House and Senate negotiators agreed Wednesday on a proposal to put limits on the Legislature’s ability to spend from the Alaska Permanent Fund, but the fate of the plan now rests in the hands of the Legislature’s other 54 members.
“We want to see if the caucus likes it,” said Rep. Neal Foster, D-Nome and the lead House negotiator.
Proposed last year and approved in separate versions by the House and Senate, Senate Bill 26 limits how much money the Legislature can spend from the Alaska Permanent Fund. Most of the fund is constitutionally protected, but about $15 billion can be spent with only a simple majority vote of the House and Senate.
With Alaska facing a $2.4 billion annual budget deficit (a figure that does not include money needed for the annual Permanent Fund Dividend), lawmakers have turned to the fund to fix the problem.
“I know it’s the biggest piece of the puzzle in terms of fixing our deficit,” Foster said.
To reassure Alaskans (and the Alaska Permanent Fund Corporation, which manages the fund), lawmakers have been pressing for formal spending limits. They disagree on what those limits should look like, which is why SB 26 has been stalled for almost a year.
The Senate passed one version, the House passed another, and a six-member conference committee was tasked with finding a compromise.
According to the compromise proposal rolled out Wednesday, lawmakers would be permitted to spend 5.25 percent of the five-year average value of the Permanent Fund per year. That amount would drop to 5 percent in 2021.
The Alaska Permanent Fund Corporation has been pressuring lawmakers to come up with some kind of system of rules to create stability and allow investors to manage the fund effectively.
“Basically, we’re trying to meet the demands of the Permanent Fund board, to give them some structure as to how they provide for the 5.25 percent. That’s all,” said Sen. Lyman Hoffman, D-Bethel, the lead Senate negotiator.
In the fiscal year that starts July 1, that formula works out to about $2.7 billion.
Critically, the compromise proposal doesn’t mention the Permanent Fund Dividend, a fact that would allow legislators to set the dividend annually at anything between nothing and several thousand dollars.
“The split that we had in the House version and in the Senate version between the dividend and the government is not in this bill,” Hoffman said.
This year’s dividend has already been set at $1,600, but future dividends would be decided on a year-by-year basis, according to Wednesday’s compromise proposal.
Asked whether that could lead to annual, drawn-out legislative fights, Foster said, “I wouldn’t say I worry about that, but that is definitely a possibility.”
The proposal was under consideration behind closed doors in the House and Senate late Wednesday.
No action was immediately scheduled, but lawmakers have previously said that the bill is a keystone in end-of-session negotiations.
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