James Brooks

Deal struck on capital budget

The Legislature is headed back to Juneau. Don’t expect lawmakers to stay long. On July 27, the Legislature will convene what is expected to be a one-day special session to pass the state’s capital construction budget. “We have conducted a straw poll, and the 27th is the day,” Senate Majority Leader Peter Micciche said by phone Thursday. The capital budget funds road construction and building projects across Alaska, and most of its funding will come from the federal government, but it — like the state’s multibillion-dollar operating budget — was caught in the political divide between the Democrat-led House Majority and the predominantly Republican Senate Majority. An agreement between those two sides has now been reached. The Legislature failed to pass the capital construction budget before the July 1 start of the state fiscal year, and that failure has begun to have consequences. For example, the Alaska Department of Transportation has long planned a $40 million effort to rebuild nine miles of the Haines Highway. The project was supposed to go out to bid in late July, but with no capital budget, it hasn’t. Aurah Landau, a spokeswoman for the DOT’s Southcoast Region, said that if the Legislature delays the capital budget until July 27, the project will be delayed. Other projects have also been affected, according to a list provided by DOT. Those include the effort to replace the ferry Tustumena, and projects to renovate roads and bridges from Ketchikan to Fairbanks. During this year’s regular legislative session, the House passed one version of the capital budget; the Senate passed another Informal negotiations between the House Majority and Senate Majority have reached the harvest phase, and lawmakers will take formal action next week. “We wouldn’t risk coming down if we didn’t feel like there was a comfortable agreement,” House Minority Leader Charisse Millett, R-Anchorage, said by phone. She said her caucus was preparing to arrive in Juneau by the evening of July 26, ready to start work the next day. Under the Alaska Constitution, the approval of two-thirds of the Legislature is necessary to call a special session. Gov. Bill Walker could also call a special session, but he is required to give 30 days’ notice beforehand. If lawmakers call themselves into action, they can act more quickly. Micciche said allowing informal negotiations outside of session will allow lawmakers to conclude their work quickly next week. Unlike during the first and second special sessions this year, lawmakers will not be collecting per diem payments while waiting for a small group of negotiators to finish their work. “I think it’s a better operating philosophy, instead of being in special session, to do the one-dayer or two-dayer,” Micciche said. I think when we get to the end of the regular sessions, these remaining conference committee-type issues —it doesn’t require the entire Legislature waiting in Juneau doing technical sessions.” Details of the compromise capital budget have not been officially released, but legislators familiar with the compromise said it does not include a boost to the Permanent Fund Dividend. Members of the House suggested including money in the capital budget to raise the dividend to $2,200 per person, but that idea was rejected by the Senate. The agreement will also decide the future of funding for several Alaska megaprojects, including Juneau Access and the Knik Arm Bridge. Gov. Bill Walker has said the state will not advance Juneau Access, but funding for the road north out of Juneau has not yet been recommitted to other projects. According to an outline of the deal obtained by the Alaska Journal of Commerce, the capital budget will look a lot like the version that passed out of the House Finance Committee in mid-June. It is likely that half of the money remaining for the Juneau Access project will be reappropriated to other projects in the Lynn Canal area, as well as to fund a new school for Kivalina — a court-mandated project. Similarly, half of the remaining funds for the Knik Arm crossing are to be divided amongst the Kivalina school, state ferry maintenance and other highway projects, according to the draft budget deal. There is $5 million in state funds for the Knik Arm crossing and $47 million in Juneau Access funds available to be moved to other projects, according to DOT. The plan would use about $122 million from the Statutory Budget Reserve Fund, which has $288 million left in it. The agreement is also expected to determine how much money the state will spend on cashable tax credits to oil and gas explorers and small producing companies. It would add $20 million to the $57 million approved for oil and gas tax credit payments in the operating budget, bringing the total between the two to the statutory calculation of about $77 million, according to the outline. Last week the Legislature passed a bill immediately ending cash outlays for the credits, but the state still owes almost $1 billion in already-outstanding subsidy claims. Additionally, the deal would not pull any of the roughly $100 million the Alaska Gasline Development Corp. has to advance gasline projects. An amendment quietly added to the Senate’s capital budget — largely a political statement — would’ve pulled $50 million from AGDC for other state expenses. House Finance Co-chair Paul Seaton, R-Homer, said in May when the move was made that the AGDC money would be duplicative, as the programs it would’ve supported were already funded in early versions of the operating budget. Seaton also said his caucus did not want to pull the rug out from under the administration’s pursuit of the Alaska LNG Project by taking back the previously appropriated money. Contact reporter James Brooks at [email protected] Journal reporter Elwood Brehmer contributed to this report. He can be reached at [email protected]

