Legislators agree that using the earnings of the Alaska Permanent Fund would do more than anything else to balance Alaska\u2019s $4 billion annual deficit.<\/p>\n
The problem: They don\u2019t agree how to use those earnings.<\/p>\n
Sen. Anna MacKinnon, R-Anchorage and co-chairwoman of the Senate Finance Committee, is attempting to find some agreement in the final days of the 29th Alaska Legislature.<\/p>\n
From her seat on the Senate\u2019s Finance committee, MacKinnon and others are trying to build a compromise proposal that combines Senate Bill 114, proposed by Sen. Lesil McGuire, and Senate Bill 128, proposed by Gov. Bill Walker, as well as other ideas proposed by lawmakers in the House and Senate.<\/p>\n
\u201cIt\u2019s the most important thing left to do,\u201d said McGuire, R-Anchorage, of the need to find a Permanent Fund compromise. \u201cIf there\u2019s an hour left, that\u2019s what we\u2019d use it for.\u201d<\/p>\n
Compromise doesn\u2019t come easy. Spending from the Permanent Fund\u2019s earnings is controversial, and many Alaskans, including some lawmakers, are resolutely opposed to changing the dividend \u2014 even if failing to act means the state will run out of available savings and be forced to end the dividend by 2019.<\/p>\n
\u201cI think there are folks in the building representing that voice across Alaska,\u201d MacKinnon said. \u201cIf you take those folks off the table, my options get very limited.\u201d<\/p>\n
<\/p>\n
The compromise idea<\/strong><\/p>\n From hearings held this year\u2019s Legislative session and on figures provided by MacKinnon and McGuire, spectators can get an idea of what that ultimate compromise may look like, even if the details are still being negotiated.<\/p>\n \u201cWe had time over the last five days, but specifically over the weekend, to gather the Senate troops and coalesce around the principles within (Senate Bill) 114,\u201d McGuire said.<\/p>\n While Walker\u2019s plan calls for drawing a set amount, $3.3 billion per year, from the Permanent Fund\u2019s investment earnings, McGuire\u2019s approach draws a percentage of the fund\u2019s value. In this case, it would be 5 percent, or $2.6 billion at the fund\u2019s present value.<\/p>\n \u201cThe feeling is that the percentage of market value approach is a sound policy that will put Alaska on the pathway toward financial stability,\u201d McGuire said.<\/p>\n While the Permanent Fund as a whole is worth more than $52 billion, most of that \u2014 or about $45.6 billion, according to the Alaska Permanent Fund Corporation\u2019s February balance sheet \u2014 is unspendable without an amendment to the Alaska Constitution.<\/p>\n What the Legislature would use is the earnings reserve, a package of about $7.1 billion that contains the Permanent Fund\u2019s investment earnings.<\/p>\n Alaska\u2019s annual Permanent Fund Dividend is paid from the earnings reserve as well, and any spending from the reserve would affect the dividend.<\/p>\n The governor\u2019s proposal guaranteed a dividend of $1,000 this year, but the dividend would fall in future years to about $300 at present oil prices. As oil prices rise, so would the dividend.<\/p>\n McGuire\u2019s proposal set a floor of $1,000 for the dividend, but in preserving money for the dividend, it provides less money for state operations than the governor\u2019s proposal does.<\/p>\n With no change to the dividend, Alaskans would get a payout of about $2,000 this year.<\/p>\n Those big payouts wouldn\u2019t last. By 2019, the earnings reserve is expected to run out of money as lawmakers use it to pay for day-to-day operations.<\/p>\n A cap on the dividend or a floor on payouts is expected to be part of any compromise proposal.<\/p>\n <\/p>\n Clash on credits<\/strong><\/p>\n The notion of changing the dividend has caused no small outcry, and as the quest for a compromise takes place in the Senate, it\u2019s complicating things in the House, which is considering the state subsidy of oil and gas drillers.<\/p>\n \u201cIf we are decreasing the dividend in order to get revenue for the state, but then we\u2019re having to turn around and pay oil companies tax credits, that to me is a difficult comparison to make,\u201d said Rep. Sam Kito III, D-Juneau.<\/p>\n It\u2019s difficult for many lawmakers, MacKinnon said, including her.<\/p>\n \u201cI wouldn\u2019t personally touch someone\u2019s Permanent Fund Dividend without addressing the oil tax credit issue,\u201d she said.<\/p>\n According to a report issued by the Senate Oil and Gas Tax Credit Working Group in December, the state paid $7.4 billion in tax credits to oil and gas companies between 2006 and 2014. Those tax credits are designed to encourage companies to drill in Alaska, creating jobs and economic impact.