THE LINK: JULY 2023 12 Modest PFD won’t require large draw on state savings It was a slog — taking 121 days and extra time in a one-day special session — but the Legislature’s FY 2024 $6.2 billion budget is balanced, a $2.4 billion Constitutional Budget Reserve was not drawn on, and there was no talk of an overdraw on Permanent Fund earnings to pay a big Permanent Fund Dividend, or PFD, proposed at $2,700. In the end, the conservative-led state House Republican Majority agreed to the plan for a more modest dividend put forth by the state Senate, which is led by a coalition of Democrats and moderate Republicans. The large PFD would have created a deficit of $600 million to $800 million that would have required a draw on savings. As they return home legislators are likely to encounter little argument from constituents over the smaller dividend, as has happened in the past. Unless there is a huge spike in oil revenues (unlikely, experts say) this could set the stage for a realistic formula to guide calculation of the PFD, replacing a current one that is obsolete, and perhaps end the annual wrangle over its amount. This debate preoccupies legislators at the end of every legislative session and is a distraction from other issues. The FY 2024 budget enacted in Juneau includes a provision that if oil prices and revenues rise there might be an extra $500 dividend. Meanwhile, there is talk of a special session in October to discuss a state fiscal plan that would include a new PFD formula. New revenues could be part of this — higher oil taxes or a state sales tax might be part of a package. However, this is going into the 2024 election year, which will dampen talk of new taxes. Also, talk of special sessions in the fall are common but unless there is an emergency they rarely happen. The FY 2024 budget is tight given the constraints of revenue but contains these items, including others: n $28.35 million was appropriated to pay down past oil exploration tax credit liability. $55.7 million had been proposed earlier in the budget cycle to completely pay off this liability but it was later reduced to help achieve a final budget compromise. The last of these obligations should be paid off next year, bringing to an end painful, as it turnout, experiment with oil and gas exploration tax incentives. The program was well-intentioned but when it was developed more than a decade ago, but it became too complex and too easy for ambitious small explorers to “game” in stacking one incentive atop another to the point that the state was paying, in cash, up to 70 percent of more of exploration well costs. The program did result in the discovery of some oil (how much is uncertain) and it did help firm up new natural gas resources in Cook Inlet, which are important for the state’s major communities. Gov. Bill Walker and the Legislature had to end the program after state oil revenues took a sharp downturn in 2016. An unpaid liability of almost a billion dollars of credit payments had built up, forcing some small independents out of business. The tax credits are now mostly owed to their banks. n $9 million was appropriated for renewable energy grants mostly for projects in rural communities. The Legislature also approved, and the governor has signed, a bill making this grant program, through the Renewable Energy Fund, permanent rather than requiring periodic reauthorization. The Legislature must still make appropriations to the fund for grants, and the governor must approve those. n $7.5 million was allocated for childcare assistance grants, although bills making systematic improvements in assistance wait until next year. Improved childcare has turned out to be very important for most business and industry groups because the difficulty of getting both adults in a household back to work after the pandemic is seen as a major source of workforce recruitment problems. Top Alaska labor organizations, for example, designated childcare as their top 2023 legislative priority. — Tim Bradner Legislature ends session with balanced budget GIESSEL STEVENS
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