Legislature averts shutdown, but more work remains

The morning after the Alaska Legislature averted a statewide shutdown, you could find more tourists than legislators in the Capitol. Though the Legislature’s second special session continues, work has all but stopped as lawmakers seek to decompress after months of budgetary debate and discussion. “I think that one thing that all of us in the Capitol can agree on is this has probably been the single most contentious legislative session that most of us have experienced,” Speaker of the House Bryce Edgmon said Thursday night. “I think we have more work to do. I think both sides understand that,” said Senate Majority Leader Peter Micciche, R-Soldotna, shortly afterward. “I think the Legislature needs to take some time off, cool down, come back together and work out solutions to the remaining issues that have to be dealt with this year.” Those issues include a capital construction budget and the state’s multibillion-dollar deficit. Despite five months of work, the Legislature passed no bill that addressed that deficit. Read the rest of the story here at JuneauEmpire.com.

Alaska Legislature averts shutdown with nine days to spare

With nine days to spare, the Alaska Legislature has averted a statewide government shutdown. At 1:04 p.m. Thursday afternoon, a joint House-Senate conference committee approved a compromise budget that funds state government past July 1 using savings from Alaska’s Constitutional Budget Reserve. The Senate voted 16-1 just before 9 p.m. to approve the deal, and the House followed suit, 31-8, just after 10 p.m. “This is very much a compromise budget, and that’s what we’ve been down here working on,” said Rep. Paul Seaton, R-Homer and House chairman of the conference committee. “No one got what they fully wanted. We had to concede; they had to concede, and we came up with this compromise package,” said Sen. Lyman Hoffman, D-Bethel and Senate chairman of the conference committee. Every vote against the budget was cast by a Republican who said they wanted to see greater budget cuts. “We just can’t keep spending money like this,” said Rep. Tammie Wilson, R-North Pole. “At some point, we have to cut back just like private business has done.” Even though the conference committee spent more than a month negotiating Thursday’s compromise, there was anxiety down to the final hours about whether enough members of the House Republican Minority would support the deal, which pays for the budget using the state’s Constitutional Budget Reserve. A three-quarters vote of the House and a three-quarters vote of the Senate is required to use that reserve, and the Coalition House Majority has only 22 members. In the end, even with Rep. Steve Thompson, R-Fairbanks, excused absent, nine members of the minority voted for the deal and the spending from the CBR. “I’m not going to try to destroy the budget to score political points,” said Rep. Dan Saddler, R-Eagle River. Gov. Bill Walker also must approve any compromise; he could veto it if he deems it incomplete. In a brief statement Thursday, he indicated that was unlikely to happen. “I am pleased the conference committee has compromised on an operating budget, which means we are one step closer to averting a shutdown of government services. Now, it is time to compromise on a fiscal plan,” Walker said in a brief prepared statement. Read the rest of the story here at JuneauEmpire.com.

Budget deal imminent

The Alaska Legislature is close to a deal to avert a statewide government shutdown, legislative leaders say, and an agreement could come as quickly as Thursday. “I think we, the Senate, should be done tomorrow. If it hits the floor, we’ll be done tomorrow,” said Senate President Pete Kelly, R-Fairbanks, in a Wednesday interview with the Empire. “I think tomorrow will be a good day. I’m anticipating we’ll be out of there by the weekend. I think we’re that close,” said House Minority Leader Charisse Millett, R-Anchorage, on the same day. In a brief hallway conversation, Speaker of the House Bryce Edgmon said he agrees with what Kelly said. Edgmon, busy in meetings and negotiations all day ─ members of the Senate Majority were seeing entering and leaving his office ─ did not have time for a more detailed conversation. “I couldn’t say we have an agreement between leadership yet. That just hasn’t happened,” Kelly said early Wednesday afternoon, but one appeared imminent. “I think you never know until you see a vote,” said Rep. Les Gara, D-Anchorage. “I would say that it seems like people are working with each other well.” The Legislature must approve a state operating budget before July 1, the start of the state’s fiscal year, to avoid a shutdown of state services. Read the rest of this story here at JuneauEmpire.com.

