Dunleavy: Budget will rely on Constitutional Budget Reserve
Gov. Mike Dunleavy is not ready to give up on paying Alaskans a statutory Permanent Fund dividend just yet. On Wednesday he rolled out is fiscal year 2021 budget proposal that includes a full dividend, which is close to $3,000.
Dunleavy even wants a $1,400 supplemental payment to cover the gap between this year’s payment and the statutory sum that was not paid. That would require separate legislation.
“Until those statutes are changed, modified in some form or fashion we continue to view the PFD as a transfer to the people of Alaska," Dunleavy said in a brief news conference.
Dunleavy’s proposal also promises no cuts to public education and 15 new state troopers.
“This is a springboard again; this is a budget that comes out,” he said. “It’s a springboard for discussions with the Legislature, with the people of Alaska because we have to together to form a budget that’s going to make sense for all of Alaskans and that’s what our goal is.”
After giving brief remarks and answering a few questions, Dunleavy walked out of the cabinet room about eight minutes into the meeting with reporters.
It’s something rarely seen from any governor holding news conference and it left some stunned at the departure. A spokesman said he had a previous commitment but would not elaborate.
Dunleavy also wants to draw $1.5 billion for a savings account that some lawmakers say cannot sustain such withdrawal.
The money would come from the Constitutional Budget Reserve. Historically, legislative budget analysts have long said the reserve needs at least $2 billion; the draw would leave about $500 million.
Senate Finance co-chair Natahsa von Imhof, R-Anchorage, said leaving $500 million in the CBR is “much too low.”
“I don’t think that that’s the smart way to go,” she said. “We’re going to be draining our savings account very below a fiscally prudent level. I think leaving about $500 million in the CBR doesn’t give us any cushion for emergencies and natural disasters like earthquakes and wildfires or even a slump in oil prices.”
House Speaker Bryce Edgmon, I-Dillingham, said he believes it will be a tough sell.
“I don't think that's going to get any support in the Legislature," he said. "We've been steadfast as we were last session in not wanting to overdraw any of our savings accounts and that includes the Permanent Fund earnings reserve.”
Dunleavy said he plans on reprising his ideas for constitutional amendments that include enshrining the PFD and creating a budget spending cap.
On Tuesday, Fitch Ratings weighed in on Dunleavy’s fiscal pursuits. The investor service had already downgraded the state’s credit rating in the fall and identified Alaska as one of three states to watch for further credit rating implications.
In its report, Fitch wrote:
"Alaska will face key questions on gubernatorial proposals, which may weaken operating flexibility. Fitch expects the governor will continue to seek a full dividend payment for residents and legislative approval for a set of constitutional amendments, constraining operating flexibility. The legislature will continue to discuss constitutional amendments the governor proposed earlier this year, which, if enacted, could weaken the state's budgetary operating flexibility and negatively affect Alaska's Issuer Default Rating (IDR)."
Lawmakers return to Juneau on Jan. 21 for the second year of the two-year legislative session. Unlike last year, respective finance committees can begin budget work immediately.
Last year, they waited until mid-February for Dunleavy to introduce an amended budget to reflect his priorities as he had only been in office a few months.
Also last year, the House had completed formal organization, which determines who runs committees and leads budget talks in time for the governor’s proposal.
This year, co-chairs Jennifer Johnston, R-Anchorage, and Neal Foster, D-Nome, are ready to weigh in.
“The governor’s budget takes a short-term view,” said Foster, who oversees the operating budget, in a prepared statement. “He is detailed about what he wants to spend but is shortsighted in his plan to pay for it. The legislature will hit the ground running in January, and we will work diligently with the administration to complete our work within 90 days.”
Dunleavy can amend his budget anytime before Feb. 19, which is the 30th legislative day.
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