Alaska House rejects constitutional amendment guaranteeing formula-based PFD

The Alaska House on Thursday rejected a proposed amendment to the state constitution that would guarantee Permanent Fund dividends paid out according to a formula in state law. House lawmakers had been waiting for more than a month to take a final vote on the measure, one of several elements of a long-term fiscal plan for the state proposed by a bipartisan group of lawmakers in 2021.

Rep. Ben Carpenter, R-Nikiski, brought the amendment forward.

“The purpose of this constitutional amendment is to protect the Permanent Fund and improve the stability and predictability of our state finances,” he said.

For decades, the state paid out Permanent Fund dividends based on a formula in state law. That changed in 2016 when Gov. Bill Walker vetoed half of the payout. The Alaska Supreme Court upheld the veto, saying the PFD had to compete for money in the budget just like any other state program. And ever since, the PFD has been the subject of intense debate during the legislative session.

In 2021, a bipartisan group of lawmakers put their heads together and came out with a report aimed at settling the annual debate. Among their recommendations was to create “constitutional certainty for the PFD.” 

And House Joint Resolution 7, if approved by the House, Senate and the voters, would do that.

The problem, said Rep. Andy Josephson, D-Anchorage, is that the formula would pay out a much larger dividend than the state can afford. The formula calls for a payout of more than $3,000 this year.

“This creates a billion-dollar instant deficit,” Josephson said. “This is sort of like, press green button, create fiscal crisis.”

Supporters of the amendment didn’t disagree with Josephson.

“I think it’s correct. It will, if passed, it will cause a crisis,” said Mike Prax, R-North Pole.

But, Rep. Craig Johnson, R-Anchorage, who also backed the resolution, said it would make a formula rewrite a financial necessity.

“Basically, all this bill does, is it forces us to make a decision,” Johnson said.

But would it? Rep. Jesse Sumner, R-Wasilla, was a bit more skeptical.

“I’m just not certain that there’s the will in the body to actually address this, and I would like to know that,” Sumner said.

He asked the House to show its commitment by advancing a bill that would change the formula — instead of the older calculation, it’d be set at 50% of the state’s annual draw on the Permanent Fund. And the House agreed by a near-unanimous vote, taking the bill out of the hands of the Finance Committee and sending it to the floor.

But the move didn’t explicitly link the two. The formula would have to pass on its own at an unspecified later date. Rep. Justin Ruffridge, R-Soldotna, acknowledged that moving one item without the other would be an act of faith.

“I hope that this body has the intention and the trust with each other. I know that’s difficult to have in the political arena, but we may have to have it — just a little bit of trust that we can see this through to the end of the process,” Ruffridge said.

And ultimately, the necessary two-thirds majority to pass didn’t have that trust. The resolution failed 22-18, five votes short of the two-thirds majority needed to advance.

Despite the setback, Carpenter said he’s undeterred.

“The only thing that we can do is to press forward and continue building support for something, and time will tell whether we’re going to be successful at that,” Carpenter said.