The long backstory behind Alaska House minority caucus votes on PFD, shutdown

A house floor with a bunch of people wandering around
Members of the Alaska House Republican minority caucus leave the floor to discuss the wording of an agreement with the mostly Democratic majority to prevent a shutdown of much of state government on June 28, 2021, in the Alaska State Capitol in Juneau. (Andrew Kitchenman/KTOO and Alaska Public Media)

Members of the Republican minority caucus in the Alaska House have been at the center of the most contentious arguments in the Legislature this year.

Past minorities have used their power to influence state policy, but the Republican caucus has pushed further. While their approach is new, it’s rooted in frustrations building among some Republican legislators and voters for years. 

When legislators ended the session early in 2020 due to the COVID-19 pandemic, budget negotiators reached a deal that linked a vote that would lead to a roughly $1,000 Permanent Fund dividend to funding the emergency response to the pandemic. 

If that vote failed to be approved by three-quarters of both the Alaska Senate and House of Representatives, dividends would have been cut to $500, instead of $1,000. 

It passed, with no votes to spare. 

Homer Republican Rep. Sarah Vance voted against it despite being a supporter of larger dividends under the formula in a 1982 state law. And a day later, Vance criticized how the budget was written to talk radio host Michael Dukes. 

“It’s unconscionable,” she said. 

Vance said her caucus was unlikely to allow a similar vote to pass again.

“If it had been any other year … we would have done it,” she said. “We would have called their bluff.”

A year later — this spring — proved Vance right.

This time, the vote would allow for dividends of $1,100. And this time it failed, leaving PFD funding at just over $525. After the vote, Gov. Mike Dunleavy vetoed the remaining amount. So there may be no PFDs this year. 

And the Power Cost Equalization program, college scholarships for Alaskans and some other programs also remain unfunded.

At the center of this debate are most members of the Republican House minority caucus, who joined Vance this time in voting no on drawing money for PFDs and other programs. 

The money would have come from the Constitutional Budget Reserve, or CBR, a state savings account that the Legislature has used to balance the budget. It required the approval of three-quarters of both chambers to pass.

The Republican legislators’ concerns have been brewing for a long time. They believe that there should be much deeper cuts in state spending and that dividends should be much larger.

Interviews with some of the members show why things have come to a head.

Rep. Kevin McCabe of Big Lake was among those who voted no. The vote also would have funded construction projects in the Matanuska-Susitna Borough, McCabe’s home. 

He said there was too much pressure to vote yes.

“I hate being bullied,” he said. “And the six or so projects that they put into the CBR that were specifically directed at the Mat-Su to obtain my vote. Frankly … I termed it, bully budgeting.”

McCabe is among eight first-term House Republicans. All of them voted no on the deal. 

Some members have said this provides leverage in supporting action on the governor’s proposals to amend the state constitution. 

McCabe likes Dunleavy’s proposal to resolve the size of Permanent Fund dividends through a constitutional amendment. New proposals to cut spending or increase state revenue would be addressed later. And McCabe said there’s an advantage to dealing with proposals to cut spending after the dividend is set: It would force cuts that the Legislature has been unwilling to make.

“Frankly, you know, I’m a conservative, small-government kind of guy and I believe our government continues to grow,” he said.

It’s an argument that parallels one that Dunleavy made when he ran for governor: that state spending is too high. Dunleavy later proposed cuts in his first year as governor. And a large public backlash to service cuts fed into a recall campaign against the governor. Dunleavy hasn’t proposed those cuts in the following two budgets.

McCabe said the biggest lesson he draws from that budget fight is that communication in support of the cuts should have been better. He said all heads of agencies funded by the budget should have been in sync with the governor. He pointed out that former University of Alaska President Jim Johnsen spoke publicly about the impact of the cuts on the university.

“We need to all get together on the same message instead of battling over limited dollars,” he said.

North Pole Republican Rep. Mike Prax also voted against drawing money from the CBR. 

