Alaska Supreme Court upholds reduction of PFD

The Alaska Supreme Court issued a decision last week, upholding Governor Bill Walker’s action to reduce the 2016 permanent fund dividend appropriation in the budget bill.
The amount paid out was $1,022.
Governor Walker argued that the legislature’s inaction to balance last year’s budget forced the capping of the PFD dividend payout.
Anchorage Sen. Bill Wielechowski (D-Anchorage) and former legislators Rick Halford and Clem Tillion, took the state to court in order to overturn Walker’s veto of half the 2016 dividend, which would have been $2,000, if paid out in full.
“The thrust of their argument was that the 1976 constitutional amendment creating the Alaska Permanent Fund gave the legislature constitutional authority to pass laws dedicating use of Permanent Fund income without need for annual appropriations and, therefore, not subject to annual gubernatorial veto,” summarizes the Supreme Court plaintiff’s arguments. However, in a prior ruling, the Alaska Superior Court had upheld the reduction of the permanent fund dividend, but on different grounds than the Alaska Supreme Court. The superior court determined that the constitutional appropriations clause required that the legislature appropriate the money, which meant the governor could also veto the appropriation.
Instead of looking at the appropriations clause, the Alaska Supreme Court focused solely on the anti-dedicated funds clause. It held that “the 1976 amendment did not exempt the legislature’s use of Permanent Fund income from the Constitution’s anti-dedication clause.
The legislature’s use of Permanent Fund income is subject to normal appropriation and veto budgetary processes.”
This means that the action taken by Governor Walker last year and the action taken by the legislature this year to reduce the permanent fund dividend appropriation was constitutional.
Article 9, section 7 of the Alaska Constitution is known as the anti-dedicated funds clause. The clause reads: “The proceeds of any state tax or license shall not be dedicated to any special purpose…” with certain exceptions. The Court’s opinion clarifies that none of the exceptions apply to the earnings of the Permanent Fund. Any money to be spent from the permanent fund earnings reserve account must go through the normal budgeting process whereby the legislature annually appropriates specific sums of money for certain purposes, and the governor can then strike or reduce those sums under the veto power.
The judges found that “because the plain language of article IX, sections 7 and 15 does not permit the dedication of Permanent Fund income, and because Governor Walker properly exercised his veto authority when reducing the legislatively authorized transfer from the earnings reserve to the dividend fund, we affirm the superior court’s decision in favor of the State of Alaska and the Alaska Permanent Fund Corporation.” According to the Juneau Empire, Sen. Wielechowski had tried for the past few years to introduce a constitutional amendment in the Legislature to “enshrine dividend payments in the Alaska Constitution. This year, it came in form of  Senate Joint Resolution 1, which passed the Senate State Affairs Committee but it is stuck in the Senate Judiciary committee. The committee is chaired by Sen. John Coghill (R-North Pole), who opposes the idea to add an amendment that would put a constitutional right to a dividend in Alaska’s constitution.
The Supreme Court ruling’s ramification is that legislators can adjust the annual amount of the dividend and, instead of paying them to eligible Alaskans, use portions of the Permanent Fund’s earnings to pay for government expenses.

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