JUNEAU, Alaska (KTUU) - The Senate State Affairs Committee got its first look Tuesday at the governor’s plan to pay back reduced dividends over the next three years.
The governor’s plan has a downside for Alaskans hoping for big dividend checks into the future.
If the Earnings Reserve Account is used to pay supersized dividends now, there will be less money in the account to pay for dividends into the future, meaning the checks from 2022 and onward will inherently be slightly smaller than if the governor’s plan is not adopted.
“I know, speaking for myself personally, that I would prefer to have the three payments over the next three years, and absorb the smaller dividends into the future,” said Alaska’s Chief Economist, Ed King.
Republican senators on the committee also expressed some concern about what the legislation might do to the state’s Earnings Reserve Account, a roughly $17 billion fund filled by investment earnings made from the constitutionally-protected Permanent Fund.
King spoke in detail about Senate Bill 23 and 24 that would pay back PFD checks that had been shrunk by Gov. Bill Walker and the Legislature over the past three years.
The bill would give eligible Alaskans more money on top of their regular annual dividend payments:
- $1,061 per eligible Alaskan in 2019
- $1,289 per eligible Alaskan in 2020
- $1,328 per eligible Alaskan in 2021
King said that $1,328 figure would need to be checked because there may have been an error made in its calculation.
The draw for the governor’s plan on the ERA is expected to be just under $2 billion over three years. When coupled with the expected draw for the regular PFD payments and state services, that figure balloons out to $11 billion over the same period.
King says that the ERA should be safe from being depleted, the fund is expected to earn $12 billion over three years, mitigating the costs of the $11 billion draw. He also described that the Department of Revenue had found there was little risk of depleting the ERA entirely by enacting the governor’s plan.
Senators on the committee expressed some concern about legislators making more unstructured draws on the ERA, especially as the Constitutional Budget Reserve has fallen to around $2 billion.
As it takes a three-quarters vote from both chambers to use funds from the CBR, Sen. Peter Micciche, R-Soldotna, said lawmakers would be tempted to keep appropriating funds from the ERA, risking future dividend payments and the Permanent Fund itself.
“I guess it's kind of like a teen, the reason you don't want them to have the first cigarette is that the second one becomes that much easier,” said Micciche
Chair of the committee, Sen. Mike Shower, R-Wasilla, also asked Department of Revenue Commissioner Bruce Tangeman why the governor’s plan would not pay back Alaskans who received smaller dividend checks but have since left Alaska.
Tangeman said when a person signs up for the dividend they sign a form that says they intend to remain in Alaska indefinitely. He also said the complexity of tracking down thousands of Alaskans who had moved out of state would be impractical.