The portion of the Alaska Permanent Fund protected by the state constitution has grown by $4 billion. That’s the result of a transfer from the fund’s earnings reserve.
Gov. Mike Dunleavy said he was going to veto the transfer. But his office failed to cross out the lines in the actual budget bill delivered back to the Legislature.
The $4 billion transfer is roughly as much as the state spends of its own money to operate all of state government.
Dunleavy signed the budget bill last Wednesday. But before he did that, he made his line item vetoes — things he intended to cross out from the budget.
On Thursday, he said he had stopped the $4 billion transfer from happening with a veto. In explaining why he wanted to veto the money, Dunleavy said he wanted to work with the Legislature on a comprehensive approach to the permanent fund, including the money in the earnings reserve.
But on page 138 of the budget bill, the line about the $4 billion transfer was not crossed out. So the transfer was not vetoed.
Legislators became aware of the issue late last week. Dunleavy tried to correct the error. He told Senate President Peter Micciche and House Speaker Louise Stutes that he intended to veto the transfer. But legislative staff weren’t prepared to make the change he was asking for.
On Tuesday, the governor’s office said he will allow the transfer to go through, despite his intention to veto it.
It means that the amount of permanent fund money that’s protected under the state constitution — known as the “corpus” — has risen from just under $48 billion to nearly $52 billion. But that still leaves nearly $30 billion that either is in the earnings reserve or is locked up in gains in investments like real estate that haven’t been realized yet.
On Aug. 2, the Legislature is scheduled to convene for the third special session this year. The governor has proposed a constitutional amendment that would protect the remaining amount in the earnings reserve. It also would put the permanent fund dividend in the constitution.
The size of PFDs that Dunleavy is proposing would be based on half of the amount drawn from the fund annually. Currently, that would lead to a dividend of roughly $2,350.
But nonpartisan budget analysts estimate it would create annual deficits averaging $1 billion this decade, without other changes to policy.
Members of both legislative majorities praised the transfer.
Sitka Republican Sen. Bert Stedman helped develop the proposal as co-chair of the Senate Finance Committee. He’d like to look at protecting more of the permanent fund.
“My concern is that the Legislature will walk through the earnings reserve like a knife through hot butter,” he said. “And we need to protect it for current and future generations.”
And Anchorage Democratic Rep. Ivy Spohnholz said it was critical to protect the $4 billion that was transferred, considering the state government’s history of spending from savings.
“I think in the end, it came out the way it needed to come out, which is ensuring that another $4 billion is protected in the corpus of the permanent fund,” she said.
Dunleavy spokesperson Corey Allen Young said the transfer won’t adversely affect his permanent fund proposal, which he said would “guarantee Alaskans receive their share of the state’s resource wealth each year and end the annual debate over the amount of the PFD.”