Press Release

Alaska Supreme Court Upholds Governorís Veto

August 25, 2017

(Anchorage, AK) – The Alaska Supreme Court issued a decision today upholding Governor Bill Walker’s action last year to reduce the permanent fund dividend appropriation in the budget bill.

“I want to thank the legal team here at the department for their hard work on this case,” said Attorney General Jahna Lindemuth. “I know this is not a decision Governor Walker took lightly, but I’m glad we have more clarity around use of permanent fund earnings as we continue to try and resolve the State’s fiscal crisis.”

Previously, the Alaska Superior Court had upheld the reduction of the permanent fund dividend, but on different grounds than the Alaska Supreme Court. The superior court determined that regardless of whether the earnings of the permanent fund were subject to the constitutional prohibition against dedicated funds, the constitutional appropriations clause required that the legislature appropriate the money, which meant the governor could also veto the appropriation.

Instead of looking at the appropriations clause, the Alaska Supreme Court focused solely on the anti-dedicated funds clause. It held: “…the 1976 amendment did not exempt the legislature’s use of Permanent Fund income from the Constitution’s anti-dedication clause…The legislature’s use of Permanent Fund income is subject to normal appropriation and veto budgetary processes.” This means that the action taken by Governor Walker last year and the action taken by the legislature this year to reduce the permanent fund dividend appropriation was constitutional.

Article 9, section 7 of the Alaska Constitution is known as the anti-dedicated funds clause. The clause reads: “The proceeds of any state tax or license shall not be dedicated to any special purpose…” with certain exceptions. The Court’s opinion today clarifies that none of the exceptions apply to the earnings of the Permanent Fund. Any money to be spent from the permanent fund earnings reserve account must go through the normal budgeting process whereby the legislature annually appropriates specific sums of money for certain purposes, and the governor can then strike or reduce those sums under the veto power in article 2, section 15 of the Constitution.

CONTACT: Assistant Attorney General Kathryn Vogel at 269-5100 or kathryn.vogel@alaska.gov.

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