Dunleavy: $1,600 PFD to stand, anticipates special session in Fall on dividend funding

Juneau, Alaska (KINY) - Alaska Governor Mike Dunleavy announced his decisions on the operating budget sent to him by lawmakers during the second special session during an address Monday afternoon.

Alaska Gov. Mike Dunleavy faced a tricky political decision.

Should he take a hard line in his push to pay residents nearly $3,000 this year from the state's oil-wealth fund, a centerpiece of his campaign last year, or accept a lesser amount approved by lawmakers not swayed by his arguments?

The Republican, facing a recall effort fueled by public anger over budget vetoes, opted for a mix, accepting the lesser amount of about $1,600 but indicating plans for another special session focused on paying what he sees as the remaining balance.

But Dunleavy can't force lawmakers to do anything they don't want to do, and some legislative leaders said they couldn't see agreeing to appropriate additional funds without agreement on changes to the dividend program going forward.

Dunleavy, in a video message released Monday, did not address making changes to the Alaska Permanent Fund dividend program. He was scheduled to speak to reporters Tuesday.

Debate over the dividend has overshadowed lawmakers' work, contributing to drawn-out regular and special sessions. For decades, the check, seen by many as an entitlement, was paid without a hitch according to a formula based on an average of fund income over five years.

The amount has fluctuated: in the past 10 years, it's been as low as $878 and as high as $2,072, the year before it was capped by then-Gov. Bill Walker amid a budget deficit that has persisted amid low-to-middling oil prices.

In 2016, Walker reduced the amount available for checks, an action upheld by the Alaska Supreme Court, which also said absent a constitutional amendment, the dividend program must compete for annual funding like other programs. It has been capped since.

Dunleavy ran on a full dividend payout, in line with a longstanding calculation that hasn't been followed since 2016, and argued that Alaskans should get a say, via a public vote, on any changes to the program.

Tension with the dividend was heightened last year, when lawmakers began using permanent fund earnings long used to pay dividends to also help cover government expenses. Many lawmakers see the calculation as unsustainable and at odds with a law passed last year seeking to limit what can be withdrawn from earnings for government and dividends. The principle of the nest-egg Permanent Fund has constitutional protections but its earnings can be spent.

Some worry the earnings reserve will be used as a piggy bank. Lawmakers began using earnings after blowing through billions in savings amid gridlock and disagreements over how best to tackle the deficit.

The roughly $1,600 dividend passed this year was cobbled together using fund earnings and savings.

"The cold hard truth is that we can't afford a $3,000 PFD going forward unless we decimate the state budget or come up with a new source of revenues," House Speaker Bryce Edgmon, an independent, said, referring to the dividend.

Walker unsuccessfully pushed for a range of new or higher taxes. Dunleavy has focused on budget cuts.

Dunleavy faced criticism for budget vetoes in June, some of which he later tempered after lawmakers, who didn't have the votes to override the cuts, passed legislation requiring a lower threshold of support seeking to restore many of his cuts. Vetoes announced Monday still included cuts to areas such as Medicaid, public broadcasting and state ferries.

Joe Geldhof, who is affiliated with the Permanent Fund Defenders, which has supported the traditional dividend calculation, said Dunleavy's decision to not veto the dividend amount approved by lawmakers was politically smart. But he said skillful negotiations will be needed for Dunleavy to get more.

Republican Sen. Lora Reinbold also has supported following the calculation until it's changed and said violating it "feels unjust to me." She expressed disappointment with the administration's negotiating skills so far and what she saw as missed opportunities.

There may be a "glimmer of hope" for a full dividend, she said, "but it's been a frustrating year."

Republican Sen. Shelley Hughes, who also has supported a full dividend, agreed with Reinbold that without leverage, Dunleavy faces an uphill fight in securing more money for the checks.

But Hughes said she hopes there is discussion on a long-term resolution to addressing the dividend moving forward. She sees some kind of constitutional amendment as the best course.

"I wasn't someone who once thought a constitutional amendment was a good idea up until more recently, when I've seen the circus and realized that we have to settle it because we're neglecting other things that we should be working on," she said.