The Alaska House opened debate on the state’s annual operating budget Tuesday by repeatedly voting in favor of $2,600 payments to eligible residents this year.
The payments would be a combination of a one-time $1,300 “energy rebate” and a Permanent Fund dividend of about that size. The House turned down a series of amendments that would have increased the dividend or provided retroactive payments. A narrow majority of lawmakers voted against those amendments, citing their cost.
Debates on amendments affecting other parts of the budget are expected to continue through the week.
Once the budget passes the House, it will advance to the Senate, where lawmakers are at work on their own proposal. The two ideas must be compromised and the result signed into law before July 1, the start of the state’s fiscal year.
Though the House’s proposed $2,600 payout is similar in size to a dividend proposed by Gov. Mike Dunleavy, the details of the two proposals are significantly different and reflect major differences between the governor and lawmakers:
• In December, Gov. Mike Dunleavy proposed a 2022 dividend of about $2,560, the result of a new distribution formula that pays dividends with half of the annual transfer from the Alaska Permanent Fund to the state treasury. This idea has become known as the “50-50 split.”
The governor also proposed an additional, supplemental dividend of about $1,250, the amount necessary to raise the 2021 dividend to what the new formula would pay.
• In March, as oil prices spiked, members of the House majority proposed a $1,300 “energy rebate.” The budget proposal being considered by the House includes that rebate plus a dividend of about $1,280, equivalent to one-quarter of the Permanent Fund transfer. This has been called the “75-25 split.”
• The state Senate has yet to vote on the dividend, but on Tuesday, members of the Senate Finance Committee considered a bill that would set a 50-50 dividend in 2022 but drop future payouts to the House’s 75-25 level unless the Legislature and governor come up with $800 million in new revenue. If that happens, the 50-50 payouts would continue.
Dunleavy proposed the 50-50 formula in May 2021, but lawmakers didn’t accept it, saying the state didn’t have enough money to pay for it. A bipartisan, bicameral working group concluded in August that lawmakers should work toward a 50-50 formula by raising revenue and cutting spending.
A spike in oil prices caused by the Russian invasion of Ukraine has changed the situation. There’s now little doubt that the state can afford a 50-50 dividend in 2022.
For members of the House majority, the question has shifted: Is a 50-50 sustainable for more than one year, and would paying it this year create a false expectation?
“The 75-25 is sustainable in perpetuity,” said Speaker of the House Louise Stutes, R-Kodiak, on March 11. “A 50-50 just isn’t sustainable in the long term when you don’t know what going to come in the future. You know that oil isn’t going to stay at 120 bucks a barrel. You know, what goes up comes down.”
That sustainability matters to lawmakers: In 2014, plunging oil prices created a tug-of-war for funding between dividends and services that resulted in the obsolescence of the state’s old formula for paying dividends. Since 2016, state lawmakers have set the dividend by fiat. An Alaska Supreme Court decision supports their legal ability to do so and ignore the old formula, which remains in state law.
A 50-50 dividend in the budget would create momentum to permanently change that old law in favor of the 50-50 option.
In the House Finance Committee and in debates Tuesday on the House floor, members of the House’s Republican minority have argued that the difference between a 50-50 dividend and the House’s energy rebate plan are semantic because they result in the same amount of money going to Alaskans.
“It’s the same number,” said Rep. Ben Carpenter, R-Nikiski.
Other lawmakers said the House should go above the 50-50 level because inflation is affecting the cost of goods and services across Alaska, creating a financial strain on individual Alaskans.
“This is the greatest time of need I’ve seen in my 63 years of life,” said Rep. Kevin McCabe, R-Big Lake.
But that rhetoric failed to change the results.
“Is it a PFD we can continue to pay out into the future? If the answer is no … then I think we know what our votes should be,” said Rep. Dan Ortiz, I-Ketchikan.