SB 26 Creates a Structured, Sustainable Draw from Permanent Fund Earnings
FOR IMMEDIATE RELEASE
April 12, 2017
Juneau – The Alaska House of Representatives today passed a major component of the plan put forward by the members of the Alaska House Majority Coalition to fully address Alaska’s $2.7 billion funding gap. 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.
“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). “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 today by the Alaska House ensures 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 State Senate. The House version also better protects the principle of the Alaska Permanent Fund by inflation proofing the fund every year with 0.25 percent of the 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). “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 allows a sustained draw of $2.5 billion from the Earnings Reserve Account of the Alaska Permanent Fund every year. 67 percent of the draw goes to the General Fund to help pay for needed state services and 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 coalesced to pass this session. The 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 has 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 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). “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.”
Senate Bill 26 passed the Alaska House of Representatives today by a vote of 22-18. The bill will now be sent back to the 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.
For more information, please contact Alaska House Majority Coalition Press Secretary Mike Mason at (907) 444-0889.