With less than a week to go before the deadline to finish this year’s third special session of the Legislature, not only are the governor and most legislators unable to agree on the amount of the Permanent Fund dividend, they also don’t agree on two key numbers central to the fiscal debates.
Legislative leadership and the nonpartisan Legislative Finance Division see a billion-dollar average annual budget deficit if the governor wins his push for a Permanent Fund dividend of $2,400 or so. The governor wants to cement the annual PFD into the constitution.
Gov. Mike Dunleavy’s team, however, puts the deficit at several hundred million dollars less, based on what many legislators call unrealistic budget-cut assumptions and overly optimistic oil revenue projections.
In another numerical disagreement, Dunleavy’s revenue department told a House committee last week that $18.6 billion was available from Permanent Fund earnings, of which the governor wants to take $3 billion to cover his PFD spending until new revenues can catch up and close the gap.
However, the Alaska Permanent Fund Corp.’s most recent financial statement, issued last Friday, shows $9.7 billion uncommitted and available in the earnings reserve account. Legislators moved $4 billion from the earnings to the constitutionally protected principal of the fund, effective in July, and the corporation already has designated close to $3.4 billion in earnings to cover its legally required contribution to the state budget for next year.
The governor’s revenue numbers are “pie-in-the-sky rosy,” said Fairbanks Rep. Adam Wool, a member of the House Finance Committee. “They are putting up the nicest numbers.”
Oil production forecasts are “overly optimistic,” Wool said, noting that today’s $70 oil is no guarantee of tomorrow’s price, besides for the uncertainty of future North Slope production dependent on federal regulatory approval and private investment.
Senate Finance Committee member Natasha von Imhof said lawmakers need to work with realistic oil price and production numbers, not “overly optimistic or overly pessimistic” projections. The best place to get those realistic numbers is the Legislative Finance Agency with its team of fiscal analysts who work for the entire Legislature, not any one member or political party, she said.
In particular, the Anchorage senator said the recent court ruling against ConocoPhillips’ proposed Willow oil field development in the National Petroleum Reserve-Alaska could delay those new barrels coming into production, further reducing state revenue forecasts.
The annual PFD already is delayed this fall as lawmakers and the governor have not agreed to an amount or funding source to cover the payments.
The House on Aug. 31 approved a dividend of about $1,100 — about $100 higher than last year — but it relies in part on a state savings account which legislative leadership believes is available but which the Dunleavy administration says is not available for spending.
The dispute comes down to different legal interpretations of a recent state court ruling on the availability of state reserve funds, focusing on which accounts are available with a simple majority vote of the House and Senate and which require a three-majority vote.
Supporters of the governor’s dividend plan, mostly Republicans, have withheld their votes on several budget issues in an attempt to win a larger PFD, while opponents of the governor’s plan object to taking more money out of the Permanent Fund for a short-term boost to dividends.
The governor has said $1,100 is not enough, but so far lacks enough votes in the Legislature to withdraw more money from the Permanent Fund to pay a larger PFD.
As of Tuesday evening, the Senate had not taken up the House proposal. It is holding committee hearings this week on dividend legislation, tax bills, and the governor’s proposals to put a larger PFD and a limit on state spending in the constitution.
Legislators face an adjournment deadline for the 30-day special session on Sept. 14. The delay in approving the dividend means Alaskans will not receive the payments the first week of October, as has been the practice since the program started in 1982.
If the Legislature does not approve a dividend appropriation by the deadline, the governor last week said another special session would be needed. Speaking on a conservative talk radio show, Dunleavy said, “We’re getting ready for the inevitability this session is going to produce very little, and we’re going to be going right back to it.”
He also suggested the next session could be held outside of Juneau. “It certainly makes sense to try a different venue because we’ve had it in Juneau now for the past several months and it’s not working.”
While looking for answers to the dividend, a House committee has been working on a state sales tax bill, which would impose a 2% state tax on top of any local taxes. Under the legislation, the state would set the taxing rules and exemptions across Alaska, taking away a large measure of local control from the 100+ municipalities that have their own sales taxes.
The sales tax bill, however, would need to get past the House Finance Committee, the full House and the Senate to even reach the governor’s desk for signature into law.