Alaska lawmakers face crunch to pay checks from oil wealth

Alaska residents don’t know how much money they might get from the state’s oil wealth this year, or even when they might get the unique payout just for living in the oil-dependent state

Alaska Oil Wealth Check (Copyright 2020 The Associated Press. All rights reserved.)

Alaska residents don’t know how much money they might get from the state’s oil wealth this year — or even when they might get the unique payout just for living in the state — and many are upset.

Some see the annual checks, which have ranged from about $331 to $2,072, as an entitlement, a benefit from the state's resources. But lawmakers have come to rely on the same pot of money traditionally used for the checks to help fund the government in a place with no statewide sales or personal income tax.

The Alaska Permanent Fund, seeded with oil money and grown through investments following its creation in 1976, has an estimated value of $81.1 billion. Residents' checks come from the fund's earnings, which lawmakers have leaned on for expenses, with oil revenue a fraction of what it was a decade ago.

Frustrated residents have called in to hearings or provided written testimony, with some saying the dividend is their money and that they’re tired of lawmakers setting an arbitrary amount for checks.

Others agree that lawmakers need to make tough decisions on the state's financial future but say a balance must be struck between paying checks each year, providing government services and investing in the still-young state.

Legislators went through billions in savings amid budget deficits and in years when oil revenue tanked. The tension over how much of the fund's earnings should go toward government or toward checks has intensified, causing gridlock and overshadowing debate on other issues.

For a traditional October payout, the agency that distributes the checks would need to know what funding is available by Tuesday, said Genevieve Wojtusik, legislative liaison with the Department of Revenue. Lawmakers are debating it in a special session, their third this year.

Wojtusik said Alaskans can expect a check 30 days after the Legislature finalizes an amount. It's not clear when that might happen.

A formula for calculating checks, dating to the early 1980s, was last used in 2015. Policymakers have since set the check size, a practice the Alaska Supreme Court has upheld. Some residents say they consider that stealing.

“I believe it is criminal to pick and choose for yourselves what to take and use for legislative action and what to give to the people of this great state,” Lara Weisensel wrote in testimony to House lawmakers.

Andrew Halcro, a former Republican lawmaker, said residents have a right to be angry but that the issue goes beyond checks.

“While we are all focused on how much we are going to pay Alaskans forever, right, the economy and the entire structure of Alaska is crumbling before our eyes,” he said.

Estimates show Alaska has lost population since 2016, the state's maintenance backlog is around $2 billion, and the oil and gas sector last year hit its lowest job numbers in decades.

Glenn Cravez of Anchorage wrote that he's a longtime resident of the state without a broad-based sales or income tax and that "it’s wonderful to not pay those taxes AND receive a PFD check each year. But as adults, we know that money does not grow on trees, and that the free ride is over.”

Gov. Mike Dunleavy has said Alaskans didn’t care what size check they got under the old formula but got upset when they thought politicians were “playing games on them."

He ran in 2018 saying the state should follow the longstanding formula and pay residents the money they should have received had it been followed. He was rebuffed by lawmakers, and his 2019 proposals for deep cuts to government services to address state deficits fueled public outcry and a recall effort that recently ended.

He is now proposing an amendment to the state Constitution that would restructure the oil wealth fund, limit what can be withdrawn from it and evenly split the withdrawals between payouts to residents and government costs.

The Legislature has yet to agree on a long-term fiscal plan. A working group of lawmakers has recommended guaranteeing a payout of some kind in the Constitution but as part of a larger package that includes new revenue of up to $775 million, cuts ranging from $25 million to $200 million and changes to a government spending cap.

The group's report said members had different ideas about the checks but recommended the Legislature work toward a formula that would provide half of what’s withdrawn from the fund toward payouts.

Senate Finance Committee co-chair Bert Stedman, a Sitka Republican, said many of his constituents "don’t want to pay taxes to have a big dividend. They want the biggest dividend they can get without taxes. That’s the tradeoff we’re trying to, I guess, rectify.”

Under Dunleavy’s proposal, this year's check would be about $2,350. Lawmakers this year proposed an $1,100 check, using funds cobbled together from various pots of money and tying strings to that amount. It failed to win enough support, and what remained was a $525 check that Dunleavy vetoed.

A payout under the longstanding formula would be around $3,869, according to a Legislative Finance Division estimate.

Rep. Ben Carpenter, a Nikiski Republican who was in the working group, said the check this year can't be lawmakers' sole focus.

“We need to be remain focused on achieving structural change that will stabilize the dividend and the state’s finances and not make everything just about the dividend because then people don’t focus on solving the problem,” he said.

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This story is corrected to say the Legislature went through billions rather than $16 billion since the latest budget figures haven't been finalized. It also deletes reference to virtual hearings.