Senate Bill 26 was passed by the GOP-controlled Senate with a vote of 12-8 which guarantees major changes in Alaska’s revenue. The bill will set the Permanent Fund Dividend at a cap of $1,000 for the next three years. Instead of relying on the current oil market revenue, SB 26 will allow some of the PFD earnings to make up some of the state’s $3.5 billion deficit.
Under the proposed plan, a little over five percent of the $57.2 billion fund would be drawn annually. The rest would be used to disperse dividends to Alaska residents, $1,000 for the next three years, and slightly more later on.
“I expect it will have no better or worse effect than past years when dividends were that amount. We need to see money circulating in the economy, but we also need funding for state services,” Sen. Natasha Von Imhof, who voted in favor of SB 26, said.
Sen. Tom Begich opposed SB 26 and believes it will have a detrimental impact on its own.
“This bill, as currently written, is near the top end of the Permanent Fund draw, severely reduces the dividend and comes with both a spending cap and promises from the sponsor of additional spending cuts,” Begich said. “Without an income tax, an earnings approach like this cannot lead us to long-term sustainability — it is simply a prescription for more devastating cuts next year that will likely fall on education and other essential government services.”
Begich said the bill that was passed was not introduced by Gov. Bill Walker, but rather a bill created in the Senate Finance Committee by the Senate majority. It replaced the bulk of the governor’s bill with SB 70.
“These cuts will only drive us even further into recession. Every economist has identified that cutting the dividend or the budget more — which this bill would force us to do — would be the most harmful thing we could do to our economy while in a recession,” Begich said.
Sen. Bill Wielechowski, who spoke against the Senate, also did not favor the bill.
“A lot of my constituents have a real problem going on with their opponents on checks, so they can go pay billions of dollars on oil tax,” Wielechowski said. “A lot of my constituents have heartburn over the idea of giving up their permanent fund checks and have them go to some of the richest, wealthiest corporations in the history of the world.”
Wielechowski has a lawsuit that is awaiting hearing in the supreme court about whether or not there shall be a dividend.
According to Sen. Berta Gardner, minority leader of the state senate, the PFD is an economic engine and bolsters local business across the state. The PFD also keeps approximately 15,000 to 25,000 Alaskans above poverty line every year.
“The new statute says the first three years of the dividend will be $1,000 and will be guaranteed, and after that, as far as I’m concerned, it’s a free-for-all,” Gardner said. “Reducing the dividend effectively is a tax on every single man, woman and child. We may get there, but we believe it has to be a part of an entire package that includes changes to our oil taxes, so the oil companies are kicking in, and it includes broad-base tax.”
Gardner referred to the proposed statute as “killing the right to a dividend.”
SB 26 also includes a spending cap of $4.1 billion, a three-year review and requires the governor to report the budget fall every December.