House Speaker Louise Stutes, R-Kodiak, center, leaves the House chambers on Tuesday, Aug. 31, 2021 following marathon floor sessions that morning and Monday night. The House passed an appropriations bill but not before members of the minority voiced deep objections. (Peter Segall / Juneau Empire)

House passes budget bill, calls for $1,100 PFD

Lawmakers and governor disagree on fund source

A bill aimed at completing the state’s budget passed out of the Alaska House of Representatives Tuesday, allocating $1,100 for this year’s Permanent Fund Dividend.

In addition to the PFD, the bill provides funding for a number of state programs, obligations and its passage has been a priority for the House majority.

The bill now goes to the state Senate, and following a long floor session Tuesday morning, House Speaker Louise Stutes, R-Kodiak, said she hadn’t spoken to her colleagues from the other body but she was confident some of the bill’s fund sources will remain the same. Part of the bill’s funding uses money from the Statutory Budget Reserve, another of the state’s savings accounts that need a three-quarter vote to access. But following a recent court ruling regarding the Power Cost Equalization account and the governor’s decision to release funding for a number of other state programs the majority is taking the position those funds are available without the vote.

The Dunleavy administration has said it believes the funds in question are still susceptible to a state accounting provision known as “the sweep,” and still require the vote.

“If we felt that way we wouldn’t have taken funds from (the SBR),” Stutes said in a meeting with reporters. “We’re not looking for a lawsuit. If we come to that point I guess that’s the direction it will go.”

The Associated Press reported legislative lawyers told a Senate committee Monday the PCE ruling suggested the SBR funds were not subject to the sweep.

“The ink is still wet on the bill,” said Senate President Peter Micciche, R-Soldotna, in an interview with the Associated Press. “I don’t have a final position on it.”

Legislative staff were reviewing the bill to ensure it was on solid legal ground, Micciche said, but noted the ruling regarding the PCE included a footnote indicating SBR funds were not subject to the sweep.

“I believe that’s probably going to be our position, I think it’s important that we settle it over time,” Micciche said, adding that without the SBR funds the dividend in the appropriations bill would only be about $600.

The budget bill passed by the Legislature in June included a dividend of roughly the same size and similarly split funding for the PFD taking about half from the Constitutional Budget Reserve. But lawmakers failed to reach the vote threshold necessary, leaving the PFD at $525, an amount Dunleavy called “a joke” and vetoed.

“I believe if the governor had not vetoed the last PFD this PFD would be $1,100 right now and would be ready to go out,” Micciche said.

The Senate Finance Committee will discuss the bill Wednesday at 3 p.m.

Deep divisions

During floor debate, members of the House minority caucus voiced strong opposition to the bill and to the accelerated legislative process it had undergone, which minority members say was rushed. The appropriations bill was not the intended purpose of this special session said Minority Leader Cathy Tilton, R-Wasilla. Gov. Mike Dunleavy initially called the August special session to deal with the state’s long-term fiscal issues and minority members complained the session so far had dealt with the appropriations bill and not those fiscal policy issues.

Stutes and other lawmakers called on the governor to amend the call of the session, saying lawmakers still needed to fulfill many of the state’s financial obligations.

Debate on the appropriations bill extended into the night Monday and lasted all morning Tuesday during which minority members complained the Legislature was violating state laws or the state constitution by not paying a Permanent Fund Dividend based on the traditionally-used formula from the 1980s.

[House budget debate stretches into evening]

“This bill makes a mockery of law, the entire concept of law,” said Rep. David Eastman, R-Wasilla. “I’m saddened by the miserable condition in which we find the Legislature.”

Rep. David Eastman, R-Wasilla, speaks on the floor of the Alaska House of Representatives during a floor debate on Tuesday, Aug. 31, 2021, over an appropriations bill during the Legislature’s third special session of the summer. Eastman submitted a number of amendments to the bill, none of which ultimately passed. (Peter Segall / Juneau Empire)

Rep. David Eastman, R-Wasilla, speaks on the floor of the Alaska House of Representatives during a floor debate on Tuesday, Aug. 31, 2021, over an appropriations bill during the Legislature’s third special session of the summer. Eastman submitted a number of amendments to the bill, none of which ultimately passed. (Peter Segall / Juneau Empire)

The Alaska Supreme Court ruled in 2017 the Legislature was not bound by the statute, but Eastman and other conservative lawmakers have said the state should follow that statute or repeal it.

On Tuesday Eastman submitted several amendments to the appropriations bill, including one to use $2.5 billion to pay dividends based on the formula, but all eventually failed. Several of Eastman’s amendments aimed at blocking funding for institutions that implemented certain policies regarding COVID-19 vaccines, particularly vaccine mandates.

An amendment did pass that would have prevented funding from going to organizations that solicit, collect or maintain information about COVID-19 vaccine status, but as that would impact a health care provider’s ability to accurately record patient’s medical information, it was later rescinded.

Eastman and other conservative representatives said repeatedly that the state’s funding should go first to the PFD and only then should the rest be allocated to state programs.

“Programs don’t build pride,” said Rep. Mike Cronk, R-Tok, a former public school teacher who said that PFDs helped people in his district who were feeling the economic strain. “And that’s what we’ve lost in this state.”

Minority members also complained that this year’s PFD was not being funded with money from the Alaska Permanent Fund, but had been cobbled together from other fund sources like the SBR. That made this year’s payment not a PFD but just a check from the government, according to Rep. Chris Kurka, R-Wasilla, and several other minority members who complained of government handouts.

But majority members countered that significant cuts had been made to state programs while others had increased. House Finance Committee co-chair Kelly Merrick, R-Eagle River, said the appropriations bill contained roughly $10 million in reductions while Eastman’s PFD proposal would cost $2.5 billion. Rep. Ivy Sponholz, D-Anchorage, noted the University of Alaska system had reduced its budget by $60 million over three years while the Department of Corrections increased its budget by roughly the same amount.

Republicans have said the record-breaking performance of the Permanent Fund over the last year was more than enough to pay for larger dividends and have called for the Legislature to break its own statutory draw limit implemented in 2018. Rep. Kevin McCabe, R-Big Lake, complained their calls for reaching a long-term fiscal solution haven’t been adequately addressed and majority members had shown little interest in collaboration.

Committee meetings are scheduled for every day this week to discuss policy proposals based on recommendations from the working group tasked with assessing the state’s fiscal deficit. But while those recommendations do provide some direction the report contains few concrete proposals the Legislature to immediately take.

Following the floor session, Stutes and Rep. Calvin Schrage, I-Anchorage, repeated the majority’s criticism that minority members had not brought forward serious proposals for cuts or revenues. Some Republicans had backed the governor’s proposals for resolving the state’s fiscal issues but several lawmakers in both bodies criticized those proposals for having overly optimistic revenue projections.

Stutes said members of the minority should identify which cuts they want to make instead of calling for undefined cuts to the state budget.

“It’s easy to say ‘I want spending cuts.’ It’s harder to say where are the spending cuts going to come from,” Stutes said. “If you want spending cuts show us how we are going to provide for that.”

• Contact reporter Peter Segall at psegall@juneauempire.com. Follow him on Twitter at @SegallJnuEmpire.

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