State lawmakers went back to work last week in Juneau, with two familiar topics likely to dominate the budget-writing work.
“The real question is what are we going to do for the Permanent Fund dividend … and what are we going to do for education,” Rep. Dan Ortiz told the Wrangell Borough Assembly Jan. 9.
“That’s what the argument is going to be about.”
Ortiz, a retired schoolteacher in Ketchikan, also represents Wrangell and Metlakatla. He’s been in the state House since January 2015 and serves on the Finance Committee, which is in charge of the budget.
The representative said he supports an increase in the state funding formula for public schools, while Gov. Mike Dunleavy has proposed a spending plan for the fiscal year that starts July 1 which provides no increase in the funding formula for K-12 education.
There has not been a permanent increase in the formula since the 2016-2017 school year, much to the frustration of school districts across Alaska.
The governor’s proposed budget, however, would pay out a much larger dividend this fall, estimated at about $3,400. His budget uses a formula in state statute from the 1980s that legislators and governors have not followed since 2015 when declining state revenues and general fund budget deficits made the so-called “full dividend” unaffordable without large-scale cuts to public services and/or new taxes.
The governor’s dividend would be two and a half times the size of last year’s $1,312 payout.
With such a large dividend for 2024, Dunleavy’s budget shows a deficit of almost $1 billion, which he proposes to take from the state’s dwindling savings account.
Ortiz told the Wrangell assembly he disagrees with that plan.
“A PFD of that size is just not sustainable,” he said, showing the math that paying out large dividends would drain the Permanent Fund earnings reserve, resulting in the demise of the annual payment.
“It made us nervous last year,” he said of his colleagues, “and it makes us nervous this year.”
The governor and his large-dividend supporters have battled in recent years with advocates for a smaller, affordable dividend that would not drain the Permanent Fund’s reserves. The dividend is paid from the state general fund, the same as schools and most other public services. The general fund gets the vast majority of its money from Permanent Fund earnings and oil taxes and royalties.
The governor in 2021 proposed a constitutional amendment for a new dividend formula, which would have resulted in a payout of almost $2,800 per person last year. Legislators did not act on the proposal.
The Legislature gaveled back to work on Jan. 16, for a session limited by the constitution to no more than 121 days.