Stalled in 2021, Alaska senators now plan fast vote on formula to set future Permanent Fund dividends

JUNEAU — The Alaska Senate is planning to vote as early as next week on a pair of bills that would write a new formula for future Permanent Fund dividend payments.

The measures are an attempt to resolve a six-year-old dispute that has deadlocked the Legislature and repeatedly driven the state to the brink of a government shutdown. Unusually, the Senate is advancing the bills without knowing whether they have enough support to pass.

“We’re going to let it flow and see what leaves the (Senate),” said Senate President Peter Micciche, R-Soldotna.

The two bills may be amended significantly, senators said, or they could die entirely.

“It’s not how we typically do things in the Senate,” said Sen. Bill Wielechowski, D-Anchorage.

Sen. Mia Costello, R-Anchorage, said the upcoming vote is part of a deal agreed upon last year between members of the Senate, which has struggled to find consensus on the dividend issue.

“During the special session last year, the co-chairs of Finance promised that there would be meaningful measures brought to the floor in February to resolve some of these longstanding dividend questions,” she said.

Sens. Bert Stedman, R-Sitka, and Click Bishop, R-Fairbanks, are the co-chairs of the Senate Finance Committee and said there was no backroom deal. Instead, they said, they’re reviving an idea that died in special session last year, and the timing is an attempt to settle the dividend before considering the rest of the budget.

“I’m not sure there was ever a real agreement, but I think it makes sense. We’ll get it on the floor and see where the votes are,” said Sen. Gary Stevens, R-Kodiak.

Traditional formula is a non-starter

Alaska has a dividend formula in state law, but it hasn’t been used since 2016 because elected officials see it as unaffordable. If it were used this year, it would result in a payment of more than $4,200 per person but create a deficit of more than $1.5 billion, according to figures from the Legislative Finance Division.

“We’re not going to take $1.5 billion out of a $4.5 billion budget. That’s just fantasyland. That’s beyond fantasyland. It’s hallucinations with LSD,” Stedman said about cutting services to pay for the traditional dividend.

Tax changes large enough to pay for the traditional dividend have not advanced in the Legislature.

“That leads us to the conversation of being forced to change the statutory formula,” Stedman said.

There have been many proposals to write a new formula. Most have been based on a 2018 law that created an annual transfer from the Alaska Permanent Fund to the state treasury.

That transfer is now the largest source of general-purpose revenue for the state, but lawmakers disagree about how much of the transfer to use on dividends and how much to use on services.

“We’re deeply fractured,” said Sen. Roger Holland, R-Anchorage.

New ideas being debated

Gov. Mike Dunleavy supported the original formula during his 2018 run for governor but switched proposals last year and now endorses a 50-50 split between dividends and services. The result would be a PFD of about $2,540 this year, and if oil prices stay as high as currently projected, it could be paid without a deficit.

The governor proposed including the formula in a constitutional amendment, which would require 14 votes to advance in the Senate. Right now, legislators say there’s not enough support for an amendment, which has them instead looking at a bill, which requires only 11 votes.

But some legislators are concerned about the size of the 50-50 dividend, saying it may not be sustainable if oil prices fall or if the cost of services rises faster than forecast by the governor’s office. They’ve proposed both a gradually implemented 50-50 and a wholly different alternative.

Senate Bill 199, one of the two bills in play, would pay an $1,100 dividend this year, $1,200 next year, and $1,300 in 2024. After that, the dividend would grow with inflation. But if the Legislature enacts revenue measures worth at least $700 million per year by the end of 2025, the dividend would change to the 50-50 option.

Senate Bill 200, the other bill, would use a 75-25 split instead of a 50-50 split. That results in a dividend of about $1,240 this year, rising over time. That idea passed the Senate in 2017 but died in the House the following year. It’s now been revived in both the Senate and in the House.

Sen. David Wilson, R-Wasilla, is a member of the Senate Finance Committee but opposes the current versions of the two bills and said he will try to amend them before they leave the committee, which could take place Wednesday.

Close vote expected

Without a reliable formula in place, the annual dividend-setting process in the Senate has turned into high drama, with the amount usually decided by a single vote.

Wielechowski, who has supported other ideas, said he expects the votes in the Senate on SB 199 and SB 200 to be similarly close, and Micciche said he expects the same.

“We’ll take the time we need to on the floor to see if we can arrive at a Senate position that has at least 11 votes, and we’ll keep trying to get a fiscal plan moving,” he said.

On social media this week, Dunleavy urged Alaskans to testify on SB 199 and SB 200, and a member of his staff spread that call on the private, right-wing “Save Anchorage” Facebook group.

The result was a torrent of testimony against the two ideas.

“I think the public’s pretty angry. They’re tired. They want resolution,” Wielechowski said.

Stedman said he believes Dunleavy is opposed to the two ideas but said that doesn’t matter at this point.

“I think we need to do our job independent of his wishes,” Stedman said.