Alaska state senators differ on PFD path as committees fail to meet during first half of special session

Woman in turquoise parky standing at a microphone
Sen. Shelley Hughes, R- Palmer, speaks under introduction of guests during a Senate floor session, Feb. 8, 2019. (Photo by Skip Gray/360 North)

Alaska state senators are split over Gov. Mike Dunleavy’s plans to change the Permanent Fund dividend and how to pay for it. The fourth special session is halfway over, and while some House committees have met, none have met in the Senate.

Palmer Republican Sen. Shelley Hughes said she’s frustrated the Senate isn’t meeting. She wants to start passing major bills now because, she said, it will be tough to do it next year.  

“If we can get one or two moving, perhaps in January, the momentum would be there to continue,” she said. “But I think it’s going to be incredibly difficult in an election year.”

Hughes said the amount of taxes needed to pay for the budget isn’t clear. For example, in December, the state will update its forecast for how much oil revenue it expects in the future. 

“To do our proper job, we have to look at the revenue forecast, and we have to look at the growth of the Permanent Fund and how much larger that draw would be,” she said.

Hughes supports drawing an additional $1 billion during each of the next two years to balance the budget. It’s balanced now, but at a much lower PFD level than what Dunleavy proposed, which Hughes supported. 

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Not all senators agree with the approach supported by Hughes and other Republicans who are in alignment with Dunleavy on the PFD. There are two other groups of lawmakers in the Legislature with their own ideas about how to balance the budget and fix the PFD.

Another group of Republicans is also skeptical of substantial amounts of new taxes. But they point to current revenue forecasts that say the budget wouldn’t balance with higher dividends and no major new taxes. 

Sitka Republican Sen. Bert Stedman is in that group. He wants to protect $30 billion in Permanent Fund earnings that aren’t currently protected in the constitution. But he isn’t eager to put the PFD in the constitution, at least for now. 

“In my opinion, we should rewrite the formula and run it for a couple of years, see how it works,” he said. “And if it looks like it’s a stable concept that’ll last for, you know, several decades like the last formula, then we can talk about doing something like that at that time. But it’s far too early to do that.”

Stedman said the Finance Committee that he co-chairs will consider bills that would set the dividend formula at different levels. But he said that can happen during the next regular session, in January. 

The third group of legislators — mostly Democrats — is more open to introducing new taxes as part of a package that would pay for larger dividends. Anchorage Democratic Sen. Tom Begich has re-introduced tax proposals that were considered by the Legislature in the past, like increasing oil taxes. He acknowledged that larger taxes aren’t popular but said they’re needed to reach an agreement.

“That is what I am kind of looking for, from my colleagues: the willingness for them to see the bigger picture, ” he said.

The taxes that Begich proposed would be enough to allow for the state to pay for dividends at an amount that’s higher than in recent years but lower than what Dunleavy has proposed. To pay for Dunleavy’s proposed amount, Begich said a statewide tax like a sales tax would be needed. But he said the tax could be repealed if oil and permanent fund revenue grew enough. 

But he said counting on higher oil prices would be irresponsible. A working group of legislators laid out how much money the state would need, as well as other assumptions like how much revenue the state would bring in. And Begich said it would be hard to reach a compromise if lawmakers stray from those assumptions. 

“It doesn’t matter what the price of oil is today because you have to base it on the agreed-upon consensus on those assumptions,” he said.

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If the Department of Revenue bases its December revenue forecast on oil at $75 per barrel, similar to the oil futures market in recent days, then the state budget could be in balance over the next nine years at Dunleavy’s proposed PFD amount.

Senate President Peter Micciche is trying to sort out how to get the three groups to agree on a set of major policy changes — or at least the 11 senators needed to pass bills. 

Micciche, a Soldotna Republican, said a new committee could help make that happen. He wants it to include senators from the working group and others. 

“I think we’re going to need some representation from the various schools of thought,” he said. “Or you’re going to have the same problem. You’re going to have things headed in one direction that can’t get 11 votes, or the other direction that can’t get 11 votes.”

He said that if the Legislature lowered the state’s spending limit, it could allow for new, temporary taxes. Micciche praised the working group, which had legislators from both the Senate and the House. But he said that from this point forward, each body should pass its own version of major changes and then work out compromises.

 “It’s tough enough with 20 senators,” he said. “It’s nearly impossible with 60 legislators. So if you have the two statements — or two positions — of a bill that passes, I think that’s something much easier to work.”

The Senate has only had enough members to hold a regular floor session once in the fourth special session. That happened on its first day. That would be needed again to pass Micciche’s proposal for a new special committee that has the power to pass bills. But a group of senators also could meet to work on a compromise that it would recommend to the others. 

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Andrew Kitchenman is the state government and politics reporter for Alaska Public Media and KTOO in Juneau. Reach him at akitchenman@alaskapublic.org.

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