Updated at 11:40 a.m. on Wednesday, June 29


ANCHORAGE — In an unprecedented move, Gov. Bill Walker announced Wednesday morning he’s partially vetoing funding for the Alaska Permanent Fund dividend checks this fall – cutting them to $1,000 instead of an estimated $2,000 under current calculations.


“The cuts we’re making are difficult, but we’re able to afford a $1,000 dividend this year,” said Walker. “If we don’t make a change on the dividend program, it completely goes away in four years.”


The change in PFD amount was part of Walker’s original proposal to utilize the permanent fund’s earnings, included in Senate Bill 128. The measure passed the Senate, but died in the House Finance committee just before lawmakers gaveled out of a May special session two days early.


Now, Walker says he’s making it easier for House members to adopt the measure.


“Many House members came and said you know if I vote for reducing the permanent fund, I may not get re-elected. I’ve taken care of that today,” said Walker. “They have someone to blame, they can blame me.”


The amount of this year’s dividend was a sticking point for several members of the House committee, as some expressed concern about the impact a reduced check would have on the economy. House Speaker Mike Chenault and Rules Committee Chair Craig Johnson said they doubt the Legislature has enough votes to overturn the governor’s PFD reduction, which requires a vote of two-thirds of the Legislature, or 45 members.


“That’s a very high hurdle. I don’t anticipate the support, quite frankly,” Johnson said. “I think there are people on both sides that think it’s too much and people that think it’s still not enough.”


The final version of SB 128 before the House committee set dividends at $1,500 this year and next. Walker said he would keep an open mind in regards to the higher amount, should that version ultimately pass, based on how the other pieces of the bill came through. But leadership in both bodies said despite the governor’s reduction in dividends this year, it’s unlikely that bill will pass the House.


“Right now, I can’t see that bill getting to the floor, I can’t see it having the votes to pass,” said Johnson.


“My concern is, if you reintroduce the same bills, how are you going to get a different result?” said Senate Finance Committee Co-Chair Anna Mackinnon, who voted for the measure in the Senate.


“This is what happens when you don’t have any new sources of revenue; when you lose 80 percent of your revenue and don’t put anything back in,” Walker said.


Overall, the governor’s vetoes totaled $1.29 billion dollars:



  • $665 Million in PFD reduction

  • $190 Million in government, K-12, and University of Alaska funding

  • $250 Million in paused projects, including $18 million for U-Med Road project

  • $430 Million in oil and gas tax credits


[View complete list of vetoed items]


Walker recognized, however, that the state’s oil and gas tax credit obligation would continue into the future.


“It’s not a savings, as such … we need to find a different method of paying from a timing standpoint that more matches where we are on our financial situation,” Walker said. “I can’t justify paying all of those credits out of our operating capital.”


In an emailed statement shortly following Wednesday’s announcement, Sen. Anna MacKinnon, R-Eagle River, Co-Chair of the Senate Finance Committee, equated the veto to “throwing away a credit card bill.”


“Putting them off won’t make it go away,” said MacKinnon. “It just hurts Alaska’s credit with the very investors we need to help refill our pipeline.”


The Alaska Oil and Gas Association (AOGA) also expressed displeasure with the governor’s veto of the oil and gas tax credit payments, calling the decision “shortsighted.”


“Today’s veto tells investors Alaska is closed for business and will go back on its own policy whenever the price of oil fluctuates,” Kara Moriarty, AOGA President and CEO, wrote in an emailed response.


[View AOGA’s complete response]


If the Legislature does not pass a long-term proposal to utilize the permanent fund’s earnings for state services this year, Walker says the cost of waiting will only increase next year – he estimates, by $1.2 billion, an amount comparable to the $1.2 billion in cuts he says have been made to the budget since fiscal year 2015.


“I now challenge both sides to come to the table,” said Walker.


Governor Walker has called a fifth special session this year — to begin July 11 in Juneau — for lawmakers to consider his long-term fiscal plan, including use of the permanent fund earnings and broad-based taxes.


In addition to budget vetoes, Walker also announced he was closing down the Knik Arm Bridge and Susitna-Watana Dam mega-projects.




 


Correction: An earlier version of this story listed $259 million in paused projects. The correct amount is $250 million. 


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