Ahead of special session, Alaska lawmakers consider phasing in PFD changes along with new revenue

A couple people sit at a desk
Sen. Lyman Hoffman, D-Bethel; Rep. Jonathan Kreiss-Tomkins, D-Sitka; and Rep. Kevin McCabe, R-Big Lake, attend a comprehensive fiscal plan working group meeting on July 22, 2021, at the Anchorage Legislative Information Office. (Andrew Kitchenman/KTOO and Alaska Public Media)

The Alaska Legislature has just days to go before the scheduled start of a special session, on Aug. 2.

But it’s not yet clear whether a working group of lawmakers will recommend proposals for the rest to consider during the session. 

The working group says it’s still weighing whether to recommend amending the state constitution. 

Gov. Mike Dunleavy has proposed putting Permanent Fund dividends in Alaska’s constitution. He wants to spend 50% of the money drawn annually from the Permanent Fund on PFDs. The other 50% could pay for state services. 

Group co-chair Sen. Lyman Hoffman raised the possibility of phasing in new revenue. He spoke at a working group meeting on Thursday.

“One concept could be that we would agree to the 50/50 split, but we would have to come up with a stair-stepped approach until the revenue measures came into place,” Hoffman said.

Hoffman is a Bethel Democrat who caucuses with Republicans.

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Currently, the PFD amount under a split would be roughly $2,350. That’s nearly twice the average paid over the last five years. But it’s more than one-third lower than what would be paid under the formula in state law. 

But without new taxes or spending cuts, paying PFDs that high would cost the state $922 million more than it raises each year. 

Hoffman said the dividend could be phased in as new revenue measures go into effect.

RELATED: Alaskans will have chance to weigh in on long-term budget changes this week

Sen. Shelley Hughes, R-Palmer, said there’s an advantage to not cutting PFDs to close the budget gap: Only Alaskans receive dividends.

“When you use part of the PFD to close that revenue, it impacts residents only,” Hughes said during the working group’s meting. “Other forms of revenue impact nonresidents as well.”

The working group is weighing several proposed constitutional amendments that would protect Permanent Fund earnings and limit how much money is drawn from the fund each year. 

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