The Alaska House Finance Committee on Thursday evening failed to muster enough votes to advance a modified version of Senate Bill 128 that preserves its deficit-fighting components and calls for a larger Permanent Fund Dividend.
Speaking Thursday evening, Rep. Steve Thompson, R-Fairbanks and co-chairman of the committee, said he had only five of the six votes needed to move the bill out of the 11-person finance committee and on to the floor.
The committee is expected to try again today.
Even if SB 128 advances to the House floor, it will face an uncertain future. Several lawmakers and members of the governor’s staff said off the record Thursday that the bill lacks the 21 votes needed for passage. Other lawmakers added that the bill may be advancing simply so the House can vote it down and end a legislative session that began five months ago.
SB 128, written by Sen. Lesil McGuire, R-Anchorage, and adopted by Gov. Bill Walker as the cornerstone of his 13-point plan to erase Alaska’s multibillion-dollar deficit, calls for 5.25 percent of the average value of the Alaska Permanent Fund to be spent each year on state services and the dividend. The average would be calculated by using five of the previous six years’ Permanent Fund values. The money would be taken from the fund’s earnings reserve, which collects earnings from the fund’s investments.
The constitutionally protected corpus of the fund would remain untouched, and at high oil prices, the amount of money drawn from the fund would decline.
At current Permanent Fund values, the draw would be $2.4 billion, with about $1.92 billion earmarked for state operations.
In this year’s already-approved budget, that money would replace planned withdrawals from the state’s Constitutional Budget Reserve.
Drawing money from the Permanent Fund’s earnings reserve would affect the dividend in a significant way. The version of SB 128 passed by the Senate earlier this month would result in a guaranteed $1,000 dividend through 2019. Without SB 128, the dividend is expected to be about $2,000 this year.
The modified version of SB 128 considered by the House committee Thursday would guarantee the dividend at $1,500 this year and next. That higher value might lower the amount of money available to fight the deficit, though exact figures were not immediately available.
The modified bill also relaxes spending caps included in the Senate version. Those caps, included at the urging of Sen. Bill Stoltze, R-Chugiak, would limit the amount of money drawn from the Permanent Fund at high oil prices.
Members of the finance committee, including Rep. Les Gara, D-Anchorage, said those caps — if not adjusted for inflation or to allow gradual growth — could gradually rob the state of the ability to continue providing services at present levels.
SB 128 does not completely solve the state’s deficit, but it would approximately halve it. Though lawmakers have cut approximately 30 percent from the state’s budget over the past two years, those cuts pale in comparison to the decline in oil prices that caused the deficit.
If the deficit is not reduced or erased in the next few years, the state is expected to run out of savings no later than 2022. The Dividend program could end as soon as 2020, and the state could be forced into draconian budget cuts or steep tax hikes.
The Alaska Legislature’s special session will meet its 30-day time limit on Tuesday. If lawmakers fail to approve some version of SB 128 by then, Gov. Bill Walker has warned — through veiled implication — that he will call them into another special session.
The finance committee is expected to meet again at 9 a.m. today.