<\/p>\n In the state\u2019s next fiscal year, Alaska is expected to pay $775 million in credits to oil and gas companies. The state is only required to pay about $70 million, but unpaid credits roll over to the following year.<\/p>\n Last year, for example, Gov. Walker vetoed payments on $200 million in tax credits. Those deferred payments make up part of the $775 million the state is expected to owe next year.<\/p>\n \u201cYou either pay now, or you pay later,\u201d Speaker of the House Mike Chenault, R-Nikiski, said last week.<\/p>\n That puts the state in an awkward situation. As it prepares to cut millions of dollars from education, police services and other functions, it is preparing to pay millions more in tax credits to multibillion-dollar oil and gas companies.<\/p>\n Furthermore, with oil prices so low, oil producers are losing money on the North Slope. Under the state\u2019s incentive program, oil producers can collect 35 percent of their losses in tax credits. They can use those credits, through a loophole in the state\u2019s tax law, to erase all of the oil production taxes they would normally pay.<\/p>\n Right now, companies are collecting more in credits than they have to pay in taxes, and because the credits don\u2019t expire in a given year, the companies can roll them forward.<\/p>\n \u201cThat\u2019s money we\u2019re not bringing in when prices go back up,\u201d said Rep. Cathy Mu\u00f1oz, R-Juneau and a member of the House Finance Committee.<\/p>\n <\/p>\n Seeing the larger machine<\/strong><\/p>\n House Bill 247, awaiting a vote on the House floor, cuts the credit system, but many House lawmakers think it doesn\u2019t go far enough.<\/p>\n Mu\u00f1oz is among them. She wants to see the operating-loss credit cut to 25 percent and Cook Inlet oil producers held to the same standards as North Slope ones. Right now, Cook Inlet producers pay no production taxes in order to encourage natural gas flow for Anchorage and Kenai Peninsula communities.<\/p>\n \u201cThat\u2019s pretty much the big discussion from our side now. What do we do about credits?\u201d said Kito.<\/p>\n He wants to see a tighter cap on the amount of credits a single company can collect in a given year.<\/p>\n Interior, Anchorage and North Slope lawmakers, meanwhile, are more concerned with keeping the oil industry \u2014 the region\u2019s main employer \u2014 stable. Neither side seems to have enough votes to win. The House has delayed voting on HB 247 since Saturday.<\/p>\n Until an agreement is reached on tax credits, one on the Permanent Fund will be much more difficult, MacKinnon said. Until lawmakers can tell their constituents that they aren\u2019t giving up a portion of their dividend for oil and gas subsidies, it\u2019s tough to gain agreement.<\/p>\n \u201cI believe that I lose more legislators both in the House and the Senate if there isn\u2019t a balance that happens with tax credits,\u201d she said.<\/p>\n Right now, MacKinnon is going from lawmaker to lawmaker, trying to build a coalition. \u201cThe issue right now is getting people around a particular idea,\u201d she said.<\/p>\n It will take 21 votes in the House and 11 in the Senate to pass a Permanent Fund spending bill.<\/p>\n \u201cI\u2019m not there. I don\u2019t have a majority of folks,\u201d she said.<\/p>\n","protected":false},"excerpt":{"rendered":" Legislators agree that using the earnings of the Alaska Permanent Fund would do more than anything else to balance Alaska\u2019s $4 billion annual deficit. The problem: They don\u2019t agree how to use those earnings. Sen. Anna MacKinnon, R-Anchorage and co-chairwoman of the Senate Finance Committee, is attempting to find some agreement in the final days […]<\/p>\n","protected":false},"author":426,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_stopmodifiedupdate":false,"_modified_date":"","wds_primary_category":4,"footnotes":""},"categories":[4],"tags":[34,230],"yst_prominent_words":[],"class_list":["post-3438","post","type-post","status-publish","format-standard","hentry","category-news","tag-alaska-legislature","tag-state-news"],"_links":{"self":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/3438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/users\/426"}],"replies":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/comments?post=3438"}],"version-history":[{"count":0,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/3438\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media?parent=3438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/categories?post=3438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/tags?post=3438"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/yst_prominent_words?post=3438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}