The Senate majority unveiled its plan to limit state spending and draw money from Permanent Fund earnings to pay for the state budget Friday.
Senate President Pete Kelly, R-Fairbanks, said the plan in Senate Bill 70 will prevent spending from getting out of control.
“We’re going to initiate a spending limit, so that once we get the budget down, then it doesn’t just take off again the next time we have a little bit of money,” Kelly said.
The Senate majority’s plan would draw 5.25 percent of the fund’s value from Permanent Fund earnings for the next three years, then scale back to a 5 percent draw.
Permanent Fund dividends would be $1,000 for the first three years. Then PFDs would be a quarter of the overall draw, projected to be somewhat more than $1,000.
There are two big differences with the plan introduced by the House Finance Committee. One is that the Senate plan doesn’t include the income tax included in the House.
The Senate version would also limit state spending to $4.1 billion. That’s about $200 million less than Gov. Bill Walker’s proposed budget.
Senate Finance Co-Chairman Lyman Hoffman, a Bethel Democrat, said the cuts are much smaller than what would have to occur if the state doesn’t draw from the Permanent Fund.
“Many people throughout Alaska say we’ve cut enough, but until we have a long-term plan, we have to continue to look at budget reductions,” Hoffman said.
The other big difference is that the spending limit would only allow the state budget to grow at the inflation rate.
Hoffman said the Permanent Fund restructuring in the bill would protect dividends in the future.
The Senate Finance Committee plans to hold hearings on the bill Monday and Friday.