The House’s Republican Majority is moving forward with a contingency plan to tap the rainy day account without Democratic support.
The bill offered Tuesday executes an accounting trick that makes it easier to access the state’s $10 billion Constitutional Budget Reserve. That reserve is governed by byzantine rules that require a three-quarter vote when the state has money available to it in other funds, but require only a majority vote when the reserve is the largest source of spendable dollars available to the legislature.
This is where the Permanent Fund comes in. Because the Fund’s investment earnings are in an account separate from the Fund’s corpus and are legally available for the legislature to spend, that money triggers a three-quarter vote on the budget reserve. But if you move that money to the corpus of the Permanent Fund, it basically gets locked up and can only be spent through a vote of the people. With that money no longer spendable, the legislature only needs a majority vote to access the rainy day fund.
Speaking on APRN’s Talk of Alaska, House Speaker Mike Chenault stressed that this plan would not draw money from the Permanent Fund to plug the state’s multi-billion-dollar deficit.
“There’s no money out of the earnings reserve going to pay for government,” Chenault said.
The bill before the House works as a fail-safe against government shutdown. It would only move the earnings reserve money if the legislature fails get a three-quarter vote by June 30 — the legislature’s last day to reach a budget compromise before the state government partially shuts down. On top of shifting $5 billion from the earnings reserve to inflation-proof the corpus, the bill would also move money from the Alaska Higher Education Investment fund into another account on the shutdown deadline. The education fund primarily supports the Alaska Performance Scholarship.
Democrats oppose the move, describing it as a sleight of hand.
“It is an accounting gimmick to try to get around working with us in a bipartisan manner that reflects the spectrum of Alaskans,” said House Minority Leader Chris Tuck.
For weeks, the legislature has been at an impasse, with Democrats seeking increased education funding, Medicaid expansion and cost-of-living increases for public employees as part of a budget deal.
Tuck also expressed concern that shifting the funds could affect dividends in bad years for the national economy. In a letter circulated by the House Majority, the Alaska Permanent Fund Corporation’s chief financial officer wrote that the transfer should not have an impact on dividend payouts in typical or even weak years, but also made the caveat that projections do not always match the market performance.
Concern over the dividend has also caused some skittishness within the Republican House Majority. Last week, six members of that caucus signed a letter stating their opposition to the idea.
Lawmakers have until June 1 to find a way to fully fund their budget before pink slips are sent to thousands of state employees.
