The Alaska Senate has approved a new formula for the annual Permanent Fund dividend, but the idea remains a long way from becoming reality.
On Monday, the Senate voted 12-7 to approve Senate Bill 107, which calls for three-quarters of the annual transfer from the Alaska Permanent Fund to be reserved for services and the remaining quarter to be reserved for dividends. That approach is commonly known as the “75-25” for the way it splits the transfer. One member, Sen. Scott Kawasaki, D-Fairbanks, was excused absent from the vote.
If the Legislature and governor approve an additional $1.3 billion in new revenue by 2030 and the balance of the Constitutional Budget reserve rises above $3.5 billion, the formula would change to a 50-50 split.
Were it in place this year, a 75-25 split would result in a Permanent Fund dividend of about $1,300 per recipient, and a 50-50 split would create a dividend roughly twice that.
The new revenue could come from oil taxes, sales taxes, income taxes or the carbon sequestration programs proposed by Gov. Mike Dunleavy.
The bill is sponsored by the Senate Finance Committee, whose leaders said on the Senate floor that it’s part of a long-term fiscal plan for the state.
“This is before us because, even today as we speak, the argument is before the Legislature: What should the dividend split be?” said Sen. Lyman Hoffman, D-Bethel.
At current spending levels, a 50-50 dividend results in a deficit of several hundred million dollars. The Alaska House approved a 12-month spending plan last month that contains a $600 million deficit and a 50-50 dividend.
The Alaska Senate is preparing a competing proposal that includes a 75-25 dividend and no deficit.
The oxygen has been sucked out of this building, and we have been stymied on dealing with major pieces of legislation.
– Sen. Lyman Hoffman, D-BethelSince 2016, the amount of the dividend has dominated discussion in each year’s legislative session.
“The oxygen has been sucked out of this building, and we have been stymied on dealing with major pieces of legislation,” Hoffman said.
Though lawmakers acknowledge the need for a new Permanent Fund dividend formula, policy differences have created widely different views of the situation.
The Senate passed a 75-25 split as early as 2017, but the House has repeatedly declined to adopt that proposal, preferring larger figures.
It remained unclear on Monday whether the House will take up the Senate proposal in the current legislative session, which ends May 17.
Hoffman and other members of the Senate Finance Committee argue that the new bill allows for the possibility for a larger figure, but only if legislators and the governor find a way to reliably pay for it.
Sen. Shelley Hughes, R-Palmer and a proponent of a larger figure, said the bill offers a false alternative because the $1.3 billion needed for the 50-50 split is impossible to obtain.
“Envision a road running right into a mountain. That’s how I see this bill. The mountain is the unattainable revenue,” she said.
The difficulty cited by Hughes was on display elsewhere in the building as oil company lobbyists voiced opposition to Senate Bill 114, a proposal from Sen. Bill Wielechowski, D-Anchorage, to modify the state’s oil tax system.
The modifications would generate between $300 million and $600 million in new revenue per year for the state, less than what’s needed for the 50-50 split. Oil company advocates said taxes may already be too high to attract investment.
Proposals to reinstate a state income tax or impose a state sales tax have yet to advance from committee this year, and no single proposal raises even half the figure envisioned as what’s needed under SB 107.
“I don’t believe this is truly part of a fiscal plan,” Hughes said.
Sen. James Kaufman, R-Anchorage, disagreed, saying that the fiscal plan will become clear as additional pieces advance.
“All the pieces we need to get done will get done,” he said before voting yes on SB 107.
Sen. Bert Stedman, R-Sitka and co-chair of the Senate Finance Committee, also urged patience.
“It is a piece of a fiscal plan, not a fiscal plan. A piece,” he said of SB 107.
The final vote showed the Senate Majority’s 17-member caucus split on the issue, with only 12 members voting yes.
Voting against SB 107 were Sens. Matt Claman, D-Anchorage; Forrest Dunbar, D-Anchorage; Bill Wielechowski, D-Anchorage; and David Wilson, R-Wasilla, of the majority; and Shelley Hughes, R-Palmer; Robb Myers, R-North Pole; and Mike Shower, R-Wasilla, who are not in the majority.
Voting in favor were majority Sens. Click Bishop, R-Fairbanks; Jesse Bjorkman, R-Nikiski; Cathy Giessel, R-Anchorage; Elvi Gray-Jackson, D-Anchorage; Lyman Hoffman, D-Bethel; James Kaufman, R-Anchorage; Jesse Kiehl, D-Juneau; Kelly Merrick, R-Eagle River; Donny Olson, D-Golovin; Bert Stedman, R-Sitka; Gary Stevens, R-Kodiak; and Löki Tobin, D-Anchorage.
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