Governor adds spending bill to special-session agenda, forestalling a walkout by some legislators

JUNEAU — Alaska Gov. Mike Dunleavy added a spending bill to the agenda of the ongoing legislative special session, meeting the demands of lawmakers who said they were unlikely to continue work without it.

Dunleavy has asked the special session to consider a new formula for paying Permanent Fund dividends starting after next year’s elections, but many legislators — principally Democrats — said they were unwilling to consider a change unless they were given the ability to also revise this year’s budget, including the 2021 dividend.

“If there’s no appropriation bill, I think we’re gone,” said Rep. Adam Wool, D-Fairbanks.

Wool and others said that without Thursday’s change, legislators were likely to go home. They might run out the 30-day session with a series of procedural meetings or simply end it early, said Rep. Matt Claman, D-Anchorage.

That’s less likely now.

Senate President Peter Micciche, R-Soldotna, and Senate Minority Leader Tom Begich, D-Anchorage, issued a joint statement Thursday evening praising the governor’s action.

“I appreciate Gov. Dunleavy’s willingness to be flexible and work with the Legislature for the benefit of Alaskans,” Micciche said in a written statement, adding that he hopes the change will build momentum toward a long-term change to the dividend payment formula.

Thursday’s change doesn’t directly deal with a new formula, which likely requires voter approval.

Instead, it allows the Legislature to reconsider this year’s dividend and other issues.

Dunleavy vetoed the 2021 dividend to encourage work on a new formula. He had originally said that consideration of this year’s dividend would come after passage of the new formula, but the first four days of the special session passed without a single hearing.

In addition, legislative disagreements this spring resulted in the de-funding of some programs.

The new spending bill added by the governor would fix many of those issues. It calls for a $2,350 dividend, money for high schoolers’ college scholarships and money for WWAMI, the state’s equivalent of medical school. That funding is subject to legislative approval and could be changed.

Lawmakers said they couldn’t address those issues on their own because they lacked the votes to call their own special session. Without those votes, they must rely on an agenda set by the governor.

“An appropriations bill isn’t technically needed. The problem, however, is that most legislators, nearly all of them, want the Alaskan people to have a dividend. And in order to do that, in the current posture, we need an appropriations bill,” said Rep. Andy Josephson, D-Anchorage.

“We also need an appropriations bill to consider another avenue of dealing with the vetoes because we didn’t override them, and we’re not going to,” he said.

Friday is the deadline for the House and Senate to override any or all of Dunleavy’s budget vetoes; no override vote is planned.

The governor’s new dividend formula would constitutionally guarantee the dividend and pay upwards of $2,500 per person but creates a deficit of between $800 million and $1 billion in 2023.

Projections provided by the Dunleavy administration indicate the deficit would shrink and vanish in subsequent years as oil prices and production rise. The governor has proposed increased spending from the Alaska Permanent Fund to cover the deficit in the meantime.

That strategy does not have sufficient legislative support, lawmakers say.

“There’s not going to be any serious movement on his fiscal plan,” said Rep. Bart LeBon, R-Fairbanks.

As an alternative, a bipartisan, bicameral working group of eight legislators has proposed a framework that calls for new revenue — likely a statewide sales tax — budget cuts and a tighter state spending cap, allowing the state to afford bigger dividends under a new formula.

A spending bill isn’t needed for any those things, and members of the Alaska House’s Republican minority have repeatedly called for hearings to refine and develop that plan.

“We’ve been here, we have our people here. We’re ready to work, let’s go,” said House Minority Leader Cathy Tilton, R-Wasilla.

Lawmakers who support the governor’s plan say they’re worried by the prospect that the Legislature could now pass a 2021 dividend, then adjourn without addressing the long-term formula.

Dunleavy is running for reelection, and some legislators have begun speculating whether it might make sense to pass an interim dividend this year, then consider serious changes after the election.

“I think that with a year left in his term, people are looking to next year,” Josephson said.

Dunleavy retains the ability to veto any spending bill, including the dividend.

“I think at the end of the day, it all boils down to a lack of trust,” said Rep. Calvin Schrage, I-Anchorage and a member of the group that crafted the alternative plan.

“I think everyone’s worried that each faction is going to try to get their piece out of the process, and then go home and leave the rest unaddressed,” Schrage said. “And so I think we need to deal with things as a package. And until we do that, people are going to be hesitant to move things forward.”