Uncertainty rings in 2019 for Juneau
The forecast is cloudy with a chance of big PFDs.
Alaska’s political future has gotten murkier, not clearer, since Election Day despite the fact that Republicans hold a majority of seats in both chambers of the Legislature as well as the governor’s office.
The picture is likely to get a little clearer sometime shortly after the morning of Jan. 4 when the Alaska Supreme Court will hear arguments in the disputed House District 1 race between Republican Bart LeBon and Democrat Kathryn Dodge.
The Downtown Fairbanks House race has gone from LeBon holding a slim, 79-vote lead immediately after the election to being certified as a tie by the Division of Elections after Thanksgiving to now a one-vote lead for LeBon after a recount and reviews of disputed ballots.
Anchorage Superior Court Judge Eric Aarseth upheld the recount results Dec. 21, but his ruling is still subject to a Supreme Court review of the matter.
Control of the state House could hang on the Supreme Court’s decision — due by Jan. 14, just a day before the Legislature convenes in Juneau — but only if Republicans can rein in enough members of their own party.
House Republicans staked their claim to control of the chamber immediately following the election with a minimum 21-member majority in the 40-seat body with Healy Rep. Dave Talerico as speaker.
However, that control relied on LeBon’s victory and each member consistently toeing the caucus line.
It fell apart Dec. 8 when Kenai Republican Rep. Gary Knopp announced he would not be a part of a group with no margin for dissention, contending it would be doomed to fail at some point during the legislative session. Knopp is calling for a bipartisan majority that would stay away from partisan policy issues.
Staunchly conservative Wasilla Rep. David Eastman regularly broke from other Republicans in votes and was the House’s lone “no” vote on multiple non-controversial matters last year.
Republican Reps. Gabrielle LeDoux of Anchorage and Louise Stutes of Kodiak drew the party’s ire by caucusing for the past two years with Democrats in a bipartisan majority. It appears unlikely, though not impossible, that LeDoux and Stutes will join a Republican-only caucus this go-round.
Still, House Republicans congratulated LeBon on his District 1 seat victory in a Dec. 22 statement with “Alaska House Majority” letterhead. The release, signed by 19 Republicans including LeBon, states that “The Alaska House Majority remains strong and welcomes Representative-elect LeBon and additional members joining the team to help lead the Alaska State House of Representatives.”
Eagle River Republican Sharon Jackson, appointed by Gov. Michael J. Dunleavy to fill the District 13 seat left by acting Corrections Commissioner Nancy Dahlstrom, did not sign the statement but is likely to caucus with the Republican group.
It all leads to the strong possibility that control of the House will be up for grabs when the Legislature convenes Jan. 15. In that case, Republican Lt. Gov. Kevin Meyer would preside as Speaker pro tempore until a majority of the representatives settled on a leader of their own.
Policy debates on tap
On the policy side, there are so many permutations of what the final formation of the House could be — and more scenarios if Dodge ends up winning District 1 — that nearly everything seems possible.
Legislators of all stripes along with Dunleavy have insisted that improving public safety across the state is a top priority for 2019. Criminal justice changes could be made regardless of the makeup of the House given it is a bipartisan issue, but the prospect of a full repeal of the beleaguered Senate Bill 91 criminal justice reform package passed in 2016 is unclear in all scenarios.
Dunleavy’s desire to return Permanent Fund dividend payments to their historical, statutory formula is also a bipartisan proposition throughout the Legislature as well; however whether or not it can make it through the Senate, where Republican leaders have stressed the need to use most of the annual Permanent Fund earnings draw for government services in-lieu of new taxes will be a sticking point.
Dunleavy called for a PFD calculated by the statutory formula of roughly $3,000 in the budget proposal he inherited from former Gov. Bill Walker. He declined to include PFD “back payments” from the last three years the dividend was set at lower-than-formula amounts by Walker and legislators, but those appropriations could still be part of Dunleavy’s final budget proposal due in mid-February or a separate bill.
An Alaska Supreme Court decision that followed Walker’s 2016 veto of half the PFD appropriation declared that the constitutional power to appropriate, either through a veto or through legislative action, trumps the statutory formula and allows the governor or the Legislature to ignore the formula currently in law.
Dunleavy said at a debate in Fairbanks on Oct. 24 that he would have to consider whether to veto the budget if the Legislature sends him one without the PFD amount set according to the statute.
The combination of back payments and a 2019 dividend totaling roughly $6,700 per Alaskan has been calculated as about a $4 billion appropriation from the Earnings Reserve Account, which holds the spendable portion of the Permanent Fund.
The Earnings Reserve held about $16 billion that could be spent as of Nov. 30, according to the Alaska Permanent Fund Corp.’s latest financial statement. However, the fund’s total balance has fallen from nearly $62.3 billion on Nov. 30 to $61.3 billion as of Dec. 20 as financial markets have contracted in recent weeks, according to the APFC. Those losses come out of the Earnings Reserve.
Specifically to the budget, the final composition of the House may not have a huge impact on what the final fiscal year 2020 budget looks like if legislators elect to fill a presumed budget deficit from traditional sources.
That’s because accessing the state’s remaining savings account, the $1.7 billion Constitutional Budget Reserve, requires a three-quarters vote from each legislative chamber, meaning the ruling majority would have to make budget compromises to use the CBR, as has been the practice in recent years.
Legislators could instead fill the current projected $1.6 billion 2020 deficit — destined to ebb and flow on the size of the budget and oil prices — from the Earnings Reserve through simple majority votes, but that would be the closest thing to-date of a true and oft-dreaded “raid” of the Permanent Fund.
Elwood Brehmer can be reached at [email protected].