OPINION: Court cases give Legislature carte blanche

  • Sen. Bill Wielechowski, D-Anchorage, argues in Alaska Superior Court on Nov. 17, 2016, in favor of his lawsuit challenging former Gov. Bill Walker's veto of the Permanent Fund dividend appropriation earlier that year. (Photo/File/AJOC)

Few would envy the position the Legislature and former Gov. Bill Walker found themselves over the past four years dealing with crashing oil prices and the ensuing multi-billion-dollar budget deficits.

Reducing the Permanent Fund dividend, virtually eliminating the capital budget and reversing past practice by not paying off oil and gas exploration tax credits in full each fiscal year easily lead the way on the least popular actions that have been taken.

Even with those moves, some $14 billion from the state’s savings accounts was still necessary to close the budget gaps for the fiscal years since 2015 to the present.

In the aftermath of Gov. Bill Walker’s veto of half the Permanent Fund dividend appropriation in 2016 — reducing it from a projected $2,044 per Alaskan to $1,022 — Sen. Bill Wielechowski, D-Anchorage, and a few former legislators took a lawsuit all the way to the Supreme Court challenging the action as contrary to the formula for paying the PFD currently in statute.

By the time the Supreme Court ruled in Walker’s favor, the Legislature had followed his lead in the 2017 session — and the Superior Court judge that ruled against Wielechowski, et al, on the same day the case was argued the prior November — by arbitrarily setting the PFD at $1,100 rather than following the statutory formula.

In a nutshell, the Supreme Court determined that the constitutional authority of the governor to veto appropriations and the similar vested authority of the Legislature to make appropriations took precedence over any law such as the one that calculates the annual amount of the dividend.

It is a similar reasoning that allows the Legislature to stay in session for the 121 days written in the constitution rather than the 90-day limit approved by voters through an initiative in 2008.

While legally sound, the PFD ruling gave the Legislature the ability to ignore its own laws so long as whatever action it takes as an alternative does not conflict with the Constitution.

The anger over three straight years of Walker, and then the Legislature, disregarding the PFD formula was ridden by Mike Dunleavy all the way into the governor’s mansion with the central promise of his campaign being a pledge to follow the law.

Then on Jan. 2 a Superior Court judge handed down another ruling that, unlike the Supreme Court decision that allows the Legislature and the governor to disregard the law, allows them to violate the spirit but not the letter of the Constitution.

One year before Walker vetoed half the PFD appropriation in 2016, he without warning slashed $200 million from the budget earmarked to pay off earned oil and gas exploration credits.

A year later, despite assuring the financial institutions lending to small companies working in Alaska he wouldn’t do it again, Walker vetoed $430 million worth of the payments.

In the aftermath, those banks stopped lending money to the independent explorers and before the Legislature finally eliminated the programs on both the North Slope and Cook Inlet the total tab for tax credits owed swelled to more than $800 million.

Business arrangements the state had with BlueCrest in Cook Inlet and Brooks Range Petroleum Corp. on the Slope had to be reworked, while Caelus Energy, which is owed some $100 million for its work, has been forced to sell off acreage and assets as it appears ready to exit the state after buying Pioneer Natural Resources properties for $550 million in 2013.

With the state’s business reputation in tatters, Walker’s administration finally came up with a plan to pay off the credits without a lump sum appropriation from the Legislature by instead creating a state entity to sell up to $1 billion worth of bonds that would be paid for by the companies owed money taking a haircut of 10 percent in exchange for receiving most of what they’re due sooner rather than waiting years to be paid in full according to the statutory formula.

The only problem with the plan is that the Constitution has strict limits on how the state may issue debt such as for emergencies or through a vote of the people to approve general obligation bonds.

Walker and the Legislature worked around these limits by creating an “independent” entity that would sell the bonds and using “subject to appropriation” language that would not legally qualify as binding the State of Alaska to debt according to the Constitution.

A lawsuit ensued, and the workaround language was deemed sufficient by a Superior Court judge to not create the legal definition of debt and therefore “passes constitutional muster.”

To call this a troubling precedent would be an understatement, as it essentially gives the Legislature a blank check to get around putting debt issues to a vote of the citizens. Nothing would stop it from creating a “Transportation Bank” that could sell “subject to appropriation” bonds to pay for infrastructure projects without having to seek the approval of Alaskans.

That’s not to say that Judge Pate erred in his legal reasoning, but it is to say that it should not be so easy to get around the very plain intent of the constitutional framers to limit the ability to take on debt without a vote of the people.

The PFD ruling has allowed the Legislature to ignore the laws it has passed, and the bond ruling allows it to get around the intent and spirit of the Constitution through nothing more than a shell entity and the three words “subject to appropriation.”

In this respect, the solutions to the budget deficits that were crafted by Walker and the Legislature may turn out to be worse than the problems they were trying to solve.

Andrew Jensen can be reached at [email protected].

Updated: 
01/09/2019 - 11:27am

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