Governor Walker’s administration unveiled the first part of their plan to bridge the budget gap on Wednesday. The plan would convert the Permanent Fund into an endowment-like fund that would take in oil income and generate annual revenue for the state. The changes would protect the state from the highs and lows of oil prices. The part of the change that is likely to cause the most debate is that the Permanent Fund Dividend would be reduced to approximately $1,000. The average over the past 10 years has been $1,400. Eligible Alaskans would still receive a check, but it would not be at the same levels seen in the past few years.
Attorney General Craig Richards introduced the plan at a morning briefing and explained that it would be only part of the plan and would require approval from the Legislature. The plan would help stabilize money coming into the general budget. The rest of the plan is yet to be announced, but will likely include other options for increased revenue and cuts to the budget.
The endowment model is not a new concept for the Permanent Fund and there are legislators who have suggested similar plans as a way to help bridge the funding gap for the state. One thing that legislators seem to agree on is that it will take time to go through the Governor’s plan and understand the details. The Alaska Dispatch News notes that legislators believe the plan has merit but any change to the Permanent Fund Dividend will be a hard sell to constituents. The coming weeks/months will require education for both lawmakers and the public so that there is understanding of what the plan means for the state and Alaskans.
Related to the budget woes, Anchorage’s bond rating with Standard & Poor’s (S&P) is holding at the top-level AAA but the outlook was dropped to “negative” from its last outlook of “stable”. Three months ago, S&P downgraded the state of Alaska to a “negative” outlook. The revision in the outlook means that there is a chance that Anchorage’s bond rating will be revised in the next two years. If that happens, it will change the interest rate that Anchorage pays for bonds. Anchorage is still in good shape, but things could change if the state pulls support for local pension liabilities and school bond debt payments. This is another issue that we will continue to monitor in the coming months.