S&P puts Alaska back on credit watch negative

JUNEAU — A stopgap budget deal in the Alaska Legislature would avert a statewide shutdown, but it would still have consequences, a national credit rating firm warned June 20. In a new report, Andrew Little of S&P Global Ratings wrote, “If Alaska uses a significant amount of its reserves again and remains structurally imbalanced, we would likely lower (its) rating.” S&P is one of America’s “big three” institutional credit rating agencies. Just like your personal credit score, a higher rating means lower borrowing costs. Governments with better credit ratings are perceived to be at lower risk of default or delayed payments. In return, they tend to pay lower interest rates. In a prepared statement, Speaker of the House Bryce Edgmon said the Alaska Legislature “must do more than just pass the FY18 budget this year. We need new and more diversified revenues for Alaska.” The coalition House Majority led by Edgmon has continued to push for a long-term fix for Alaska’s $2.7 billion annual deficit, even as a government shutdown looms. The predominantly Republican Senate Majority, meanwhile, has said the Legislature’s priority should be a stopgap budget that uses savings to fund state services for one year. Members of the majority now say Alaska’s deficit is a problem for later. S&P’s report suggests it favors the House’s angle, if not its exact plan, for solving the deficit. “As noted in our prior reports, without structural fiscal reform in the 2017 legislative session, we would likely lower the state debt ratings,” Little wrote. As late as December 2015, Alaska had top marks from all three credit rating agencies. In January 2016, citing declining oil revenue and the lack of a fiscal plan, S&P lowered Alaska’s rating one notch. Moody’s Investment Services followed suit in February 2016, and Fitch Ratings in June 2016. Moody’s doubled down with a second downgrade in July 2016, but the other two rating agencies have not yet followed suit. According to a January 2017 presentation by S&P, 15 states have a AAA bond rating. Thirteen have an AA+ rating (the second-highest), and 13 have an AA rating (third-highest). Illinois has the lowest bond rating of any state, six steps below AAA. Gabriel Petek, the person in charge of S&P’s state ratings, wrote in an April column published by the Congressional newspaper The Hill that “U.S. states have entered a new era characterized by chronic budget stress.” Alaska isn’t alone in facing a credit rating crunch: Since January 2016, S&P has issued 11 state credit rating downgrades and just two upgrades, Petek wrote.

Alaska remains on course for statewide shutdown; second special session begins

After its first special session ended in failure, the Alaska Legislature is still searching for a way to avert a July 1 statewide government shutdown. On Monday, lawmakers are poised to renew debates on how to bridge a political gap between the coalition House Majority and the Republican-led Senate Majority. Gov. Bill Walker called both the House and Senate into special session on Friday, but after brief floor sessions, each body adjourned until Monday. Speaking to reporters Friday afternoon, Walker said he is confident that the Legislature can avert an economically catastrophic shutdown. For better or worse, however, the issue is largely out of his hands. Under the Alaska Constitution, the Legislature is the body that approves the state’s budget, and it’s the Legislature that must reach an agreement. “The worst thing we could do is have government shut down … and have even greater uncertainty out there than we have today,” Walker said. Walker does have the power to set the agenda for the special session, and his to-do list includes just one item: a state operating budget. Read the rest of this story here at JuneauEmpire.com.  

House ends special session with failed ‘Hail Mary’ on budget

It was a mic-drop moment on a trampoline. In a surprise Thursday night move, the Alaska House of Representatives attempted to avert a statewide government shutdown by forcing the Alaska Senate and Gov. Bill Walker to accept a take-it-or-leave-it deal. The Senate left it, and Alaska’s state government is now two weeks from shutting down. “Tonight was not an ideal end to the session,” said Speaker of the House Bryce Edgmon, D-Dillingham, shortly after the House adjourned. In a series of caucus-line votes, the coalition majority that runs the House inserted a version of the state operating budget, funded primarily with savings from the earnings reserve of the Alaska Permanent Fund, into the state’s capital construction budget. The House approved that combined budget and adjourned a special session called by Walker. With the House having left the special session, the Senate must accept the House’s version of things or reject it and end the special session with no deal. While the Senate took no official action Thursday night, Senate President Pete Kelly has left little doubt. In a statement, he said the Senate Majority is “deeply disappointed in the House Majority’s actions tonight.” In a series of caucus-line votes, the coalition majority that runs the House inserted a version of the state operating budget, funded primarily with savings from the earnings reserve of the Alaska Permanent Fund, into the state’s capital construction budget. The House approved that combined budget and adjourned a special session called by Walker. With the House having left the special session, the Senate must accept the House’s version of things or reject it and end the special session with no deal. While the Senate took no official action Thursday night, Senate President Pete Kelly has left little doubt. In a statement, he said the Senate Majority is “deeply disappointed in the House Majority’s actions tonight.” Find the rest of the story here at JuneauEmpire.com.  

