JUNEAU — Alaska lawmakers from all parties agree they need to focus on bridging the state’s unprecedented budget shortfall this legislative session. The fastest way to do it is by using the Permanent Fund’s earnings to pay for government, instead of the Permanent Fund dividend program.


In December, Gov. Bill Walker introduced a proposal that would draw $3.2 billion from the earnings reserve for government spending, while guaranteeing a $1,000 dividend check next year. But there’s a similar bill in the Senate, introduced last year, that would guarantee a $1,000 dividend every year.


Sen. Lesil McGuire’s Senate Bill 114 looks a lot like the governor’s plan because it’s the basis for his proposal.


“I said when I first saw her plan, I thought it was too clever for its own good,” said Department of Revenue Commissioner Randall Hoffbeck. “But then as we looked at it and some of the ideas behind it and the way it really does tie us to resource development in the state, it made a lot of sense. It made so much sense we were more than happy to steal it.”


Both the governor’s proposal — Senate Bill 128 — and Sen. McGuire’s ill would utilize the Permanent Fund’s earning to pay for government and tie dividends to oil production instead.


“So if the state does well, you do well,” said Sen. McGuire to members of the State Affairs Committee Tuesday. “If the oil industry does well, you do well. It’s a partnership.”


That means that as oil fields dry up, so will the PFD program.


“Are we shifting risk to the dividend while saving the government? That’s the question,” Sen. John Coghill asked during the meeting.


Part of Sen. McGuire’s minimum dividend guarantee means the state would pull from savings to write PFD checks in years when oil production is low. She said she doesn’t expect dividends in the near future to drop below the $1,000 mark.


“But it’s true the price of oil is constantly moving,” McGuire said. “There is a chance that it could go below but when we’ve run our scenarios in our office, we think it will be more likely that it’s above $1,000.”


McGuire said her office found years in which dividends could potentially rise above $3,000, based on new investments and fields that might be coming online.


Hoffbeck said the governor’s administration looked at providing a similar minimum guarantee, but determined it would be too expensive because it would mean $100 to $200 million less in funds for government spending.


“The dividend would be smaller,” Hoffbeck said of the governor’s plan. “There’s no doubt about it, but it would become increasingly harder to maintain a $1,000 dividend at those prices over a period of time as well.”


Under SB114, 74 percent of oil royalties would go to funding the dividend program versus the governor’s proposed 50 percent, which means dividend checks would be bigger in general. In turn, there’d be less royalty money left over for government spending — about $1.9 billion, rather than the $3.2 billion in the governor’s proposal — which means it would take a lesser dent out of the budget shortfall this year.


Both Hoffbeck and McGuire said something like the governor’s plan or SB114 are the only solutions that will come close to bridging the budget gap.