In addition, he voted against making the budget date effective on July 1. The failure of that vote in the House led Dunleavy to say that much of state government would shut down. The shutdown was prevented during a special session in late June. 

Prax said he’s advocating for his principles. 

“Nobody wants to shut down the government, put all the employees and all the programs under this much uncertainty — nobody wants to do that,” said Prax, who’s in his second term. “But … we the public have been talking about this going on 20 years, when it comes right down to it.”

Prax wants votes on the three constitutional amendments proposed by the governor, or at least something similar that would put the dividend in the constitution, limit spending and require public votes on new taxes. 

Prax also wants to see the PFD resolved first. He said Alaskans should receive the dividends under the formula in state law. This year, that amount would be roughly $3,700, while Dunleavy has proposed dividends of roughly $2,350 under a constitutional amendment he’s proposed. And Prax said Alaskans should be paid back what they would have received over the past five years if the state followed the formula. Altogether, that amount would be more than $10,000, or nearly $7 billion in Permanent Fund earnings. 

Eagle River Republican Rep. Ken McCarty, a first-term member, said the dividend formula should be fixed. 

He hasn’t reached conclusions on what changes need to be made to the dividend and state spending, as well as taxes or other revenue. He expressed frustration that more of his questions weren’t answered during this year’s budget process. 

“To make informed decision-making, we need information,” he said. “And life is not just a ‘yes/no.’ But it’s ‘yes, no and I need more information before I can make that yes/no (decision).’” 

McCarty also noted that this year is different because the balance in the Constitutional Budget Reserve is lower than in the past. 

Its value has fallen from more than $12 billion in 2014 to roughly $1 billion today.

“That’s our safety net money,” McCarty said. “If there was some major disaster, where is that money to cover those type of needs? And we don’t have it anymore.”

He said there should be larger cuts to spending on state agencies than have happened in the past five years. He also said the state must devote money to rebuild the Constitutional Budget Reserve. And he said it must invest in its infrastructure, from maintaining roads and bridges to increasing the amount of food that’s grown in Alaska to increase its food security. 

Fairbanks Democratic Rep. Adam Wool says the new Republican minority has gone further in its demands than previous minority caucuses have. He said for the Legislature to function, the minority can have some say, but ultimately their power should be limited.

“When I was in the minority, did I feel like I had a lot of influence? Not really. I mean, we could hold up a three-quarter vote on the CBR for certain budget items,” he said. “But, you know, there’s a price to pay to be in the minority and there’s a reward for being in the majority.”

For example, in his first two years in the Legislature as a member of the then-Democratic minority, it used its power to block draws from the Constitutional Budget Reserve to protect tens of millions of dollars in education funding, while members the current Republican minority supports Permanent Fund dividends that would cost at least $1.5 billion.

Wool also rejected the argument from minority-caucus Republicans that their voices weren’t heard enough in the budget process. Wool said their voices were heard, but most of their proposals didn’t have the votes to pass.

Wool said the minority-caucus Republicans’ numbers don’t add up. 

And he expressed concern that they want to draw more than planned under a law intended to limit draws from Permanent Fund earnings. He noted that at the same time, they criticize spending down the amount in the CBR. 

“On a good year, you spend 5% and on a bad year, you spend 5%,” he said. “And if they don’t understand that or want to abide by it, then I think … it’s going to be hard to see eye to eye on some of this stuff.” 

Lawmakers who supported the limit on the annual draw from Permanent Fund earnings expressed concern that the Legislature would spend down the Permanent fund’s earnings reserve if there wasn’t a limit.

Wool has proposed a bill to change the dividend formula and introduce an income tax among other provisions. The measure is intended to balance the budget in the long run. Wool noted that none of the minority-caucus Republicans have put forward a detailed plan. 

“I’m waiting for them to put out a plan that’s a balanced-budget plan into the future, with balancing revenues and expenditures, including the PFD, without overdrawing the (Permanent) Fund,” he said.

A legislative special session is scheduled to begin on Aug. 2. 

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