Alaska lawmakers make small move toward averting government shutdown

JUNEAU — The Alaska Legislature will not call for the outsourcing of DMV licensing and administrative services to a private company. The decision came Tuesday as lawmakers took a small step forward in their effort to avoid a statewide government shutdown in the first week of July. Three Representatives and three Senators met in a brief conference committee to agree upon the budgets for the Alaska Department of Administration and the Alaska Department of Commerce, Community and Economic Development. The House and Senate have each approved different versions of the state’s operating budget for the coming fiscal year (which starts July 1), and the conference committee has been tasked with ironing out the differences. If the committee fails to complete its mission by July 1, state government will shut down. Separate negotiations are ongoing to determine how the state will pay for the budget being considered by the conference committee. “Two agencies have now been agreed upon completely,” said Rep. Paul Seaton, R-Homer and the House chairman of the conference committee. Senate President Pete Kelly called Tuesday’s action something that “could’ve been done back in April,” but said it’s something necessary if lawmakers have any chance of averting a shutdown. The most significant decisions Tuesday came in the budget for the Department of Administration, where conferees agreed to cut $442,600 from the department’s travel budget, reducing it to 2015 levels. The Senate had proposed the cut, citing the availability of teleconferencing. Conferees also agreed to remove a call for the state to “outsource administrative and licensing services to private sector business partners to the extent practicable.” That request had been made by the Senate. In the Department of Commerce, lawmakers approved a $50,000 grant to the Medallion Foundation, which aids aviation safety, and agreed to divert $15,000 in vehicle rental tax receipts to a seasonal position at the Tok Visitor Center on the Alaska Highway. Speaking during the meeting, Seaton said other departments’ budgets will come up quickly. “Expect that later this week. I do expect that we will meet again later this week,” he said. Once conferees agree on a compromise budget, it still must be approved by the House and Senate, and lawmakers must find a way to pay for it. • Contact reporter James Brooks at [email protected] or call 419-7732.

Walker pleads with Legislature for compromise

JUNEAU — A day after the Alaska House Majority rejected his compromise bid to avert a statewide government shutdown, Gov. Bill Walker said he still hopes that shutdown can be averted. “My message to legislators: If you can’t find further compromise in what I have presented, please, please develop your own compromise,” he pleaded during a June 6 press conference with the Capitol press corps. June 7 is the 21st day of a 30-day special session called by Walker to give the Legislature time to avert a statewide shutdown by agreeing upon a budget and a way to pay for that budget. The state’s fiscal year starts July 1. If lawmakers can’t reach a deal before that date, state services will all but end on Monday, July 3. Read the rest of the story at JuneauEmpire.com       • Contact reporter James Brooks at [email protected] or call 419-7732.    

House majority rejects Gov's fiscal compromise

In a bid to avoid a state-spanning government shutdown, Gov. Bill Walker on Monday proposed a compromise to bring the Alaska Senate and Alaska House together. Walker’s compromise was promptly rejected by the coalition majority that runs the House. That leaves the state on course for a July 3 shutdown that would paralyze state services and commercial salmon fisheries at the peak of the season. In an evening press conference, Speaker of the House Bryce Edgmon, D-Dillingham, said the governor is on the wrong track with a proposal that would slash the state deficit from about $2.7 billion per year to about $300 million per year. He said the House Majority is continuing to champion a strategy that eliminates the entire deficit within three years. Unless the deficit is entirely eliminated, Edgmon said, Alaskans will continue to worry about how it will be balanced and what will need to be cut to make the budget balance. Find the rest of the story at JuneauEmpire.com.

Walker: Legislature in stalemate

Calling the Alaska Legislature’s current situation a “stalemate,” Gov. Bill Walker has announced that he will make a bid to avert a pending shutdown of the Alaska government. “A government shutdown is unacceptable, and compromise is essential. So my team and I have begun work on a compromise package from concepts currently on the table, and intend to present the compromise to all four caucuses next week,” Walker said in a statement Friday morning. “There is no reason lawmakers cannot complete their work within the current special session.” Walker called the Alaska Legislature into special session after it failed to pass a budget or close the state’s $2.7 billion deficit in a 121-day regular session. Now, only two weeks remain in that 30-day special session, and the state government will shut down Monday, July 3 if no agreement is reached. Even before July 3, the state will begin shutting down remote fishing management operations, endangering Alaska’s multibillion-dollar salmon fishery. It is unclear what compromise Walker will suggest, but deputy press secretary Jonathon Taylor said by email that “it will include legislation that is already on the table and is actionable under the Special Session call.” Find the rest of the story at JuneauEmpire.com.

