Alaska House Passes SB 26 Creating a Draw from Permanent Fund Earnings
April 14, 2017
Senate Bill 26 passed the Alaska House Wednesday by a vote of 22-18. Senate Bill 26 creates a sustainable draw from the earnings of the Alaska Permanent Fund, while still paying out dividends and protecting the principle of the fund.
In a prepared statement Governor Bill Walker stated, "[Wednesday], members of the House of Representatives took a significant step toward building a more stable future for Alaska. Their courageous actions show we are making progress toward a complete solution. I look forward to working with legislators in both chambers to reach the finish line on fixing Alaska this year."
“Passing this bill will help stabilize the Alaska economy and remove the uncertainty that comes from relying solely on oil revenue, which swings wildly up and down based on the price of a barrel of oil,” said Speaker of the House Rep. Bryce Edgmon (D-Dillingham).
Edgmon said, “Today is an important day because a majority of the members of the House ignored political risks and instead acted for the wellbeing of Alaskans, their jobs, and the economy.”
The version of SB 26 passed Wednesday by the Alaska House will ensure that eligible Alaskans will receive a $1,250 Permanent Fund Dividend for the next two years, 25 percent more than the $1,000 dividend called for in the version of the bill that passed the Alaska State Senate. The Alaska House version is also said will better protect the principle of the Alaska Permanent Fund by inflation proofing the fund every year with 0.25 percent of the percent of market value (POMV) sustainable draw.
“Permanent Fund Dividends are vital to those who live in rural Alaska who don’t have the same access to large cash economies as those who live on the road system. This bill makes sure dividends will continue to be paid so that every Alaskan can benefit from our shared oil wealth,” said House Finance Committee Co-chair Rep. Neal Foster (D-Nome).
Foster said, “Using the earnings of the Alaska Permanent Fund in a responsible way has been recommended by business leaders, economists, and the national credit raters as the best way to stabilize state revenue and protect our economy. I am proud of my House colleagues’ forward looking vision, and for showing the courage to do the right and responsible thing to make sure Alaskans get the kind of Alaska we all want to live in.”
SB 26 will allow a sustained draw of $2.5 billion from the Earnings Reserve Account of the Alaska Permanent Fund every year. Sixty-seven (67%) percent of the draw goes to the General Fund to help pay for needed state services and thirty-three (33%) percent will be used to pay Permanent Fund Dividends. This creates certainty in an otherwise volatile revenue stream.
SB 26 is just one component of the full fiscal plan that the Alaska House Majority Coalition came together to pass this session. The Alaska House has already passed $62 million dollars in smart and targeted budget cuts compared to last year, as well as HB 111 to reform Alaska’s unsustainable oil tax subsidy structure.
The House Finance committee said they have been working hard on refining a balanced measure for new revenue which the House will consider on the floor this week.
In an effort to ensure final passage of a comprehensive plan, conditional language was added to SB 26 stipulating that it only takes effect if the Alaska Legislature balances the Permanent Fund draw in SB 26 with oil subsidy reform and broad based revenue directed towards education, which bore the brunt of the Alaska Senate’s proposed cuts this year.
“The responsible and sustainable use of Permanent Fund earnings is an essential part of what must happen to protect our economy from a recession that will linger for years and years if we do nothing. However, use of the earnings cannot be the only answer because it does not fill the gap by itself and does not affect all Alaskans equally,” said House Finance Committee Co-chair Rep. Paul Seaton (R-Homer).
Seaton said, “It’s unfortunate that we had to use conditional effect language in this bill to effect overall state revenue restructuring, but it has become increasingly clear that the Senate Majority needs some encouragement to actually sit down and compromise on the other components necessary to close the half-billion dollar annual gap their plan leaves for the foreseeable future. All three components directly address the topic of restructuring our state revenue. Our Coalition voted for this bill today because we are committed to a vibrant and diversified future for Alaska where our kids can get a great education, our seniors and elders are cared for, and our economy works for all Alaskans.”
Alaska House Republicans voted against changes made to the Senate and Governor's draft fiscal plan Wednesday on the House Floor. Senate Bill 26, originally a bill to provide for a structured draw from the state's Permanent Fund earnings reserve account, was changed in the House Finance Committee to include conditional language that would nullify the fiscal solution if a broad based tax amou?nting to $650 million or more, and the House's version of HB 111 were not also passed by both bodies.
"I don't trade votes," said Representative Lance Pruitt (R-Anchorage). "This bill asks me to tie my support for Senate Bill 26 to two other legally unrelated bills. That feels unethical and is not how I evaluate policy."
"I decide how to vote on bills based on their merit and the input from my district," said Representative Dan Saddler (R-Eagle River). "I will never promise to vote for a tax plan that raises an arbitrary amount of money without seeing the plan first – and that's what this bill tells me I have to do."
Tying tax policy and a POMV plan together was previously deemed unconstitutional by legislative legal advisors, meaning the measures would have to be considered in individual bills. House Finance members voted to attempt to circumvent this "single subject" requirement by including the conditional language included in Senate Bill 26.
"I know that this is the House Democrats' idea for how to get their way," said Representative Charisse Millett (R-Anchorage). "This is political gamesmanship, and Alaskans deserve better than that. They deserve real progress on a fiscal plan."
The House Republican Caucus said they will continue to stand firmly against an income tax, unneeded industry tax hikes, and budget growth. The House's version of Senate Bill 26 passed 22 to 18, and now heads to the Senate for a vote on concurrence with the House's changes.
Senate Bill 26 passed the Alaska House of Representatives Wednesday by a vote of 22-18. The bill will now be sent back to the Alaska State Senate for concurrence.
If the Senate does not accept the changes made in the House, the bill will go to a Conference Committee of members of both bodies.
Editing by Mary Kauffman, SitNews
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