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Sen. Hoffman Wants To Add PFD Formula To Constitution, Remove ‘Political Football’ From Campaigns

Sen. Lyman Hoffman during a Senate Finance Committee meeting on March 29, 2016. Credit Skip Gray / 360 North
Skip Gray
360 North

The Alaska Legislature reconvenes on Monday, July 8 for a special session to decide the amount of this year’s Permanent Fund Dividend. Legislators will also have the opportunity to override or amend Gov. Mike Dunleavy’s vetoes, totaling about $444 million, that slash or eliminate funding for services across the state. Democratic Sen. Lyman Hoffman of Bethel serves as the Legislature’s most senior member and sits on the Senate Finance Committee. KYUK talked with Sen. Hoffman about his expectations for the special session ahead.


KYUK: Senator Hoffman, with the special session approaching on Monday, what are you going into this session wanting to do personally?

Sen. Hoffman: Personally, I think that we need to address the capital budget and figure out what the long-term solution for the permanent fund dividend should be. The amount that the $3,000 that the governor wants, I think we tried that already in the Senate, and it died 10-10. And I voted for it, but I don't see much movement on that issue in the Senate. I understand the House is going to take that bill and try to modify it downward. I would assume that that would be about $1,600. And if they can get the votes for, it would come over to the to the Senate. And we'll see what happens. But I think that the governor has drawn a line in the sand, and if it is anything less than $3,000, he would veto it and we're back to square one. 

KYUK: Some people, including organizations like the Yukon-Kuskokwim Health Corporation, are advocating for a complete override of the governor's vetoes. What's the likelihood of that do you think?

Sen. Hoffman: I would say that even if we were in session with all 60 of us, it would be a big hill to climb. But now that we have a divided legislature on where to meet. Many people want to meet in Juneau. Others want to meet in Wasilla, which the governor proposed, and some others want to even meet in Anchorage. So I think that come Monday morning, we will not see 40 people in one location, and we have until Friday to take a vote. Whether or not we convene in one location with 45 people by then, I would say the odds are very slim. And even if we can get those votes, those 45 people, I doubt seriously that the Valley people are going to pull away from the governor's position, and we will not get the 45 votes to override. 

KYUK: On Monday, in which city will you be showing up in? 

Sen. Hoffman: On Monday I plan on being in Juneau. 

KYUK: Which items in the budget would you most want to change? Which programs would you most want to give more funding to? 

Sen. Hoffman: Well obviously, the senior care benefits are important. Public broadcasting has always been a high priority of mine. The education question, I think the governor is grasping at straws. I think we passed that budget already. So I think that there's potentially going to be a lawsuit there. But the biggest concern that I have is power cost equalization. We've worked on that for many, many years. There's a billion dollars in the endowment for power cost equalization, and because it was listed as an item in the capital budget, that budget has been sent to the governor. And we did not get the necessary votes to override a sweep. So there's the potential that the governor can sweep the billion dollars into the general fund. And that gives me great concern. In the past, Gov. Walker has said that that is not an item that he had on his list that could be swept, but this governor, I've asked him several times on whether or not he will follow Gov. Walker's position and not sweep it. But from the last year dealing with Donna Arduin, who is the OMB [Office of Management and Budget] Director, she says that it is on the list to be swept. 

KYUK: Did you speak with the governor directly about this matter?

Sen. Hoffman: I spoke to him over the course of the year on this matter and told him that it should not be an item that swept. I've had conversations with Ben Stevens, who is in the governor's office, and expressed to him that it should not be swept. Also of concern in the capital budget is expenditures from the earnings of the power cost equalization fund to fund the crime bill, some $300 million and other funds that I don't think is an appropriate source of funds. He says, on one hand, when we're dealing with the $3,000 dividend that is the law of the land, and I agree with that, and that's why I voted for it. On the other hand, when we're talking about power cost equalization, we passed a bill on what to do with the earnings and excess earnings of the power cost equalization fund, and none of them include funding the crime package. So I have expressed to him that he needs to veto those items and be consistent on what the law says on what to use those funds for. Hopefully he will do that. If he does not do that, that gives me great concern and we will see where I go from that point if he decides to fund any programs that are not consistent with the letter of the law on what power cost equalization earnings should be spent on. 

KYUK: Have you talked personally with the governor about other budget items? 

Sen. Hoffman: I have not talked with him, but I plan on seeing if I could have a conversation with him on Monday or Tuesday. 

KYUK: Alaskans across the state are asking to be taxed, which is something I think [is] unusual for any state in the country to see residents asking for that. Would you support adding additional taxes?

Sen. Hoffman: Yes, I would. We need to look at how we fund state government. At a $1,600 dividend, I think we would be in the deficit mode, right around half a billion dollars. The first place that I would look at taxing would be though the oil companies and revisiting our tax structure. I think that there's broad support from Democrats and Republicans, at least in the Senate. The governor does not support that concept, and I find that hard to fathom that he would leave that one industry harmless while he is hurting women, children, the elderly, the poor, education, public education, the university, a slew of other programs. So it's unfathomable to me that he would not look at treating all people in this state on an equal basis, and I think it's time to look at our oil structure and revisit the tax structure for oil companies first. And if that is not enough, then we should look at taxing Alaskans in general. 

KYUK: Would you support a state income tax?

Sen. Hoffman: I would support a state income tax before I would support the sales tax. 

KYUK: The reports that we've been able to gather from the capital is that there's been a really stark partisanship occurring. What has it been like to be down there this session?

