No special session this year on fiscal issues, Alaska legislators say

Speaker of the House Cathy Tilton, R-Wasilla, and Senate President Gary Stevens, R-Kodiak, talk before a joint session of the Alaska Legislature on Tuesday, Feb. 7, 2023, at the Alaska State Capitol in Juneau. (Photo by James Brooks/Alaska Beacon)

The Alaska Legislature will not meet in a special session this fall to discuss a long-term fiscal plan for the state.

Lawmakers had discussed the possibility of a special session in the spring, but in the last days of the regular session and in the following weeks, they drifted apart on key elements of a plan intended to keep state revenue and expenses in line for multiple years.

Jeff Turner, Gov. Mike Dunleavy’s deputy communications director, said by email that Dunleavy asked the Senate president and speaker of the House to see if there was a package of items they could agree on in a fall special session.

“At this point, the legislature has not shown meaningful interest in coming together to work on fiscal issues. Accordingly, the governor is not going to call them into special session and waste time and money,” he wrote in an email.

“That’s not going to happen,” Senate President Gary Stevens, R-Kodiak, said on Wednesday when asked about a special session.

“There’s really no consensus right now. There’s lots of plans out there and folks have lots of ideas,” he said, adding that lawmakers will have to see what percolates to the top when the regular session begins in January.

Continued disagreement over the elements of a comprehensive fiscal plan have members of the House now preparing to advance bills separately, rather than as a comprehensive whole, said Speaker of the House Cathy Tilton, R-Wasilla.

“We’ve realized that we don’t have the numbers to come to a consensus on a full plan with lots of components. Maybe we’ll try to focus on something that takes care of the (Permanent Fund Dividend) issue like HJR 7,” she said.

House Joint Resolution 7, proposed by the House Ways and Means Committee, would guarantee a dividend, paid according to a formula set in law.

Rep. Andy Josephson, D-Anchorage and the most senior member of the House minority caucus on the House Finance Committee, said he’s open to the idea of a constitutional guarantee, but the sticking point to amending the constitution is going to be first reaching agreement on the payout formula. 

A 1980s-era formula already exists in state law, but legislators have ignored it since 2017, labeling it unaffordable. 

They’ve been unable to decide on a replacement, and the Legislature has set the dividend by fiat for seven consecutive years. This year’s payout, expected in October, will be about $1,300 per recipient.

The Alaska Senate voted to approve a new formula this spring, but that proposal was amended by the House Ways and Means Committee and failed to advance through the House before the end of the legislative session.

Rep. DeLena Johnson, R-Palmer and co-chair of the House Finance Committee, said the core of the issue is whether legislators are willing to authorize taxes in order to pay for larger dividends.

“I think there’s disagreement — and I think it’s throughout the Legislature — about the idea of whether there should be a tax to pay out a PFD. And that’s the crux of it,” she said.

Before 2018, the sole primary spending from the Alaska Permanent Fund was to pay the annual cash dividend to residents. 

That year, lawmakers began spending from the fund to pay for state services. 

The annual transfer from the Permanent Fund to the state treasury — $3.5 billion this year — is the biggest general-purpose source of revenue for the state, larger than oil revenue.

Most new dividend formulas involve splitting that transfer in some way, preserving some money for dividends and the rest for services.

The Senate proposal, dubbed a 75-25 split, keeps 75% of the transfer for services and reserves 25% for dividends. Under most projections, can be paid sustainably as long as the transfer itself is sustainable.

But many members of the House support a 50-50 split instead, something that would either require significant new taxes or steep cuts to services. Supporters say the 50-50 split represents a middle ground between the 75-25 split and the traditional formula, which is close to 25-75 at current Permanent Fund values.

Spending on services has risen for the past two years, even accounting for inflation. Taxes were discussed during the last legislative session, but lawmakers say they’re far from agreement on the topic.

Through the first two and a half months of the fiscal year, oil prices have been running higher than state projections, and if they stay high, that will add to legislators’ unwillingness to raise taxes, Johnson said.

“Honestly, when we’re sitting here looking at near $100/barrel oil, the thought of implementing either a sales tax or an income tax — I think it’s going to have a hard time getting traction,” she said.

In previous years, some lawmakers have cited low oil prices as a reason to oppose new taxes.

Tilton said members of the predominantly Republican House majority will need to talk about a path forward, and that may include looking at things that help reduce spending, such as changes to the Executive Budget Act.

Alaska Beacon is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Alaska Beacon maintains editorial independence. Contact Editor Andrew Kitchenman for questions: Follow Alaska Beacon on Facebook and Twitter.

Alaska Beacon is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Alaska Beacon maintains editorial independence. Contact Editor Andrew Kitchenman for questions: Follow Alaska Beacon on Facebook and X.

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