New formula for Permanent Fund dividend payments heads toward Alaska Senate vote

JUNEAU — Seeking to end years of debates over the size of the Permanent Fund dividend, the Alaska Senate Finance Committee voted without dissent Thursday to advance a new payment formula to the full Senate.

Senate President Peter Micciche, R-Soldotna, said a vote could take place as soon as next week.

“It is very important. Depending on any amendments that happen in that bill, this is the cornerstone of a fiscal plan,” he said.

The bill’s fate in the House and with Gov. Mike Dunleavy is uncertain, but if it becomes law, the new formula could end debates that have paralyzed the Legislature and driven the state to the brink of shutdown several times.

“It has been the great divider in this building for years now,” Micciche said.

The Alaska Legislature voted in 2018 to set up a recurring transfer from the Permanent Fund to the state treasury, and the new formula would reserve half that transfer for dividends this year.

The result would be a 2022 payment of $2,600 per recipient, at a cost of $1.7 billion.

The other half of the transfer would be reserved for state services, a division known in the Capitol as the “50-50.”

Dunleavy has proposed a permanent 50-50 formula and has published budget projections that show it as sustainable. Members of the committee are skeptical that high oil prices will remain for longer than a year and believe the cost of services could rise faster than projected by the Dunleavy administration.

As a result, the finance committee’s proposal would reduce payments in subsequent years to a 25% share of the transfer. The 75-25 split would result in an estimated payment of about $1,300 per recipient in 2023.

If legislators can agree on tax and revenue changes worth at least $800 million per year before the end of 2026, the 50-50 split would resume in 2027. If not, the 75-25 split continues.

In an unusual move, senators are advancing the formula change bill without a guarantee that it has enough support to pass the Senate. That means the formula could change substantially before it advances out of the Senate.

One alternative, discussed by Senate Minority Leader Tom Begich, D-Anchorage, would gradually step up dividends from the 75-25 formula to 50-50 over multiple years. Begich and other lawmakers have also proposed reducing the amount of new revenue needed to trigger the 50-50 formula.

“We’ll have a lot of discussion, I’m sure, on the floor,” said Sen. Bill Wielechowski, D-Anchorage, who opposes the current version.

Skeptical lawmakers and members of the public have advocated a constitutionally guaranteed dividend, saying that according to a 2017 Alaska Supreme Court decision, lawmakers could ignore a changed formula just as they have ignored the existing formula, which hasn’t been followed in several years.

Last year, a legislative working group said a formula change should be accompanied by other pieces of legislation, such as a tightened state spending cap and new revenue. Sen. David Wilson, R-Wasilla, said he’s skeptical of a proposal that doesn’t include those other pieces.

Nonbinding intent language within the formula bill says that it is envisioned as a first step toward a complete plan.

Previous dividend votes in the Senate have taken place with razor-thin margins, and the same is expected when lawmakers debate the formula change.

“One thing I can guarantee you is it will be an exciting day — or so — on the Senate floor,” Micciche said.