Alaska Legislature’s budget negotiators settle on $1,100 dividend, but upcoming vote could cut it in half

JUNEAU — A panel of legislative budget negotiators has set this year’s Alaska Permanent Fund dividend at about $1,100, though that amount could be cut roughly in half unless three-quarters of the state House and state Senate agree.

On Sunday evening, six lawmakers — three from the House and three from the Senate — finished work on a compromise state budget that incorporates parts of differing plans passed by the House and Senate earlier this year.

Legislators have until Friday, the end of an ongoing special session, to approve the multibillion-dollar compromise, which keeps state services functioning past July 1.

Members of the House and Senate believe they have enough votes to pass the compromise budget, but they may lack the supermajority needed to fully fund the budget with money from the state’s Constitutional Budget Reserve.

Without that money, the dividend will be cut to about $525 per person and a variety of programs will go unfunded. The state’s subsidy for rural electrical power would end, at least temporarily; high school students will have to go without scholarships promised by the state; $114 million in tax credits to oil and gas companies would go unpaid; and a series of construction projects across the state could stall.

Senate President Peter Micciche, R-Soldotna, said he expects the Senate to vote on Tuesday. House Speaker Louise Stutes, R-Kodiak, declined on Sunday to say when the House might vote; she said she could have a better idea on Monday morning.

Once the House and Senate vote, the budget will go to Gov. Mike Dunleavy, who may veto or reduce particular items. He cannot increase them, which makes the $1,100 dividend amount the maximum possible unless the Legislature changes its plan during a special session already scheduled for August.

The Alaska Senate approved a $2,300 dividend in May, but paying for it and the rest of the state budget would have required lawmakers to take more from the Alaska Permanent Fund than is allowed under a 2018 law.

During negotiations, the Alaska House’s coalition majority remained staunchly opposed to breaking the limit, leading to the compromise $1,100 figure.

Micciche said a larger dividend is possible if legislators and the governor agree on a new, constitutionally guaranteed dividend formula. Dunleavy has proposed one such option and hoped that lawmakers would approve it during the ongoing special session.

That proposal received a cold reception from lawmakers who said the governor’s proposal is unrealistic because it calls for as-yet-unseen new taxes or spending cuts many times larger than any since Dunleavy became governor.

“You’re not going to cut $500 million out of this budget in any way, shape, or form or it would have been done by previous legislators, the current governor or the previous governor. We need to have a shot of reality here,” said Sen. Bert Stedman, R-Sitka, in a Friday meeting of the Senate Finance Committee.

The governor disagrees with that assessment and has urged lawmakers to act. In a social media message Sunday night, he said that “once again the PFD is a political football subject to the whims of politicians.”

With long-term fixes receiving limited attention, the special session has been devoted mostly to discussion of the upcoming year’s budget and the 2021 dividend.

In addition to the dividend and basic services, this year’s budget includes plans for roughly $500 million in federal economic aid. The final compromise:

• About $250 million will spent on “normal” programs usually funded by the state’s general fund, in order to boost the amount of money available for the dividend;

• A new $90 million aid program for tourism-related businesses;

• $50 million in grants for local governments that lost revenue during the COVID-19 pandemic;

• $20 million in grants for nonprofits;

• $7 million for electric utilities;

• $10 million for the Alaska Tourism Industry Association;

• And $6 million for “food security enhancement” projects that could include new farming efforts.

Stedman, the lead Senate negotiator on the budget, said about $20 million has been set aside for Dunleavy to spend flexibly.