Ahead of the Easter weekend, an Alaska House committee inserted a massive Permanent Fund dividend into its latest draft of the state budget. It’d be in line with the formula used to calculate the dividend until the mid-2010s, what’s called a statutory dividend, and it would send about $3,800 to each eligible Alaska resident.
Supporters say Alaskans are facing higher costs than ever, especially with the jump in oil prices since the U.S. and Israel attacked Iran. Detractors say it’s irresponsible — way too expensive for the state to manage even with high oil prices.
Alaska Public Media's Eric Stone joined Alaska News Nightly host Casey Grove to break it all down.
The following transcript has been lightly edited for clarity.
Casey Grove: So, Eric, should I book my vacation now? Sounds like we could all be a lot richer come October.
Eric Stone: You know Casey, as much as I love to get out of Juneau and escape our wonderful fall storms full of sideways rain, I wouldn’t buy those plane tickets quite yet. The legislative session is more than halfway over, but it’s still relatively early in the budget process. There’s a long way to go.
What passed last week was an amendment to the House Finance Committee’s version of the budget. And don’t get me wrong — it’s important. A lot of what the committee changes actually does make it through to the final budget. But it’s not final by a long shot.
CG: So, how did we wind up with a $3,800 PFD in the draft of the budget?
ES: To put it simply, one member of the Democrat-heavy bipartisan majority broke ranks and voted with Republicans to put it in. That was Nome Democratic Rep. Neal Foster, who co-chairs the committee. He’s long been a full-PFD guy.
Foster represents a number of rural communities in Western Alaska, and he says inflation is taking a bite out of Alaskans’ budgets — you mentioned fuel prices earlier, but also health care, food, and so on. And he says balancing the budget on the back of the PFD isn’t fair.
Rep. Neal Foster: My folks back home ask, why are we forcing low and middle income Alaskans to take financial hit, and yet we don't ask anything of high-income earners or oil companies? And I have to agree with them when they say it's not fair. I want to help Alaskans put food on the table, to pay for health care, to heat their homes and keep the lights on.
ES: Republicans said a lot of the same things as far as costs being high, though of course they’re not exactly clamoring for taxes on Alaskans or oil companies. Here’s Fairbanks Rep. Will Stapp.
Rep. Will Stapp: I just don't think that you can look at people who are going to be paying seven, eight dollars a gallon gas — hopefully that drops — this October, and we can tell them with a straight face that we decided to spend all their money on government programs when they can barely afford to heat their house.
ES: Of course, the immediate question is, how the heck do you pay for this? That’s a $2.4 billion dollar expense in a state budget that’s usually about $6 or $7 billion of unrestricted funds.
Before the session, there was a lot of talk of belt-tightening, small PFDs, et cetera. Of course, the Iran war has changed things significantly — but lawmakers are still only banking on about a half billion dollars more next year than they originally thought, and that’s of course well short of what a statutory PFD would cost.
CG: Well, Eric, as you probably know the state can’t print money, not legally, anyway. So where would the money come from?
ES: It requires a $1.4 billion draw from the state’s Constitutional Budget Reserve, the primary rainy-day fund, and that’s the result of a plan from Rep. Jeremy Bynum, a Republican from Ketchikan. And the twist here is that it takes a three-quarters supermajority to access that savings account — so the full $3,800 would only be paid if three quarters of the House and three quarters of the Senate each agree to it.
If it doesn’t pass, there’d be a smaller dividend — $1,500 or so under Bynum’s plan, though as I’ve been saying this whole time, that’s not even close to being finalized.
Now, the rainy-day fund has about $3 billion, so a $3,800 PFD would drain about half of it. And given that oil prices are high, it’s not exactly raining. So Rep. Calvin Schrage, an Anchorage independent, says he doesn’t think it’ll wind up passing — and he says he’s worried lawmakers are giving Alaskans the wrong impression.
Rep. Calvin Schrage: It puts a full PFD into the budget in concept, but the votes would not be there to fund it. So it would give people false hope, just for the rug to be pulled out from under them, and I just don't think that that's right
ES: Anchorage Democratic Rep. Andy Josephson says he’s not so sure — it very well could pass.
Rep. Andy Josephson: If folks feel like, "Well, this is a temptation, but it won't come to fruition," you should have seen 2022.
ES: As folks may remember, in 2022, a pretty conservative Senate sent over to the House a version of the budget with a $5,500 dividend — oil prices were high in the wake of Russia’s invasion of Ukraine. Ultimately, Alaskans got something closer to $3,200, and Josephson says even that was probably more than the state could afford, in retrospect.
He offered an amendment earlier in the process that would have provided the same $1,000 dividend this year as last year, but it did not have enough support to pass, at least at this point.
CG: Gotcha. Kind of a long way to go, and we don't know which way things will go. But where do things go from here?
ES: Well, the House Finance Committee finalized its latest draft of the budget last week, and that means its next stop is the House floor. Expect that in the coming days or weeks. There will be tons more amendments, and we could see the PFD figure change again — but since the majority is so slim at 21 out of 40, and Foster supports this concept, that PFD figure could conceivably pass the House.
From there, though, it’ll go to the Senate, which will develop its own draft, and they’ll work out the final figure in the closing days of the session in May.
So, Casey, if you do buy plane tickets, just make sure they’re refundable.
