Judge upholds Walker’s veto halving Permanent Fund dividends

The Alaska Permanent Fund Corp.’s exterior sign. A judge ruled in favor of the corporation and upheld Gov. Bill Walker’s veto of half of dividend funding. (Photo by Skip Gray, 360 North)
The Alaska Permanent Fund Corp.’s exterior sign. A judge ruled in favor of the corporation and upheld Gov. Bill Walker’s veto of half of dividend funding. (Photo by Skip Gray, 360 North)

Governor Bill Walker’s veto of half the Permanent Fund dividend money will stand for now. A judge found Thursday that Walker had the authority to cut the money.

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In a lawsuit, Sen. Bill Wielechowski sought to reverse Gov. Walker’s veto of $666 million. He argued in court that the constitutional amendment establishing the Permanent Fund also allowed the legislature to dedicate money that governors can’t veto.

But Anchorage Superior Court Judge William Morse said there’s no record that lawmakers wanted to eliminate gubernatorial power to veto parts of the budget. In an exchange with Wielechowski, Morse said that if they wanted to make such a big change, they would have said something about it.

“You’re telling me that what they secretly were trying to do was eliminate the governor’s veto authority – but they never mentioned that,” Morse said.

Wielechowski replied: “It wasn’t a secret, your honor. We think it’s very clear that if the legislature’s allowed to dedicate funds for a specific purpose, then it just naturally flows from that.”

Walker’s veto cut the dividend from $2,052 per Alaskan to $1,022.

Walker said the decision was painful, yet necessary to preserve dividends into the future, and to help close the state’s budget gap.

Opponents said the state should cut the gap in other ways – such as raising oil and gas taxes or cutting more state spending – before considering a PFD cut.

Assistant Attorney General Margaret Paton-Walsh defended Walker’s position. She said that other than money set aside for the Permanent Fund itself, the legislature appropriates all state spending each year, including the Permanent Fund dividends. And the governor can veto any of that money.

“I mean, the reality is the legislature has been appropriating this money throughout the history of the dividend program,” Paton-Walsh said. The legislature didn’t appropriate the money the first year of the PFD, but started appropriating it in the second year.

Morse said the Alaska Constitution gives the governor a lot of power to veto spending. He noted it takes a three-quarters vote of the legislature to override a budget veto.

“That’s an enormous dislocation of legislative power and it gives to the governor in this unique view an enormous amount of authority to eliminate spending,” Morse said. “I don’t think that the Permanent Fund amendment intended to eliminate the governor’s role in the spending of the income from the principal of the Permanent Fund.”

After about an hour and a half of oral arguments, Morse immediately gave his verdict from the bench: the state won, and the plaintiffs lost.

“I applaud both sides for very fine briefing, very fine and helpful oral argument, and I wish all of you the best of luck in front of the Supreme Court,” Morse said.

Wielechowski and his fellow plaintiffs, former legislators Clem Tillion and Rick Halford, are expected to appeal soon. And with no facts in dispute, the court could make a final determination on the case  quickly.

Walker said in a statement that he’s pleased with the timeliness of the ruling, and it allows his administration to continue focusing on resolving the deficit.

The money Walker vetoed will stay in the Permanent Fund earnings reserve. It will be available for future budgets.

Andrew Kitchenman is the state government and politics reporter for Alaska Public Media and KTOO in Juneau. Reach him at akitchenman@alaskapublic.org.

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