Walker calls special session

The Alaska Legislature is headed into a special session. On Wednesday night, the Alaska House of Representatives and Alaska Senate adjourned the first regular session of the 30th Alaska Legislature without finishing a budget and without finding a way to pay for that budget. Minutes after the House and Senate adjourned, Gov. Bill Walker called lawmakers into a special session starting at 11 a.m. Thursday. On Walker’s agenda for the special session are a series of budget-related items and measures addressing Alaska’s prescription drug abuse epidemic. Walker has asked lawmakers to consider the state’s operating budget, its capital construction budget, a hike in the state’s gasoline tax, cuts to the state subsidy of oil and gas drilling, spending from the earnings of the Alaska Permanent Fund, and “an act or acts to increase an existing tax or to establish a new broad-based tax.” Read the full story at JuneauEmpire.com

Human Rights Commission nominee lone defeat for Walker in joint session

JUNEAU — The Alaska Legislature has refused to confirm the appointment of a transgender Fairbanks man to the state’s Human Rights Commission. The Legislature, meeting in joint session May 16, refused the confirmation of Drew Phoenix by a 24-35 margin. Phoenix was the only person among more than 100 gubernatorial nominees to not receive legislative confirmation during a marathon 4½-hour floor session. While the state of Alaska does not keep statistics on such matters, the Empire believes Phoenix would have been the first transgender individual in an Alaska appointive or elective position. Human Rights Commission members are unpaid. “Like all my nominees, Drew Phoenix was the most qualified for the position,” Gov. Walker told KTUU-TV through a statement by spokeswoman Grace Jang. “I thank him for putting his name forward, and for his willingness to serve.” Read the rest of the story at JuneauEmpire.com.     Contact reporter James Brooks at [email protected] or call 419-7732.    

Session reaches constitutional end with work far from done

JUNEAU — May 17 is the 121st and final day of the Alaska Legislature’s 2017 regular session. There’s more to come. Despite four months of work, lawmakers have not agreed upon a fix to the state’s $2.7 billion annual deficit. They have not agreed upon a budget to fund state government past June 30. They have not finished rolling back reforms to the state’s criminal justice system or taken steps requested by Gov. Bill Walker to fight the opioid drug abuse epidemic. They need more time, and there are two ways to get it. On their own, they can vote to give themselves more time. If two-thirds of the House approves and two-thirds of the Senate agrees, lawmakers can extend their session for 10 more days. As of May 12, Senate President Pete Kelly said he supported such an extension. Speaker of the House Bryce Edgmon said he supported an extension, too. Kelly leads a Senate bloc with enough votes to extend. Edgmon’s House bloc doesn’t have enough votes. In the House, an extension vote requires the support of the Republican House Minority. As late as May 15, House Minority Leader Charisse Millett, R-Anchorage, said the House Minority wants to see the Legislature settle upon a narrow agenda in exchange for its support of an extension. Without a focus on specific issues, the minority will not vote to extend. That doesn’t mean an end, because there is a second option. If the Legislature fails to act on its own, Gov. Bill Walker will call lawmakers into a special session, just as he has done the past two years. Walker’s special session — limited to 30 days — will be restricted to an agenda that he sets. Lawmakers will be limited to debating and voting upon topics that he selects. Furthermore, Walker could select a later start date for his special session, allowing the Legislature a brief break before resuming work. It is unclear if he would take that option or call the special session to begin May 18. In a special session, lawmakers would have two parallel tasks at the top of their agenda. The first would be deciding upon a budget for the coming fiscal year, which starts July 1. The second would be deciding how to pay for that budget. Lawmakers appear convinced that the state can no longer simply use savings to close the deficit. They are considering a program to automatically draw a portion of the earnings of the Alaska Permanent Fund, and they are considering changes to the state’s subsidy of oil and gas drilling. An income tax is no longer on the table, but a special session could allow lawmakers time to consider another tax, such as the school tax suggested by Sen. Click Bishop, R-Fairbanks. Even with an extension or special session, the Legislature — and every other Alaskan — faces two looming deadlines. If a budget is not signed by June 1, each state employee will receive a written notice stating that he or she will be fired in 30 days. If a budget is still not signed by July 1, state government will shut down, and those state employees will be laid off. — James Brooks, Juneau Empire Contact reporter James Brooks at [email protected] or call 419-7732.

Senate kills income tax

The Alaska Senate on Friday voted 15-4 to kill an income tax proposed by the House, all but ensuring the Alaska’s multibillion-dollar deficit will not be solved this year. Most of those in opposition said they refuse to raise taxes on Alaskans during a recession. “The Senate enthusiastically ended discussion, at least for this year, on the idea of penalizing them for having a job,” Senate President Pete Kelly, R-Fairbanks, said after the vote. “It’s not good for the economy, it’s not good for Alaska, it’s not good for our future. Most of all, it’s not needed.” Another senator, Sen. Shelley Hughes, R-Palmer, compared the state government’s spending habits to an opioid addict. Read the rest of the story at JuneauEmpire.com.       Contact reporter James Brooks at [email protected]

