POMV deal is done – stage being set for ending session

POMV deal is done – stage being set for ending session

At the end, it happened fast. The conference committee on SB 26 convened at 9 a.m. May 8, voted and sent the bill out eight minutes later. A few hours later both the House and Senate ratified the conference committee report, sending SB 26 on to the governor. After a year of agony and sniping over the proposal to use some of the Permanent Fund earnings for the budget the quick resolution seemed anticlimactic. But that’s the way these things happen.

At the end, it happened fast. The conference committee on SB 26 convened at 9 a.m. May 8, voted and sent the bill out eight minutes later. A few hours later both the House and Senate ratified the conference committee report, sending SB 26 on to the governor. After a year of agony and sniping over the proposal to use some of the Permanent Fund earnings for the budget the quick resolution seemed anticlimactic. But that’s the way these things happen.

Here’s what the final version has: It sets a 5.25 percent-of-market-value for FY 2019 but requires the actual draw to be an average of the five previous years’ market value for the Permanent Fund. Given that the Fund has been growing, the actual withdrawal rate is less than 5.25 (Sen. Anna MacKinnon, a member of the committee, said it would be 4.3 percent for FY 2019). SB 26 also has the 5.25 percent drop to 5 percent in 2021, which would mean less money. But if the Fund keeps growing in total value the financial effect would be eased.

The bottom line: Here’s what SB 26 does
Here’s what SB 26 does for FY 2019: The draw is estimated at $2.8 billion, and with about $1 billion needed to pay for the $1,600 Permanent Fund dividend, the money available for the state general fund is about $1.8 billion. Add that to approximately $2.2 billion from ordinary state revenues, for a total of about $4 billion available. However, the FY 2019 operating and capital budget will likely wind up at $4.6 billion (undesignated general funds) so there’s still about a $500 million gap. There are funds in the Constitutional Budget Reserve that can cover that but there will have to be a 3/4 vote of both the House and Senate. We wonder what price the 18-member House Republican Minority will extract, because its votes are needed to get to three-quarters of the 40-member House. There’s no problem in the 20-member Senate, where the Republican Majority commands enough votes.
Policy issues: There’s sure to be more debate (it’s political season) on SB 26, but two areas are particularly important: (1) the apparent “severing” of the PFD from financial performance of the Permanent Fund and (2) the new competition between the budget and the PFD.

Here’s what the final version has: It sets a 5.25 percent-of-market-value for FY 2019 but requires the actual draw to be an average of the five previous years’ market value for the Permanent Fund. Given that the Fund has been growing, the actual withdrawal rate is less than 5.25 (Sen. Anna MacKinnon, a member of the committee, said it would be 4.3 percent for FY 2019). SB 26 also has the 5.25 percent drop to 5 percent in 2021, which would mean less money. But if the Fund keeps growing in total value the financial effect would be eased.

The bottom line: Here’s what SB 26 does
Here’s what SB 26 does for FY 2019: The draw is estimated at $2.8 billion, and with about $1 billion needed to pay for the $1,600 Permanent Fund dividend, the money available for the state general fund is about $1.8 billion. Add that to approximately $2.2 billion from ordinary state revenues, for a total of about $4 billion available. However, the FY 2019 operating and capital budget will likely wind up at $4.6 billion (undesignated general funds) so there’s still about a $500 million gap. There are funds in the Constitutional Budget Reserve that can cover that but there will have to be a 3/4 vote of both the House and Senate. We wonder what price the 18-member House Republican Minority will extract, because its votes are needed to get to three-quarters of the 40-member House. There’s no problem in the 20-member Senate, where the Republican Majority commands enough votes.
Policy issues: There’s sure to be more debate (it’s political season) on SB 26, but two areas are particularly important: (1) the apparent “severing” of the PFD from financial performance of the Permanent Fund and (2) the new competition between the budget and the PFD.

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