Alaska's BudgetBy Senator Bill Wielechowski
July 11, 2021
The Governor’s Budget Vetoes The Governor vetoed $889 million from the budget that passed the Legislature. The Governor’s vetoes include:
The Governor also vetoed the transfer of $4 billion from the Permanent Fund Earnings Reserve to the Fund’s Corpus, and as a result of his veto, a simple majority vote would permit the Legislature to spend away those funds. Many of the items vetoed by the Governor were actually items that he had originally proposed. K-12 Education Education funding is determined by a formula called the Base Student Allocation (BSA). The Legislature passed a budget that used the student numbers from 2019 instead of the numbers from 2020 due to the fact that so many students were not attending public school in 2020-2021. This was an important item in the budget because school districts are anticipating enrollment to return to pre COVID-19 numbers for the upcoming schoolyear. If the Legislature had not made this adjustment, schools would not have enough funds to educate our students. The PFD Because the Governor vetoed all funding the state’s budget for PFDs, there currently is no PFD funded for this fall. The August Special Session The Governor has called the Legislature into another special session to be held in August to focus on a constitutional amendment on the PFD, funding for this year’s PFD, and potential revenue measures. In addition to the PFD the Legislature will need to deal with other outstanding budget issues including the possibility of overriding the Governor’s budget vetoes, authorizing other appropriations, and dealing with the failed “reverse sweep” vote. While the Legislature did pass a budget, it failed to reach the necessary ¾ vote to prevent a “sweep” of state accounts that transferred into the Constitutional Budget Reserve (CBR) at midnight, June 30 th . The failure of the annual reverse sweep budget vote threatens to cause statewide impacts to special accounts like the Higher Education Investment Fund and the Power Cost Equalization Fund, which have been swept into the CBR instead of preserved for their special purposes. Without a reverse sweep vote these accounts and many others will stay in the CBR fund. If the Legislature does not fix the reverse sweep there will no longer be funding available for important things like University of Alaska scholarships and rural energy financial assistance. I believe the Legislature must address the reverse sweep in the upcoming special session. Constitutionalizing the PFD There are currently two different proposals in the Senate to enshrine the PFD in the Alaska Constitution. A Constitutional Amendment would require approval of 2/3 of the Legislature to bring it to a vote of the people. The Wielechowski Plan – SJR 1 Senate Joint Resolution 1 (SJR 1) would enshrine the PFD program in the Alaska Constitution. It would protect overspending the Fund by moving the balance of the Earnings Reserve Account, which currently holds the Fund’s investment earnings, into the Fund’s corpus, where all future earnings will be retained and thereby safeguarded from access. SJR 1 then limits the permissible draw from the Fund to 5% of a five-year averaged market value. The people’s PFD would be apportioned as either the amount of the historic calculation formula or 50% of the draw value—whichever is greater. In this way, the people will always receive first call on the earnings of the Fund, ahead of government. The Dunleavy plan – SJR 6 Senate Joint Resolution 6 (SJR6) would also constitutionalize the PFD and combine the balance of the Earnings Reserve Account into the corpus of the Permanent Fund. The Governor’s plan would take 5% of the earnings and share it with the people, with 50% going to government and the other 50% going to the payment of PFDs. The Governor’s plan also constitutionally mandates power cost relief to rural areas of the state. While I appreciate the Governor seeking placement of the PFD in the Constitution as well, I am a proponent of the original historic formula that worked for 34 years before PFD funding was first cut in 2016. Under this historic calculation, the PFD would be over $3,400 this year. Under the Governor’s 50/50 plan, the PFD would only be about $2,300. The formula was set by a visionary governor, Jay Hammond, and a rationale, informed Legislature who never anticipated any cuts to the PFD. They believed government needed to be wise with the state’s finances and make careful spending and revenue decisions. They understood that when the people receive the first call on the Fund’s earnings, ahead of Government, that it represents their small, equal share of the resource wealth they’re entitled to as their maximum benefit under the Alaska Constitution. The people’s PFD should have never been cut. The last five years of cuts are a result of the Legislature’s failure to address revenue measures, like seeking our rightful value for our oil, and allow wealthy corporations to extract from our lands with Alaskans getting little in return. The oil industry told people last fall that if they voted against Ballot Measure 1, which would have raised taxes on the oil companies, that it would “Save the PFD.” The people did as the oil companies wanted and failed Ballot Measure 1, and already this year, there is NO funding for PFD in the state budget. We can’t trust the PFD will be saved unless we enshrine it in the Alaska Constitution and take up revenue measures, like fixing oil taxes. Until then, I am not ready to give up the fight on the PFD. Senator Bill Wielechowski
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Received July 02, 2021 - Published July 11, 2021 Related Viewpoint:
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