Bill allowing Uber, Lyft becomes leverage near session’s end

JUNEAU — A divide between the House and Senate has stalled a push to bring ride-sharing services like Uber and Lyft to Alaska. Senate Bill 14, allowing Uber, Lyft and similar companies to operate in Alaska, needs only a vote of the full House and the signature of Gov. Bill Walker to become law. Those actions seem unlikely to happen, even as many lawmakers say they support the idea. Instead, the House is effectively starting the legislative process anew by advancing its own version of Uber legislation from the House Labor and Commerce Committee May 10. SB 14 meanwhile remains in the House Rules Committee, awaiting a final vote. “It’s been there for a month under the control of the House leadership that could’ve put it on the floor, and you have to ask them why they haven’t done that,” said Sen. Mia Costello, R-Anchorage and the sponsor of SB 14. Read the rest of the story at JuneauEmpire.com.

House waiting on Senate to pass fuel tax increase

JUNEAU — With one week remaining in the Legislature’s regular session, a core piece of the state budget is still receiving no public attention. The rough-draft budgets approved by the House and the Senate take for granted that the Legislature will hike the state’s gasoline tax, but legislation enacting that hike hasn’t been considered for more than two months. “We all understand that this is the mechanism that this is logical for us to go forward,” said Rep. Paul Seaton, R-Homer and co-chairman of the House Finance Committee. “That hasn’t happened yet, but it doesn’t mean it won’t happen at all.” At the start of this year’s legislative session, Gov. Bill Walker proposed tripling Alaska’s motor fuel tax by 2018. From 8 cents per gallon of gasoline at the pump today, the tax would rise to 16 cents this year, then reach 24 cents next year. Alaska’s gas tax would go from the lowest in the nation to merely below the national average. Read the rest of the story at JuneauEmpire.com.      

Oil issues stall Legislature

In your car, oil acts as a lubricant. In the Alaska Legislature, it’s a clotting factor. With 12 days remaining until the Alaska Legislature’s 121-day constitutional limit, debates over the state’s subsidy of oil and gas drilling are the key item blocking further progress on a fix to Alaska’s $2.7 billion annual deficit. “That really is the direct problem we’re having with the Senate over this past week,” said Rep. Les Gara, D-Anchorage, on Friday. On Friday morning, Speaker of the House Bryce Edgmon, D-Dillingham, and House Majority Leader Chris Tuck, D-Anchorage, confirmed that the coalition House Majority remains committed to the idea of putting all four “pillars” of its deficit fix on the negotiating table at the same time. Not all of those “pillars” are yet ready for negotiations, which is why the Legislature has not yet reached a deal. The House’s deficit plan includes spending from the Alaska Permanent Fund’s investments, modest cuts to the budget, an income tax, and cuts to the state subsidy of oil and gas drilling. The Senate has proposed its own deficit-fighting plan. The Senate Majority’s proposal includes spending from the Alaska Permanent Fund’s investments and steeper cuts to the budget. The Senate plan does not entirely fix the deficit, but that’s a feature, not a bug, Senate leaders say. Having a continued deficit — one small enough to be sustainably covered by the state’s savings accounts — will pressure the Legislature to keep spending low. Meanwhile, oil prices are expected to gradually recover, mending the state’s finances. As Gov. Bill Walker said in late April, there are two philosophies in the Legislature when it comes to the deficit: “Are we going to fix it, or are we going to try to get through it?” he said. With the House viewing the deficit as something to fix, and the Senate viewing it as something to survive, this year’s action will be decided at the compromise table. The House and Senate have each proposed different versions of a Permanent Fund spending plan, and those different versions are ready for negotiation. Likewise, the House and Senate have proposed different amounts of budget cuts, and those are ready for negotiation as well. The Senate has firmly rejected an income tax, and the Senate Labor and Commerce Committee has canceled all hearings on House Bill 115, the version of the tax passed by the House. That leaves House Bill 111, which has passed the House and has been revised by the Senate Resources Committee. Gara called that version “a beautiful deal if you’re an oil company.” HB 111 will be revised still further in the Senate Finance Committee, which has scheduled hearings from Tuesday through Saturday. Sen. Anna MacKinnon, R-Anchorage and co-chairwoman of the Senate Finance Committee, indicated that the committee is open to compromise on the issue. Asked Friday morning, Gara responded that “their compromise is their position” and not a true compromise. Wednesday, May 17 is the 121st day of the regular session and the Legislature’s constitutional limit. If lawmakers haven’t finished their work by then —something that appears likely — they can add 10 days of extra time with a two-thirds vote of each house. If they still haven’t finished, they can call themselves into special session for 30 days, or the governor can. By that point, time will be running out quickly. If a budget is not approved by July 1, state government will shut down. Contact reporter James Brooks at [email protected]