Sen. Hoffman: Well I don't know about a stark partisanship in the Senate. I think Senate President Cathy Geisel has been very fair with the Democrats. I'm a Democrat. I'm in the majority. And in discussing the operating budget in the way that the senators have been treated, they feel that they are being treated very fairly in the Senate for the first time. Sen. Steadman, who is the chairman of the operating budget, has given subcommittee chairs to the minority. That, I think, is the first time in state history, so I don't see the partisanship issue in the Senate. But I do see it as a major issue in the House. 

KYUK: Because you're a Democrat, but also in the Republican majority in the Senate, does that create any certain obligations when it comes to voting on budget matters?

Sen. Hoffman: If I'm in the majority, one of the requirements in the past has been to vote for the budget. But under this organization, with Sen. Geisel and the team, the choice is there to not vote for the budget. You would not be kicked out of the caucus if you do so. You would lose any chairmanships you have and could face further penalties, but none of them include being kicked out of the majority. So I have voted for the budget, the operating budget. And I think the organization that we have may be tenuous, because we have people around the dividend issue that were split down the middle. So that has been the most contentious issue. The operating budget has not been one of those. 

KYUK: What do you see as the most likely scenario to arise out of this upcoming session?

Sen. Hoffman: The way that the agenda is set with the dividend, I would say the most likely possibility would be reduced dividend, other than the $3,000, and the result of that would be vetoed by the governor, and we would be back to square one. 

KYUK: What does that mean? If you're back to square one, would it just stand or would it be bouncing back and forth?

Sen. Hoffman: Well, we would have a situation where we have not set an amount for a dividend, and the Legislature would feel obligated to do something. We will not end this year without a dividend. It's just a matter of working out what the dividend will be. I personally feel that we need to resolve the dividend amount. Rewrite the law like the governor said. He said the law of the land, the formula calls for a $3,000 dividend. He has not put that on the plate for the call, which I find strange, because many people feel that we cannot afford continuing to have a $3,000 dividend. In order to fund a $3,000 dividend, right now we would have to come up with an additional $1.2 billion, which is substantial. And then if we do not rewrite the formula, next year when he is still the governor, without changing the law, we'd have to fund another $3,000 dividend. And the governor agrees that it is unsustainable at that level, but he has not placed that on the call, so I think that the first thing we need to do as a Legislature is look at the rewrite of the formula. The second issue I think needs to be the capital budget. We're losing hundreds of millions of federal dollars to build infrastructure in the state. And the third thing, which I know needs to happen, is agree upon a level of funding for the dividend. 

Aside from that, the governor still has one of his main issues is constitutionalizing the Permanent Fund. Whether that is with a formula or just putting the Permanent Fund into the Constitution remains an unanswered question. I strongly believe, as the governor does, that do we need to constitutionalize the dividend, but that is a very, very high hurdle. We would need 14 senators and 27 members of the House, and I think that there are probably a strong 13 to vote for a constitutional dividend. But then that could be further divided if we decide that each individual members should say that it should be just stated in the Constitution or put into the Constitution as a formula. Many people don't want to put into a formula because things change. So that is another issue that I think is out there that the governor wants to get accomplished, but I don't see that happening by both bodies this year. 

KYUK: What would you hope would be accomplished by putting it in the Constitution? 

Sen. Hoffman: The problem that we have today is that it is a bidder's war on everybody's campaign platform. The governor got elected on it. Many people didn't know who Gov. Dunleavy was, but because he presented an issue that said we need to go back to the formula, and if you elect me, I will get you a $3,000 dividend. And I think that was the key point that was made by this governor, and the electorate voted for him for that purpose. So until we resolve the long-term solution of what the dividend will be, it will be a campaign issue for decades to come. So I think that somehow we need to address that issue. I think the governor understands that $3,000 dividend, even though he's supporting it this year, is not a sustainable item. I think everybody agrees with that. But we need to face that issue and make sure that the people of Alaska know that they will get a dividend.

Statutorily, I don't think it's protected. We saw Gov. Walker reduce the amount down to $1,100 in past years. We did not even address it in a veto. So it is a large political football that needs to be addressed by the Legislature. Otherwise every campaign is going to be, "I'm running for the Senate." And somebody wants to run against me and I say that,  "It should be $1,500." They could say, "Well if you vote for me, I'm going to vote for $2,000." And the next candidate will say, "Well I'll support $3,000." So it's a question that needs to be taken off the political ballot, because government and politics should not be about the dividend. It should be about what the services of the people of Alaska need and what we can provide. 

KYUK: What feedback have you received from your constituents about what they want to see happen in this upcoming session?

Sen. Hoffman: Well, I think that the constituents want to see the dividend resolved, and I think that they are also concerned about inadequate funding for education, for the university, for seniors, for the poor. All of these need to be addressed satisfactorily in a long term solution.

KYUK: Any other particular budget items you want to speak to? 

Sen. Hoffman: I think our plate is pretty full, and I hope that we can get to them. The problem is that none of them except for the dividend is before us today, and that gives me great concern. 

KYUK: Anything else, Senator?

Sen. Hoffman: No, I enjoyed coming back to Bethel, enjoyed the Fourth of July. The festivities were great. People from all over the Delta were there, and fortunately we started out a little cloudy and ended up with a nice warm Fourth of July and everybody had a great time.

KYUK: Thank you, Senator. 

Sen. Hoffman: Thanks.

Anna Rose MacArthur served as KYUK's News Director from 2015-2022.