Big bills finally on the move as Legislature hits crunch time

  • Rep. Mike Chenault, R-Nikiski, speaks with freshman Rep. Dean Westlake, D-Kotzebue, during a break in the opening session of the Alaska Legislature on Jan. 17 in Juneau. The session is hitting the April 16 deadline for a 90-day session with major issues outstanding including the size of the budget and how to fund it through Permanent Fund earnings and other new revenue such as an income tax and higher taxes on the oil industry. (Photo/Mark Thiessen/AP)

Now we’re getting somewhere.

The House and Senate majorities still have large philosophical gaps to bridge, but the procedural pieces are being put in place to make that happen.

With less than a week to go in the voter-prescribed 90-day session on April 16, the House brought to the floor its version of Senate Bill 26, Gov. Bill Walker’s legislation to spin off Permanent Fund income to fund government, on April 12. An amended version of the Senate bill was passed out of the House Finance Committee April 11. The House passed the bill 22-18 along caucus lines.

For most of the session, the Democrat-led House Majority coalition was pushing House Bill 115, Finance Co-chair Rep. Paul Seaton’s proposal to draw earnings from the Permanent Fund and make dividends a direct income tax credit for individuals with a tax liability.

With HB 115 and SB 26 being the foundational fiscal plan elements for the House and Senate, respectively, the bodies had been on parallel paths without a foreseeable means of resolution.

The move by the House Majority to split their income tax in HB 115 from a Permanent Fund plan and forward an amended SB 26 at least gets the two trains moving toward each other on the same track.

While the resulting conference committee collision — if SB 26 passes the House — will undoubtedly be a messy one, it will provide a way to reconstruct a Permanent Fund plan from the political wreckage.

The basis of the House version of SB 26 is similar to the Senate’s in that it starts with a 5.25 percent of market value, or POMV, draw annually on the Fund that is decreased to a 5 percent draw after several years.

The divergence comes in the details, where the House would guarantee $1,250 PFDs for two years instead of the Senate’s $1,000 dividend pledge for three.

Additionally, the House plan starts to reduce the Fund draw when spendable state oil revenues exceed $1.4 billion, as opposed to the Senate’s $1.2 billion trigger, which amounts to a simple difference in how much cash each body wants the state to have at its disposal long-term.

The House, among other changes, also cut out the Senate Republicans’ $4.1 billion unrestricted general fund spending cap.

Senate leaders have acknowledged the statutory appropriations limit is basically unenforceable; it is a philosophical statement and a stepping-stone to drastically tighten the current constitutional spending limit, which would require voter approval.

Finally, the House added contingency language to SB 26 that would require the Senate to approve a broad-based tax and the House’s oil tax increase before the Permanent Fund draw portions take effect.

House Majority leaders said in an April 11 press briefing that their decision to split the Permanent Fund POMV draw from the income tax and make HB 115 an income tax-only bill was a show of compromise to the Republican-heavy Senate that has insisted a broad-based tax should be left for future sessions if it is to be considered at all.

However, the linked Permanent Fund-income tax version of HB 115 drew criticism that it could violate the state Constitution’s single subject rule for legislation, a technical but major detail.

As of April 12, HB 115 was also on its way to the House floor.

Meanwhile, the stage is set for another sticks-and-gloves-all-over-the-ice brawl over the operating budget. The House voted down the Senate’s version of the budget 10-30 on April 11, with minority Republicans splitting their votes.

The Senate’s operating budget cuts about $330 million from the current fiscal year budget. Some Republicans are uneasy about Senate reductions to K-12 education and university funding, while others contend the overall budget cuts don’t go far enough.

The House-approved budget is on par with current spending levels, leaving a gap of several hundred million between the two bodies.

Elwood Brehmer can be reached at [email protected].

04/12/2017 - 2:10pm