Senate passes bill drawing from Permanent Fund

The state Senate passed a bill Wednesday that would draw money from the Alaska Permanent Fund to pay for the state government’s budget. The bill also would limit Permanent Fund dividends, as well as overall amount the state can spend.

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Twelve senators voted for Senate Bill 26, while eight voted against the measure, introduced by Governor Bill Walker. It’s similar to legislation the Senate passed last year. But that bill died in the House.

Eleven Republicans and one Democrat supported the bill, while three Republicans and five Democrats opposed it. Juneau Democrat Dennis Egan changed his vote from favoring the bill to opposing it after the initial vote.

Eagle River Republican Sen. Anna MacKinnon said it’s a challenge to close the state’s budget gap in a way that receives support from both legislative chambers and Walker. She said she would like to cut state government further before making changes to the Permanent Fund. But she said the state is limited in how much more it can cut.

“The services in Alaska are more expensive than most places in the U.S. certainly, but even in other parts of the world,” MacKinnon said.

The bill would draw 5.25 percent annually from the fund, with a quarter of that money going to dividends.

Dividends would be set at $1,000 for the next three years – similar to their amount last year, after Walker vetoed half of dividend funding.

Under the bill, dividends are projected to go up slightly after the first three years.

Bill supporters say it’s necessary to help close the $2.7 billion gap between the amount the state spends and the amount it raises in oil royalties, taxes and fees.

Kodiak Republican Sen. Gary Stevens noted the original ballot question that created the Permanent Fund said that after oil could no longer pay for government, the Permanent Fund would.

“No one relishes making tough decisions that are also unpopular with many, many people in Alaska,” Stevens said. “But it is time to vote for what we as individuals, as elected responsible representatives believe is best for our districts and for Alaska. It’s time to support the governor’s bill.”

Eleven Republicans and two Democrats supported the bill, while three Republicans and four Democrats opposed it.

Anchorage Democrat Sen. Bill Wielechowski opposed the bill. He said the Alaskans’ ownership of the state’s natural resources under the Statehood Act means the Legislature shouldn’t cut PFDs.

“We have a unique constitution in that regard, and a unique obligation to ensure that that money is disbursed fairly and equitably to all Alaskans,” Wielechowski said.

Wasilla Republican Sen. Mike Dunleavy said he’d like to see deeper cuts to government and that the Permanent Fund draw in the bill is too large.

“In the end, who do we want to win here: government or the people?” Dunleavy asked.

It’s not clear whether the House and Senate will agree on changes to the Permanent Fund.

Unlike last year, the House has been debating its own Permanent Fund bill. But the House bill includes an income tax, which many senators oppose.

In a separate bill as part of the annual state budget, the House has proposed drawing more than $4 billion from the Permanent Fund this year – much more than the Senate bill would draw.

This would allow the House majority to avoid negotiating concessions with the House minority over drawing money from the Constitutional Budget Reserve.

The House Finance Committee is scheduled to debate its Permanent Fund bill, House Bill 115, on Friday.

Update: This story has been updated to reflect that Juneau Democrat Dennis Egan changed his vote of support for the bill to a vote against it.