House approves income tax

It was tax day. On April 15, the Alaska House of Representatives voted 22-17 to impose Alaska’s first income tax in 37 years. Juneau’s two Representatives, Democrats Sam Kito III and Justin Parish, voted yes. House Bill 115 heads to a reluctant Senate, and its legislative future is uncertain. Nevertheless, lawmakers on Saturday acknowledged their action was unprecedented in Alaska’s modern history. Speaker of the House Bryce Edgmon, D-Dillingham, called it “a very extraordinary day in Alaska’s history.” “I think this is one of the most important votes that I or the other members will ever cast,” said Rep. Jonathan Kreiss-Tomkins, D-Sitka. Seventeen Democrats, three Republicans and two independents voted yes. Seventeen Republicans voted no, and Rep. Mark Neuman, R-Big Lake was excused absent. After the vote, Senate President Pete Kelly, R-Fairbanks, released a prepared statement calling the tax “absurd on its face” and added, “As I’ve said many times, the only thing standing between Alaskans and an income tax is the Senate.” If HB 115 is approved by the Senate and signed by Gov. Bill Walker, single Alaskans making between $14,300 and $50,000 per year will pay 2.5 percent of their adjusted gross income to the state. Alaskans making more money will pay a higher rate. A single Alaskan making $50,000 per year will pay $992.50. Someone making $100,000 per year will pay $2,992.50. A couple earning $100,000 per year will pay $1,985. A couple earning $200,000 per year will pay $5,985. Since 2012, lawmakers have cut more than 44 percent from the state’s overall budget, according to figures from the nonpartisan Legislative Finance Division. Despite those cuts, the state still faces a $2.8 billion annual deficit, brought about by depressed oil prices. The coalition majority in the House has introduced a four-part plan to erase that deficit by 2020. The parts (or “pillars,” to use the majority’s jargon) include cuts to the operating budget, cuts to state subsidies for oil and gas drilling, spending from the earnings of the Alaska Permanent Fund, and some kind of “broad-based tax,” jargon that this year means an income tax. The tax is expected to generate only $687 million to pay down the deficit — and that not until fiscal year 2020 — but supporters said it is necessary to balance the burden of fixing the problem. “HB 115 will balance and spread the impact equitably,” said Rep. Paul Seaton, R-Homer and a coalition member of the Alaska House Finance Committee. “This will complete the comprehensive, sustainable fiscal plan that so many Alaskans have asked us to do.” Speaking on the floor, Rep. Andy Josephson, D-Anchorage, said passing the tax is necessary to pass other components of the deficit-fighting plan. “A number of my colleagues are not going to support a dividend-only cut. They want a balanced plan. A balanced plan. And I can’t blame them,” he said. Rep. Justin Parish, D-Juneau, said no one likes the idea of a tax, but he’s willing to support one to avoid greater budget cuts that will harm Alaskans. One in three Juneau jobs are funded directly by state or local government, according to figures from the Juneau Economic Development Council. Parish’s voice broke as he spoke about how some students in the Juneau School District don’t get enough to eat. “At this point, cuts are our most damaging option economically and — oh my goodness, there’s no comparison — morally,” Parish said. Members of the House Republican Minority constituted all 17 “no” votes Saturday, and most said they had no interest in raising taxes when Alaska is in a recession. That recession, like the state’s deficit, has been driven by falling oil prices. “I think ultimately this is going to lead to a smaller economy for the state of Alaska, and I don’t think a smaller economy is good for anybody,” said Rep. Dan Saddler, R-Eagle River. Rep. David Eastman, R-Wasilla, said he was wearing black in honor of the day. Rep. Lora Reinbold, R-Eagle River, added that she does not feel that state government has been sufficiently cut. “We have not cut to the bone. … There is so much to still cut,” she said. Rep. Lance Pruitt, R-Anchorage, was among those who pointed to the irony of passing the tax bill on federal tax day (the deadline is officially Monday, because tax day falls on a weekend this year). “I find it also ironic that it’s the same day the Titanic went down,” Pruitt said. According to a statewide poll conducted by the Alaska Chamber of Commerce at the end of February and start of March, a majority of Alaskans remain opposed to an income tax. The sole region of the state to support the tax is Southeast Alaska, where the poll found 51 percent of residents support the idea. Outside the Capitol on Saturday morning, as legislators prepared to vote, a small group of protesters had gathered to request President Donald Trump release copies of his income tax statement. Among them was Marian Call of Juneau, who said she wished she’d organized a “please tax me” rally instead. Call pointed out that Alaska’s state government is still majority-funded by oil revenue, and she feels that an income tax would force state government to become more accountable to ordinary Alaskans. “Whoever pays the bills owns the house, and I want to own the House,” she said as she aimed a thumb at the Capitol. Contact reporter James Brooks at [email protected]

