The Alaska House Finance Committee adopted its first draft of the state's budget. It makes a variety of smallish changes from the governor's proposal, and one really big one: it removes the Permanent Fund dividend.
The change has attracted a lot of attention. So what does it mean?
Committee co-chair Rep. Andy Josephson, an Anchorage Democrat, said Alaskans shouldn’t panic — there will be a dividend this year.
The House’s first draft strips out everything new in the governor’s budget and represents essentially the status quo, minus the PFD. That provides a starting point for lawmakers to work from, he said.
But putting any PFD number into the budget right now could give Alaskans the wrong impression of what their legislators support and what a realistic dividend could be, Josephson said.
"Perhaps it's counterintuitive, but sometimes starting at zero — because we are going to have a dividend — is the more honest place to start," he said.
It’s also fairly typical, he said. House lawmakers have taken this approach for five of the past eight years, according to Josephson’s office. Members of the bipartisan House majority who control the committee approved the new draft in a caucus-line 6-5 vote.
Lawmakers on both sides have said they see Gov. Mike Dunleavy’s proposal to pay a roughly $3,600 dividend as unrealistic with low oil prices and a tight state budget.
But minority Republicans say they see removing the dividend from the budget at this stage as a worrisome sign. House Minority Leader Rep. DeLena Johnson, a Palmer Republican, said dropping the dividend from the working draft reduces pressure on lawmakers to cut spending and hold down expenses.
"If we don't have some kind of PFD, then we're just going to spend it, and we're going to continue to spend, and then we are going to continue to spend into savings," Johnson said at a news conference on Thursday.
Economists told lawmakers earlier this year that reducing the PFD to cover a deficit is akin to a regressive tax and hits low-income Alaskans the hardest.
Removing the PFD from this early budget draft also helps the majority avoid an uncomfortable vote that threatened to hold up progress on the budget last year. During the last legislative session, the budget briefly stalled when lawmakers were unable to muster the votes to reduce the PFD in a later draft.
The upper house of the Legislature is taking a different approach. The first-draft budget in the Senate includes everything the governor asked for, including the PFD. (There is one exception, Dunleavy's proposal to create a Department of Agriculture, which is the subject of an ongoing lawsuit.)
Both the Senate and House are controlled by Democrat-heavy bipartisan coalitions.
How much the dividend will ultimately be is up in the air for now, but some key lawmakers have said they don’t expect much change from last year’s $1,000 PFD.
"My best guess is between $750 and $1,400," Josephson said. "Personally, based on what happened last year, I think it's going to be around $1,000, but it's way downstream."
The state operating budget officially sets the dividend, and it’s typically one of the last bills to pass before the end of the regular session in May.
