Alaska Senate approves $5,500 payout to Alaskans, but it’s not final yet

Alaskans will receive $5,500 and could get it as soon as July if the Alaska House agrees with a budget proposal approved Tuesday afternoon by the state Senate.

Senators voted 15-5 to approve what would be the fifth-largest budget in state history and sent the draft to the House for agreement. 

If the House rejects the roughly $9.4 billion Senate proposal for fiscal year 2023, lawmakers will have to write a compromise that combines the House and Senate plans.

That could leave Alaskans with a smaller payout than preferred by senators.

Sen. Mike Shower, R-Wasilla, proposed increasing the dividend as a negotiating tactic with the House.

“I expect it to be pulled down to something different,” he said.

Senate President Peter Micciche, R-Soldotna, shared that perspective. “I think the probability is probably there that the House does not support that level,” he said.

If federal money and fee-funded programs are included in the budget tally, the total is near $19 billion according to preliminary estimates, and would be the largest budget in state history according to historical records compiled by the Legislative Finance Division.

The state expects a financial windfall due to higher oil prices caused by the Russian invasion of Ukraine, but the Senate budget would create a deficit of about $970 million. 

The state has sufficient savings to cover that deficit at projected oil prices, but Sen. Bert Stedman, R-Sitka, warned of catastrophic consequences if oil prices are lower than expected. If oil dips below $78 per barrel, the state would not have enough money to pay for the budget unless it overspends from the Alaska Permanent Fund.

“We can’t sustain this,” Stedman said.

His perspective was shared by other senators, but they were outvoted by those who said the state has an obligation to pay a dividend that matches a distribution formula in state law.

“It doesn’t have to be sustainable. This budget is just for this year,” said Sen. Roger Holland, R-Anchorage.

Though the state has not followed that formula since 2015, lawmakers have been unable to alter it because of a lack of agreement on what should replace it.

“The people could use a blessing in this state,” said Sen. Lora Reinbold, R-Eagle River. “Let’s bless Alaskans and give them a full Permanent Fund dividend.”

The vote in the Senate was closer than the final tally indicated. Some senators who voted against the big dividend later voted in favor of the budget bill after it became apparent that it had enough support to advance.

While the Senate plan includes hundreds of millions of dollars for construction projects and billions to keep state services running through summer 2023, its biggest component is $3.6 billion for cash payments to Alaskans. 

About $2.8 billion would be spent on a Permanent Fund dividend of about $4,200 per person. Senators also approved $840 million for a one-time $1,300 payment intended to compensate Alaskans for high fuel prices. 

That one-time payment was first proposed by the House, which accompanied it with a $1,300 dividend for a total payout of roughly $2,600.

Last year’s Permanent Fund dividend was $1,114, and both the House and Senate proposals would be larger than any in recent years. The Senate proposal would be the largest ever.

Before debates began Monday in the Senate, its draft budget included a $2,600 dividend and no energy rebate. On the Senate floor, senators voted to increase the dividend to $4,200 and add the additional $1,300 payment.  

Critical to the passage of both items was the absence of Sen. Natasha von Imhof, R-Anchorage, who is assisting with her husband’s cancer care. 

Afterward, von Imhof called the choice between attendance and absence a dilemma.

A longtime opponent of tax increases and service cuts, she has consistently voted against large dividends. Had she been present, the dividend increase would have required 11 votes to pass. With her absence, supporters needed — and got — 10 votes in favor.

Speaking Tuesday, she said, “To create a budget that depends upon $100 oil, in my opinion, is reckless.”

Micciche, who voted against the larger dividend but supported the final bill, said he doesn’t share that concern.

“Equally unhappy in this building seems to be the right mix,” he said.