PFD lawsuit explained

  • By STEPHANIE PROKOP
  • Wednesday, September 21, 2016 10:56pm
  • News

Anchorage Democrat Sen. Bill Wielechowski, along with former senators Rick Halford and Clem Tillion, are suing the State of Alaska and the Alaska Permanent Fund Corporation to comply with legal obligations, mainly, to pay what is owed to the Dividend Fund and subsequently, to Alaskans.

The civil lawsuit was filed before the Superior Court in Anchorage closed at noon Sept. 16.

“I think it’s pretty self-explanatory,” said Halford in an interview with the Alaska Journal, when asked why he and two others were suing and what the hoped for outcome may be. The state’s statutes, he said, makes it a case of the governor violating existing law. “It’s a constitutional dedication that starts with the language in the permanent fund itself,” he said.

Prompting the lawsuit is Gov. Bill Walker’s partial veto of this year’s appropriations bill, which authorized a transfer of $695 million by the APFC instead of an estimated $1.3 billion. What is under contention is Walker vetoing what “cannot be vetoed.”

Yes, the governor has line item veto power, Halford readily acknowledged. However, that applies to items that actually require appropriations. The Permanent Fund is an exception to the rule, he said, explaining that appropriations were never necessary because funds are supposed to be automatically transferred to the state based on a specific calculation.

Instead, the governor signed his initials after crossing out the line “authorized under AS 37.13.145(b)” and slashing the amount due in half. The $695 million was based on an estimated payment of $1,000 to every eligible PFD recipient this year. Walker had reduced APFC’s liability in an attempt to “ensure a PFD program continues for generations to come,” according to statements issued by the governor’s office.

“It’s not an easy choice for me,” Halford said of proceeding with the lawsuit. “But I feel an obligation to stand up for what we put in place a long time ago.” The former senator does have sympathy for and agrees with most of what Walker is trying to accomplish, he said, but this is not one of them. “He is taking bad advice.”

 

“I’m disappointed that an incumbent legislator who failed to work towards a solution to our fiscal crisis — a solution that would protect the long-term viability of the PFD — has decided instead to pursue this lawsuit eight weeks prior to his re-election bid,” said Gov. Walker in a statement issued Sept. 16, referring to Wielechowski. “This suit detracts from the real issue: solving Alaska’s fiscal crisis so we can then begin to grow Alaska.”

In early August, Sen. Wielechowski started the process by first sending a letter to Angela Rodell, Chief Executive Officer of the APFC, asking the corporation to transfer not what the amount the governor had used executive power to OK, but the funds as mandated by the state’s constitution.

The corporation is obligated, under Sec. 37.13.145, to transfer 50 percent of available income from the earnings reserve to the dividend fund at the end of each fiscal year. Income available for distribution, as stipulated in Sec. 37.13.140, is “21 percent of the net income of the fund for the last five fiscal years.”

According to a preliminary draft presented to APFC’s Board of Trustees during a Sept. 2 Audit Committee meeting, however, “the dividend transfer is subject to appropriation by the Legislature.”

Wielechowski did not hear back from the corporation in response to his letter, although the APFC did issue a general statement the day the lawsuit was filed:

“This year, when the time came to transfer a portion of the earnings generated by the Permanent Fund to the dividend fund, APFC transferred the amount authorized by the appropriation, just as APFC has done for the past three decades. We look forward to final resolution of this issue by the court.”

The Third Judicial District confirmed that a case number has been assigned, but could not yet confirm how the case would proceed. For example, will the court first determine standing? The Alaska Journal of Commerce was unable to reach an “off the grid” Wielechowski, who is serving as lead counsel as well as plaintiff, for additional clarification. Attorney Andrew Erickson, who is acting as co-counsel, deferred all media inquiries to the senator’s office.

Halford thinks the state may play legal stalling tactics, but will certainly not win on the issue of standing. “I don’t think there is any question about that because this is a public interest lawsuit, every Alaskan has standing as the owners of the resource and the ultimate authority of government,” he said.

 

Dividends are determined by the amount of income that is transferred from the Alaska Permanent Fund Corporation to the Dividend Fund, plus balances of prior fiscal year appropriations that lapse into the dividend fund, minus associated administration fees/costs. The APFC has confirmed that $695 million was transferred on Aug. 1.

The dividend is then calculated according to Sec. 43.23.025 which states the amount available for distribution will be divided by the number of eligible participants. The Division of Revenue could not yet say how many individuals are currently eligible, as that figure will be announced at the end of this week.

According to the lawsuit, each eligible recipient would have received $2,100 and is now going to receive about $1,000. The governor will make an official announcement regarding the PFD on Friday via the office website.

 

Stephanie Prokop can be reached at stephanie.prokop@alaskajournal.com.

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