June 1 looms as some legislative work continues over holiday

Legislators remained in special session in Juneau through the Memorial Day weekend and some committees actually scheduled meetings to work on bills, although many lawmakers were heading home Friday for the long holiday weekend.

The special session convened May 23, with legislators called back by Gov. Bill Walker after they failed to pass key bills, including the budget, by the legal end of the regular 2016 session on May 18. The state fiscal year ends June 30, and layoff notices will be sent to state employees June 1.

A House-Senate conference committee on the operating budget and mental health program operating budget, which are done separately in House Bill 256 and 257, was to meet Friday afternoon and Sunday afternoon.

The conference committee’s work is almost done as there are few differences remaining in the operating budget that need resolution, although supporters of the University of Alaska are still hoping to get some money added back to the university’s budget, which was cut sharply.

Current fiscal year 2016 spending by the university is set at $350 million in state funds, and the Legislature proposes to cut it to $300 million. However, there is an additional $25 million in cost increases the university must absorb, such as scheduled pay raises agreed on in collective bargaining contracts, that raise the total impact of the reduction to $75 million.

Meanwhile, the big budget question — how the expected $4 billion-plus deficit will be funded — remains unanswered by legislators. A bill that would set a framework for some earnings of the Permanent Fund to be used is before legislators but it has received little attention in recent weeks.

What may be causing legislators to hesitate is that the bill would also result in a lower Permanent Fund Dividend to be paid out to citizens this year. If the status quo remains, PFD checks of about $2,000 are expected to be mailed out this fall, at a cost of $1.4 billion from the Fund Earnings Reserve.

Under the proposed bills that revamp management of the Fund’s earnings, the checks would be reduced to about $1,000, lowering the cost to about $700 million.

Committees did meet on several other bills this past week, however. Hearings by the Senate Labor and Commerce committee were held Wednesday and by House Finance committee on Friday on an “omnibus” tax bill that rolled together several bills that were considered in separate legislation during the regular session.

A proposed personal income tax and tax increases on motor fuel, mining, fishing and other existing state taxes are now in one bill. Hearings were also held Friday and scheduled for the weekend by the House Finance committee on HB 374, a health care insurance bill.

This bill would expand an existing state “re-insurance” mechanism to provide financial support for people with high-cost medical problems in the individual health insurance policies that are sold in the state. It is modeled on an existing program to support insurance for Alaskans with costly health problems operated by the Alaska Comprehensive Health Insurance Association, or ACHIA.

The most high-profile issue of the session, except for the Permanent Fund earnings question, is the proposed reform of the state’s oil and gas tax credit incentives, which has turned into a quagmire that has bogged down the Legislature.

Many versions of a reform bill have been proposed by different committees in the House and Senate, all with different effects on various groups within the industry, from large producers to small producers and companies just exploring but without production.

At this point there is a version of a bill that has passed the House and a different version that has passed the Senate, with a House-Senate conference committee appointed to reconcile differences between the two. On many points the bills are in general agreement, such as winding down the tax credit program over two to three years.

On other issues there are substantial differences, and disagreements, such as an allowance for net operating loss tax credits for major North Slope oil producers and certain terms affecting a minimum state production tax those producers pay.

Despite the late hour of the extended session the conference committee on the tax credit bill, HB 247, has yet to meet and there are no meetings scheduled over the long weekend or for next week so far.

The talk in the capitol hallways is that there really won’t be a meeting of the conference committee until a basic agreement on the bill is worked out. The basic problem is the difficulty in getting 21 votes in the House on a version that will be acceptable to the Senate.

Even if the House and Senate conferees agree on a compromise version it must still go back to both bodies to be approved, or disapproved. On a practical basis the conference committee won’t produce a product until the necessary votes are there on both sides, particularly in the House.

However, the clock is ticking and June 1 is a threshold date, in two ways. First, if there is no resolution to the budget the state administration is required to send out notices of termination to all state employees effective July 1.

That is the date by which the Legislature must have an approved budget for FY 2017 or the government has no legal authority to spend money. Last year, when disagreements also bogged down the session adjournment, June 1 came and notices went out, creating an upsetting experience for state workers receiving the letters.

Lawmakers hope to avoid that this year by having acted on a budget by June 1.

A second reason the date is important is that it is the filing deadline for candidates for legislative offices. After June 1 the incumbent legislators will see who has filed to run against them.

This is important because if an incumbent faces a strong challenge for reelection the sitting legislator may be reluctant to take a controversial position on a bill, such as the Permanent Fund earnings bill with its effect of reducing the PFD.

However, if the incumbent faces no opposition or a weak opponent, he or she may be more willing to make a controversial vote.

House members serve two-year terms so all 40 are up for reelection, but many are in relatively safe districts and are unlikely to face strong challenges.

The Senate is in an even more comfortable position because senators serve four-year terms, so only 10 senators, or half the 20-member body, is up for reelection this year. Even of those standing for election, many are in seats considered safe.

05/27/2016 - 10:58am