Alaska Legislature opens special session with lawmakers considering outline of new dividend plan

JUNEAU — As the Alaska Legislature opened a new special session here Monday, a group of eight leading lawmakers published the outline of a plan that could result in a new long-term formula for the Permanent Fund dividend and state finances overall.

In the 30-day special session called by Gov. Mike Dunleavy, state legislators have been asked to debate the future of the dividend and consider a new formula proposed by the governor.

Without agreement on a new formula, there may be no payment this year, and a wide variety of state programs could go unfunded.

Before the special session, an eight-member working group was ordered to come up with a possible compromise deal.

The group included members from the most conservative and most liberal legislative districts in Alaska. It couldn’t agree upon a single pitch, but it did deliver “a strike zone” of ideas,” said Sen. Jesse Kiehl, D-Juneau and a member of the group.

“It is the framework, the starting point, the launchpad for work,” said Sen. Shelley Hughes, R-Palmer and another member of the group.

The key recommendations:

• Work toward a 50-50 dividend plan (similar to Dunleavy’s idea) as part of a comprehensive solution.

• There should be a constitutional guarantee for a dividend, even if it’s not a 50-50 dividend.

• The comprehensive fix should involve “working toward” $500 million to $775 million in new revenue and lawmakers should work toward $25 million and $200 million in new budget cuts.

• Alaska’s state spending limit should be revised.

Senate Minority Leader Tom Begich, D-Anchorage, said he was cautiously optimistic Monday that the plan presented by the working group could resolve perennial arguments over the amount of the Permanent Fund dividend.

“I believe that is possible,” he said.

Turning the compromise plan from an outline into legislation won’t be easy.

“It was a long shot at the start of the day. I think it’s an inch closer today. And if I can get an inch closer tomorrow, I’ll keep pushing like that,” Kiehl said.

Dunleavy’s proposed amendment would create a deficit of at least $800 million next year, an amount that would shrink in subsequent years as the value of state-produced oil rises and the Alaska Permanent Fund grows.

To temporarily cover the deficit, the governor has proposed taking $3 billion from the Permanent Fund as a “bridge fund.”

The Legislature’s compromise plan includes that idea as one possible path forward.

But Sen. Bert Stedman, R-Sitka and chairman of the Senate Finance Committee, said it isn’t acceptable to overspend from the Permanent Fund, and he would vote against a plan that requires it.

He believes Dunleavy’s forecasts are too optimistic.

“It sets the next governor up with a need for massive taxes,” Stedman said.

Other lawmakers, particularly from the coalition majority in charge of the state House, have also voiced their opposition to additional spending from the Permanent Fund.

In place of that spending, they’ve suggested new taxes or other revenue.

But talking to reporters on Monday, Dunleavy said he isn’t likely to approve those without a constitutional amendment tightening the state’s annual spending limit.

“If it comes to my desk without an appropriation limit, a constitutional appropriation limit, I don’t see how it’s going to work,” he said.

Dunleavy has said he wants to see action on a long-term dividend formula before he introduces legislation that would set the amount of the 2021 dividend.

Dunleavy vetoed the dividend passed by the Legislature earlier this year, and because lawmakers are in a special session that he called, they don’t have the ability to propose a dividend on their own.

Speaker of the House Louise Stutes, R-Kodiak, has asked the governor to introduce a dividend bill now and has begun to ask her fellow legislators whether there is sufficient support to call themselves into special session, an act that would allow them to set the agenda.

As the special session begins, legislators now have five days to override any of the governor’s budget vetoes, if wanted. An override would require 45 of the Legislature’s 60 members voting together in a joint session of the House and Senate.

Begich said he believes there are insufficient votes to override any of the governor’s vetoes, including the dividend. But after an evening meeting with the governor and other legislative leaders, he suggested that a bill reversing some vetoes could be part of negotiations moving forward.

Some kind of appropriations bill is needed at the very least to incorporate elements of the fiscal plan proposed by the working group. If one isn’t introduced by the end of the week, he said, the odds of success will drop significantly.

Mask mandate revived

Hours after convening the special session, a joint House-Senate panel voted 8-6 to reinstate the Alaska State Capitol’s mask mandate. The building remains open to the public, and masks are optional in individual offices.

The Capitol’s mask requirement was lifted in mid-May as the number of COVID-19 cases declined in Alaska. With the number of cases again climbing, legislators have reimposed the policy.