Dunleavy calls $1,600 dividend proposal a nonstarter
JUNEAU, Alaska (AP) — Gov. Mike Dunleavy issued a veto threat Monday over a state Senate bill that proposes a $1,600 Alaska Permanent Fund dividend, calling it a nonstarter.
The bill was offered in hopes of breaking a special session logjam that has stalled progress on a state operating budget, with the start of the new fiscal year just weeks away.
“I cannot and will not support this legislation,” Dunleavy said in a statement. The Republican governor campaigned on a full dividend payout.
Earlier Monday, Senate President Cathy Giessel called the proposed amount “doable.” It is consistent with last year’s reduced payout. But the Anchorage Republican noted the bill could be amended. The bill was scheduled for debate as early as Tuesday.
“What comes out of that, I have no way of knowing, no way to predict,” she said in an interview, adding later: “This is a very high-risk action, but I don’t see any other way to move this forward.”
Estimates indicate that if the existing dividend calculation were followed, a full payout would be around $3,000 this year. Payouts have been reduced the last three years amid an ongoing budget deficit.
Disagreements over how to handle the dividend have stalled progress on a state operating budget, and the bill was seen as an effort to disentangle the two. A prior effort by the House to do so faltered.
Dunleavy said the existing formula should be followed and not changed without a vote of the people, a position supported by some legislators. But others say the formula is outdated and unsustainable.
Last year, amid a continued draw-down of savings and disagreements over taxes and further budget cuts, lawmakers began using earnings from the state’s oil-wealth fund, the Alaska Permanent Fund, to help pay for government expenses. This created a rub with the dividend, which was long paid to qualified residents using fund earnings.
Lawmakers last year also sought to limit what can be withdrawn from fund earnings for government and dividends. The amount for withdrawal for the upcoming fiscal year is $2.9 billion. A full dividend is expected to cost $1.9 billion.
To violate the law setting the draw rate would send a message to Alaska Permanent Fund Corp. trustees that they cannot rely on the Legislature for guidance, and that could lead to changes in investment behavior “that’s detrimental to your long-term rates of return and hurts future Alaskans. For generations,” said Sen. Bert Stedman, a Sitka Republican who presented the bill during a Monday hearing before the Senate Rules Committee.
The bill proposes using general funds and money from a reserve fund accessible by a simple majority vote and a higher education investment fund to pay for the dividend. Money drawn from earnings would be comingled with general funds, Stedman said.
House Speaker Bryce Edgmon said he thought there would be support in the House to act if the Senate sent over a $1,600 dividend. But he also said he didn’t see the votes in the Legislature for a veto override should Dunleavy reject such a proposal.
The version of the operating budget that passed the Senate included a full dividend. Giessel said members of her Republican-led caucus indicated they were willing to support a full dividend this year “if other contingencies were met, that is, the formula going forward would be changed after this year.”
She told reporters last week there has been discussion about a separate special session devoted to the dividend formula. Edgmon, a Dillingham independent, said he supports that idea.