A new Senate bill would provide for a $1,600 permanent fund dividend this year. Senate Bill 1002 would allow state spending on the dividend to stay within the mandates of a law passed last year that aims to allow the fund to grow by keeping draws from fund earnings at a sustainable level.
Sitka Republican Sen. Bert Stedman told the Senate Rules Committee Monday that paying out a full dividend under a 1982 law would require the state to violate last year’s law. The law set a maximum draw this year of 5.25 percent of the fund’s value.
“If we … go in and start drawing over 5.25 percent virtually right away — it’s only been a year since we set that amount — the permanent fund will find itself in a position where they can’t rely on the Legislature on guidance on how much we’re going to demand in any given year,” he said.
Stedman said this will lead to lower permanent fund growth in the future. That’s because the fund would have less in earnings money to invest. And the lack of predictability could lead the Alaska Permanent Fund Corporation to change how it invests.
Gov. Mike Dunleavy, a Republican, said he would veto the Senate bill. He supports following the traditional dividend formula.
Dunleavy said he wants to see an amendment to restore a full PFD.
The bill would draw $770 million from the state’s general fund, which is income from permanent fund earnings and other revenue, including oil taxes and royalties. It would also draw from two other savings accounts, $172 million from the Statutory Budget Reserve and $128 million the Alaska Higher Education Investment Fund.
Anchorage Republican Sen. Mia Costello questioned paying for dividends from sources other than permanent fund earnings. She cited the governor who signed the first dividend law in arguing that drawing the dividend from earnings will limit the size of government.
“When Gov. Jay Hammond wrote about the dividend, he said that the dividend is the check on government growth, and that it’s the people of Alaska’s investment in our government,” Costello said.
North Pole Republican Sen. John Coghill said Hammond also supported an income tax. Coghill said the size of the dividend in the bill would put downward pressure on government spending.
Anchorage Republican Sen. Natasha von Imhof said having a larger dividend that pulls from state savings will put pressure on the state to reintroduce an income tax.
“For us to do an income tax on hard-working citizens to turn around and deposit it into their neighbors’ checking account is not a Republican fiscal conservative value, at least not in my book,” she said.
Dunleavy proposed balancing the budget through a combination of budget cuts and transfers from municipal governments totaling $1.6 billion. After public criticism of the proposal, lawmakers have proposed spending cuts of roughly $200 million.
The Senate floor debate on the bill could begin as soon as Tuesday.