Gov. Mike Dunleavy will call Alaska Legislature into special session twice this summer

May 14—JUNEAU — Alaska Gov. Mike Dunleavy will call the state Legislature into two special sessions this summer to address the state budget and the yearslong fiscal conflict over the Permanent Fund dividend.

The first special session, to begin May 20, will allow the legislators to finish the state's operating budget. The second session, to begin Aug. 2, intends to fix the imbalance between state revenue and spending on services and the Permanent Fund dividend.

"I want the entire thing solved this summer. Alaska wants it solved now. This summer," he said.

In the fiscal year that starts July 1, the state is projecting $4.7 billion in revenue. It would cost approximately $6.7 billion to pay for budgeted state services and a Permanent Fund dividend using the traditional formula in state law. With no dividend, the budget is almost precisely balanced.

This year's dividend has not yet been set.

The topics of the August special session include a constitutional amendment on the Permanent Fund dividend, a tighter state spending cap in the state constitution, potential new revenue from taxes or gambling, and the spending of federal economic aid.

The first special session also includes the dividend amendment, but multiple lawmakers said there is not enough support to approve it without other actions, such as those included in the second session.

Each special session will last no more than 30 days, a limit set by the state constitution, and will take place in the state Capitol at Juneau, according to the proclamations calling the special sessions.

The Legislature's regular session is scheduled to end May 19, and legislators are not on track to finish the state budget before then.

"We knew we needed more time to work on the budget, and I really appreciate the governor recognizing that," said Rep. Ivy Spohnholz, D-Anchorage.

Lawmakers have the power to extend the regular session for 10 days, adding time to finish the budget, but Senate Minority Leader Tom Begich, D-Anchorage, and House Minority Leader Cathy Tilton, R-Wasilla, said there were not enough votes for that maneuver or for the Legislature to call its own special session.

"It's not surprising that we were called for a special session to finish our work," Tilton said, explaining that the state House has moved slowly this year.

The House needed four weeks to elect a leader, and progress has been slow since then, partially because lawmakers were waiting for guidelines on how they can use more than $1 billion in federal economic aid.

"A three- to four-week delay in getting the budget to the floor didn't help," Tilton said.

Senate President Peter Micciche, R-Soldotna, declined immediate comment Thursday.

Speaker of the House Louise Stutes, R-Kodiak, issued a statement saying the House's coalition majority is ready to negotiate with the Senate on the budget and is maintaining "our longstanding commitment to finding a way to solve the state's structural deficit."

Dunleavy said the August session, limited to a handful of topics, will allow lawmakers to focus on the state's fiscal picture. Last year's legislative session was interrupted by the coronavirus pandemic, precluding discussion.

Dunleavy said the issue of the Permanent Fund dividend has been like a large boulder in the highway, blocking progress.

"The hope is that we're going to try and keep doing our best to move this large rock out of the road," he said.

The governor's preferred lever is a constitutional amendment, introduced Wednesday, that would reduce Permanent Fund dividends but guarantee them. It would also permanently cap the Legislature's ability to spend from the Alaska Permanent Fund, which now generates twice as much revenue as oil and is the state's main source of flexible income.

It's a significant compromise: Dunleavy ran for governor in 2018 with a pledge to preserve the traditional dividend formula and retroactively pay the difference between the formula and what was actually paid from 2016 to 2018.

"I would say I am willing to work with the Legislature to come up with an approach to the Permanent Fund ERA and the PFD ... that settles the issue once and for all," he said when asked whether he is abandoning that pledge.

As for the amendment, "It's certainly different from the statutory formula, there's no doubt about it."

If the amendment were adopted by the Legislature (and voters in the 2022 election), it would leave a substantial deficit, which has caused skepticism among some lawmakers.

The special session agenda for August allows for the possibility of spending cuts or new taxes that could erase that remaining deficit and create a comprehensive package.

"We need to address the fact that our revenue doesn't meet the need for funds for our constitutional obligations to provide for the education, health and safety of Alaskans," Spohnholz said.

Asked about new taxes, Dunleavy didn't rule them out.

"There are people that are going to want to talk about revenues. I think it's a legitimate conversation. We'll see where that goes," he said.

"I believe in the end it may be a combination of approaches that get us to where we need to go," he said.