The Alaska Supreme Court has ruled that Govorner Bill Walker did have the right to reduce the amount of last year's permanent fund dividend checks.
The case was brought by Democratic state Senator Bill Wielechowski and two former legislators.
They argued that the Alaska Permanent Fund Corporation was required by law to make nearly $1 point 4 billion dollars from the fund's earnings reserve available for dividends last year, despite Walker's veto.
The governor had cut the amount allocated for dividend checks after lawmakers failed to agree on a plan to address a multibillion-dollar state budget deficit.
The ruling said the legislature's use of permanent fund income is subject to normal appropriation and veto processes.
Wielechowski, in a statement, said he was "bitterly disappointed" in the court's decision, which he said highlighted a need to protect the dividend in the state constitution.
State Attorney General Jahna Lindemuth said she was glad that there is more clarity around use of permanent fund earnings.
Dividends reached as high as $2,072 dollars in 2015.
After Walker's veto last year, Alaskans received checks of $1,022 dollars.
This year, legislators set the dividend amount at $1,100 dollars.