Legislators consider using Permanent Fund to close budget deficit

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There are currently three proposals aimed at helping to close the state’s budget shortfall using the Permanent Fund. Legislators are weighing which – if any – to support.

Today they heard from their own nonpartisan budget expert on what makes each plan unique.

David Teal, the director of the Legislative Finance Division, notes these proposals would all change the source of Alaskans’ annual dividends.

“Essentially, the money appears to just fall out of the sky,” said Teal. “The truth is that the dividend is just a government check, just like any other government check. And that it’s very protected now.”

Representative Mike Hawker’s bill would essentially put dividends on hold – potentially for multiple years – until the state eliminated its deficit. Hawker is a Republican from Anchorage.

Governor Bill Walker’s plan would put $3.3 billion annually into the budget – providing a less volatile source of revenue than oil production taxes.

But Teal noted that there is a risk that fund earnings in the future won’t grow quick enough to replenish that money.

Teal contrasted that with Senator Lesil McGuire’s bill, which would pay out 5 percent per year, based on an average of the previous five years of earnings.

Both Walker and McGuire, an Anchorage Republican,  have proposed using oil and gas royalties to pay dividends, rather than the permanent fund. All three plans would likely reduce the amount available for dividends.

Representative Mark Neuman, a Wasilla Republican,  said he’d like to see voters have a direct say on how much the government spends.

Teal responded that cutting dividend checks may catch the public’s attention.

“Every expenditure means there’s less money for my dividend,” Teal said. “And if that happens, you may see the public looking over shoulder a little more than they do now, as you prepare the budget. So, I guess, fair warning: Be careful what you ask for.”

It’s not yet clear when the House will vote on legislation that would affect the Permanent Fund.