Alaska House approves use of Permanent Fund earnings for state budget, with stipulations
The Alaska House passed a bill Wednesday to turn the Permanent Fund into an endowment for state services by mandating an annual draw from fund earnings. Senate Bill 26 passed the Senate last month and sets aside 5.25 percent of the market value of the Permanent Fund next year for state government and Permanent Fund dividends.
The House changed the measure in committee and passed it on a vote of 22 to 18, along caucus lines.
Its version differs from one approved by the Senate by increasing Permanent Fund dividends from $1,000 to $1,250 and requiring implementing the plan only upon enactment of a broad-based tax and the House version of an overhaul of the state’s oil tax system. It also removes the Senate’s $4.1 billion spending limit and increases the other body’s Permanent Fund earnings’ draw limit from $1.2 billion to $1.4 billion.
Under the Senate plan, when state revenues are above $1.2 billion, drawings from fund earnings would shrink on a dollar-per-dollar basis. For example, if revenues were $1.4 billion, then a draw from permanent fund earnings would drop by $200 million to $1 billion ($1.2 billion minus $200 million.) Under the House version, the draw limit is smaller, set at an 80-cent-per-dollar basis.
House leadership says the changes to SB 26 are intended to force Senate support for a multi-faceted fiscal plan. The Democrat-led majority has identified use of Permanent Fund earnings, cuts to the state budget, a broad-based tax and changes to the oil tax system as its “four pillars” plan for bridging the state’s $2.8 billion budget gap.
Gov. Bill Walker issued a statement following the vote: “Today, members of the House of Representatives took a significant step toward building a more stable future for Alaska. Their courageous actions show we are making progress toward a complete solution. I look forward to working with legislators in both chambers to reach the finish line on fixing Alaska this year.”
On Wednesday, House Republican minority members objected to the new version of SB 26, opposing its call for a broad-based tax and oil tax changes. They also say it doesn’t go far enough to inflation-proof the Permanent Fund.
If the Senate rejects House changes to the measure, both legislative bodies may appoint members to a conference committee to forge a compromise acceptable to both the House and Senate.
According to a statutory 90-day session limit, the legislative session must wrap up on Sunday, April 16. But, House and Senate leaders have indicated negotiations between the two bodies will stretch on beyond that. The constitution allows the legislature to continue working up to 121 days.
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