Mat-Su Valley seventh-grader Shania Sommer revealed the 2015 dividend/State of Alaska photo
Joined by two old, Republican war horses, Democrat Sen. Bill Wielechowski of Anchorage today filed to suit to stop Alaska Gov. Bill Walker from seizing more than half of the money earmarked for Permanent Fund Dividends for 49th state residents this year.
The suit contends Alaskans are entitled to a dividend of about $2,100, not the $1,000 Walker wants to allow them.
The suit says the governor lacked the legal authority to veto about half of the $1.4 billion the Alaska Permanent Fund Corp. transferred to the Dividend Fund at the end of fiscal year 2016. That was the money set aside for what are widely and popularly known as simly Pee-Eff-Dees in Alaska. The PFDs are a share of the earnings of the Permanent Fund divided among all Alaska residents. The Permanent Fund is where the state parked more than $50 billion from tax revenue collected from oil companies since crude started flowing from the North Slope to the port of Valdez via the Trans-Alaska Pipeline System in the 1970s and earnings on that revenue over the years.
With the state facing a budget deficit of about $3.5 billion, Walker unilaterally capped the PFD at $1,000 and steered $696 million of permanent fund earnings into the general fund. He tried to win legislative approval for the action, but couldn’t sell enough lawmakers on his plan.
Many wanted more budget cuts before agreeing to use permanent fund earnings. Twice Walker dragged legislators back to the state capital in the isolated Panhandle city of Juneau for special sessions of the Legislature,but he never could convince enough to follow his lead.
Finally he decided he didn’t need them, got the Department of Law to offer an opinion he had the authority to veto funds earmarked for the dividend fund, and announced he alone was going to make the decision on how big a PFD Alaskans get this year.
Can he do that?
The suit contends Walker’s action was illegal.
It cites an Alaska Supreme Court decision in 1994 that held that the Permanent Fund Corp. operates under a “statutory directive” to place half the annual corporate earnings in the PFD fund. Thus the money is not, and need not be appropriated by the Legislature.
If the Legislature, which technically controls state purse strings, doesn’t appropriate the money, the suit contends, the governor can’t very well veto it.
The Alaska Department of Law, however, took issue with the Supreme Court in 2009.
The lawsuit concedes that “Senior Assistant Attorney General Michael Barnhill…opined that the court was wrong: ‘While the Alaska Supreme Court has apparently assumed that the permanent fund transfer is made automatically without an appropriation, this is incorrect.'”
Whether Barnhill or the Supreme Court had the it right will be the first question for a court to now decide. The second focuses on where the money goes if the governor does have the authority to veto the transfer.
The suit argues that even if the governor can veto the funding for the PFD, he lacks the authority to use the PFD money to pay the costs of government.
“The funds not transferred from the Earnings Reserve Fund to the Dividend Fund remain under the control of the APFC (Alaska Permanent Fund Corporation) and are not available to be spent by the State of Alaska for any purpose unless specifically authorized by a new appropriation from the Legislature,” the suit says.
Various lawyers had raised this issue as a potential problem after Walker’s veto of PFD money. Most seem to be of the opinion the case needs to be litigated if for no other reason than to make it clear where exactly authority lies.
The suit itself was not a surprise. Wielechowski had been threatening legal action since Walker’s veto this summer. But the plaintiffs joining the suit were a bit unexpected. One of them, former two-term Senate president and long-time Republican Rick Halford from Chugiak has been a staunch supporter of the governor. Halford was the co-chair of Walker’s gubernatorial transition team.
A loser in the 2010 GOP primary, Walker won election in 2014 by forming a “unity ticket” with former Sealaska Corp. president Byron Mallot, the prospective Democrat candidate for governor that year.
Mallot won the Dem primary, but looked to be a sure loser in a three-way race with incumbent Republican Gov. Sean Parnell and Independent Walker. All that changed when Alaska Dispatch News publisher Alice Rogoff and others helped broker a deal to bring Rogoff friends Walker and Mallott together as a unity ticket with Mallot as the lieutenant.
After Walker and Mallott bested Parnell in the general election with the help of Halford and some other Republicans, Halford was tapped to join Democrat Ana Hoffman of Bethel at the head of the new administration’s transition team. Walker later appointed Halford to the Alaska Gasline Development Corporation where he still serves.
That he would now publicly challenge the governor’s boldest political move is a bit unexpected, but then Halford has always been a bit of a maverick.
Somewhat less of a surprise as a plaintiff was Alaska senior statesman Clem Tillion of Halibut Cove. Another past Senate president, the now 91-year-old Tillion was one of the early backers of creation of the fund.
He has long shared the view of former friend, political colleague and Gov. Jay Hammond that all Alaskans should share the benefits of Alaska’s resource wealth via the dividend. Hammond, who died in 2005, is considered the godfather of the dividend program.
Still, Tillion’s involvement in the lawsuit is a bit unexpected given his association with Rogoff, a big supporter of the using Permanent Fund earnings to help pay the costs of state government. Rogoff has cultivated Tillion’s friendship since her arrival in the state from the East Coast about a decade ago.
She made a big splash at his 91st birthday party in Halibut Cove in July.
A month earlier she opined that Alaskans would be making a huge mistake if they didn’t go along with Walker’s plan for the PFD.
The $60 billion in the permanent fund and state reserve accounts “will shrink to $56 billion by the end of this year, if the dividend and deficit is funded without changes,” she wrote in her newspaper. “The annual earnings lost to the state of the status quo, higher-dividend distribution will be over $200 million. And over time, that loss compounds. That $200 million less every year means that over say, the next 10 years, the cost of the delay becomes more than $2 billion. It is like retiring a few months early and missing out on a higher benefits level, which could equal as much as foregone car payment every month.”
Her commentary failed to note her husband is David Rubenstein, one of the richest men in the country and a founder of the Carlyle Group, a private equity firm. Carlyle manages some of the permanent fund’s money. The more money Carlyle manages, the more it makes in management fees.
It seems that this analogy might explain the PFD situation Walker got himself into: Bill Walker’s cabin was going cold, and Bill was out of wood. So Bill grabbed an axe and went to a big tree on his property line. His neighbor saw him and told him not to cut the tree down. Not heeding this advice, Bill chopped away at it anyway. But then something happened that Bill didn’t take into account. The tree fell on his neighbor’s property. His neighbor then said: “Bummer Bill, now the tree is on my property … so you ain’t gittin’ none of it.”