House approves Permanent Fund bill with tax contingencies

For the first time in state history, the Alaska Legislature has chosen to spend the Alaska Permanent Fund on something other than dividends. On Wednesday, the Alaska House of Representatives voted 22-18 to approve Senate Bill 26, which takes a portion of the Permanent Fund’s investment earnings and applies that money to Alaska’s $2.8 billion annual deficit. As a side effect, the Permanent Fund Dividend would drop to $1,250 starting this year. “This gets us a long-term, sustainable fiscal plan,” said Rep. Neal Foster, D-Nome and co-chairman of the House Finance Committee. The Alaska Senate voted 12-8 on a different version of SB 26 earlier this year, and negotiations are expected between the House and Senate to reconcile the differences. One of the biggest of those differences is a requirement that the Legislature also enact “a broad-based tax, directed to education” and “the version of House Bill 111 that passes out of the House of Representatives.” Rep. Ivy Spohnholz, D-Anchorage, said that requirement “is what actually allows me to vote for this in good conscience,” because if the clause holds up, it would mean the burden of resolving the deficit doesn’t come entirely from reduced dividends. Under the “four-pillar” plan proposed by the coalition House majority, SB 26 would erase about $1.8 billion from the deficit. An income tax would generate anouther $650 million, and the remaining deficit would be solved with budget cuts ─ including from the state’s system of oil and gas tax credit program. That kind of comprehensive approach is seen as necessary to avoid a repeat of what happened last year. In 2016, the Senate passed a Permanent Fund spending plan similar to this year’s version, but that bill died in the House Finance Committee. Republicans and Democrats on the committee said they couldn’t vote for the plan without additional reductions in state spending and the oil industry tax credits. Without those reductions, lawmakers said at the time, they would effectively be taking money from Alaskans' dividends and giving it to government and oil companies. Seventeen Democrats, three Republicans and two independents voted for Senate Bill 26 in the House on Wednesday. All 18 members of the House’s Republican minority voted against it, and for a variety of reasons. “SB 26 … it is a sustainable plan, but for big government,” said Rep. Lora Reinbold, R-Eagle River. “There is basically nothing in this bill that I can support,” said Rep. Cathy Tilton, R-Wasilla. House Minority Leader Charisse Millett, R-Anchorage, said she wanted to see more of the minority’s ideas incorporated into the proposal. “I have no confidence in this piece of legislation. It’s bad for Alaska,” she said. Rep. Lance Pruitt, R-Anchorage and a minority member of the House Finance Committee, wanted to see spending-cap language from the Senate’s version of SB 26 kept in the House version. That didn’t happen. “It essentially has no effect to control us,” Pruitt said of the House’s version, “to control the Legislature and government from spending that money.” The Senate had proposed a spending cap and a reduction in the draw from the Permanent Fund if oil revenue suddenly surges. The House version removes that spending cap and doesn’t reduce the draw as much, even if oil prices rise. Randy Hoffbeck, the state’s revenue commissioner, warned that the House’s approach could make the state’s cashflow more volatile. Rep. Mark Neuman, R-Big Lake, said he’s concerned about what will happen to the economy if dividends decline. “I think that the people can spend that money a lot better than the government can,” he said. He added that the state may have a deficit, but it can balance that deficit through further cuts, and the state’s remaining savings accounts can tide things over until the cuts are made. “I do not see this as a crisis,” he said. Members of the majority disagree. The state’s principal savings account, the Constitutional Budget Reserve, could cover the deficit for two more years, but if no significant changes were made before that deadline, the state would be forced to turn to the Permanent Fund savings account that also pays dividends. Without a deficit fix, dividends would decline, and the state would again be forced to cut its budget unless oil prices unexpectedly rebounded. “I think we’ve cut enough,” said Rep. Justin Parish, D-Juneau, who pointed to studies from the Institute for Social and Economic Research. That institute, at the University of Alaska Anchorage, forecast earlier this year that 33,000 jobs would be lost if the Legislature attempted to balance the budget through cuts alone. “At the crossroads we’re at right now, we have two options: we either go into a 10-year recession, or we stabilize the economy,” said Rep. Geran Tarr, D-Anchorage. SB 26 returns to the Senate. Lawmakers there will vote later this week on whether to accept the changes made by the House. They are expected to reject those changes, setting up a negotiation between the House and Senate on a final deal. Contact reporter James Brooks at [email protected] or call 419-7732. Journal reporter Elwood Brehmer contributed to this report.


Subscribe to RSS - James Brooks