“Each time, I hear we’re going to take it up, we’re going to fix the problem. We haven’t fixed the problem yet, and until we do, we will continue to kick that can down the road,” he said.