The protected principal of the Alaska Permanent Fund would grow by $10.5 billion under a provision passed by the legislative conference committee on the budget on Saturday.
Sitka Republican Sen. Bert Stedman described the transfer from the permanent fund earnings reserve account as a “monumental task.”
“It’s an issue that all legislators should be very proud of and take credit for,” Stedman said of protecting the money.
The House and the Senate must vote on whether to agree to the conference committee version of the operating budget. If it passes, it would go to Gov. Mike Dunleavy, who can veto budget line items.
Legislators can spend money from the earnings reserve with a majority vote in both chambers, but they can’t vote to spend money from the protected principal. With this transfer from the reserve to the principal, the committee’s intention is to cover inflation for the next eight years.
The principal would grow to $56.8 billion, while the earnings reserve would shrink to $8.5 billion, based on the permanent fund’s current value. These numbers are estimates and don’t account for the $2.9 billion draw from the earnings that’s currently proposed to pay for the budget and permanent fund dividends. And they also don’t account for however much the fund earns over the next year.
Wasilla Republican Rep. Cathy Tilton voted against the transfer to the protected principal, which is also known as the corpus.
“While I agree that do we need to move some of the funds into the corpus, I’m not sure that this is the right amount, and I feel like it may be too much to move at this particular time,” Tilton said.
Golovin Democratic Sen. Donny Olson also voted against the transfer, which passed by a 4-2 vote.
The transfer amount could be reduced by the governor under his line-item veto authority.
In addition to approving the permanent fund transfer, he conference committee voted to change the source of $30 million for community assistance. While the Legislature originally proposed spending the money from the Power Cost Equalization endowment fund, the committee voted to change the source to the general fund, which pays for the rest of the budget.
The vote may indicate that a major change is coming to how the state pays to equalize the cost of energy in parts of the state with high power bills.
Dunleavy proposed sweeping the roughly $1 billion in the PCE fund to another savings account: the Constitutional Budget Reserve. It would take three-fourths of the members of both chambers to block this sweep, according to Stedman.
The conference committee also voted to leave the permanent fund dividend amount to be determined in a separate bill. The committee finished its work for the year, leaving it up to the House and Senate to decide whether to adopt the compromises the committee agreed to in the operating budget.
The House and Senate are both scheduled to hold floor sessions at 2 p.m. on Sunday. Friday is the last day of the special session.
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