The Senate Finance Committee today introduced a pair of bills to cap government spending and establish a 50-50 split between dividends and state expenses from the limited annual revenue available from earnings reserve of the Permanent Fund.
Senate Bill 104 caps government spending at $5 billion for fiscal year 2021, allowing for a growth rate based on inflation over the past five years.
“A spending cap gives the Legislature the discipline it needs to keep state spending at a reasonable level from one year to the next,” said Senator Natasha von Imhof, R-Anchorage, co-chair of the Senate Finance Committee.
“With an effective spending cap and predictable revenue in place, the state could begin passing a budget on a biennial basis – providing the kind of stability Alaska’s private sector economy needs to grow,” she said.
Senate Bill 103 splits revenue from the annual draw of the Permanent Fund’s earnings reserve equally between dividends and state expenses.
“The Senate is committed to protecting the Permanent Fund and dividends for future generations of Alaskans,” said Senator Bert Stedman, R-Sitka, co-chair of the Senate Finance Committee. “SB 103 creates a revenue limit for government and ensures the dividend program survives by protecting it from being consumed by the operating budget. It draws a line in the sand beyond which the state cannot cross over and take from the dividend.”
Last year, the Legislature passed Senate Bill 26, which limits the annual draw from the Permanent Fund to 5.25 percent of the fund’s market value for five of the last six fiscal years.
After three years, the draw rate decreases to 5 percent. SB 26 did not, however, address the near 40-year-old dividend calculation, which is out of sync with the new endowment model for the Permanent Fund. SB 103 seeks to resolve that issue.
“SB 103 is a conversation starter,” said Sen. von Imhof. “Alaskans are struggling between our constitutional obligations to provide for education, public safety, and basic infrastructure and our commitment to a healthy dividend program. This bill seeks to strike the right balance.”
Last Wednesday, the Senate Finance Committee discussed the interplay between the budget and dividends. Under a 50-50 split, eligible Alaskans would receive approximately $2,340 later this year.
SB 103 and SB 104 were referred to the Senate Finance Committee where a hearing is scheduled for both bills on Wednesday, April 10.