With clock ticking, major issues yet to be resolved

2015 session of the Legislature seems set to end with a big bang
Photo/Becky Bohrer/AP

A collision is shaping up between legislators and Gov. Bill Walker over the governor’s vision of a large state-led gas pipeline.

The state Senate passed a House bill March 31 that clips the governor’s wings in spending money on a large state-led gas pipeline that could compete with the ongoing Alaska LNG Project involving the three major producers, pipeline company TransCanada and the state as a 25 percent partner.

Walker has vowed to veto the bill, House Bill 132, but the Senate’s action got the bill on the governor’s desk April 1, giving him 15 days to reject the bill. That gives lawmakers time to muster votes to override Walker’s veto before the end of the Legislature’s 2015 session scheduled adjournment April 19.

Barring a deal between the legislative leadership and the governor that Walker will hold off spending scarce state funds on a large state gas project until the fate of the privately-led project is generally known in 2016, the tension over the end-of-session veto override will become a huge distraction as the Legislature winds up its work.

At this point the legislative leadership appears to be two to three votes short of the 40 needed to override a veto. The House vote in favor of HB 132 was 24-14, with Reps. Bob Lynn, R-Anchorage, and Daniel Ortiz, an independent from Ketchikan, excused.

In the Senate it was 13-7 with Sen Bert Stedman, R-Sitka, voting with six Democrats in the Senate. Combining the “yes” votes in both bodies totals 37, three short of 40 needed for an override, although there were two legislators absent in the House vote.

Last-minute attempt at deal failed

House Speaker Mike Chenault, R-Nikiski, and Senate President Kevin Meyer, R-Anchorage, said they attempted to negotiate a last-minute deal with Walker before the Senate vote.

Walker had requested the ability to assemble an independent team of his own choosing to review details of the large industry-led Alaska LNG Project, to advise the governor whether certain terms should be renegotiated.

In an interview, Chenault said the team of advisors would sign confidentiality agreements to be able to review details of the project. However, they would only have been able to brief Walker on conclusions, as the governor has not signed a confidentiality agreement.

Partners in the Alaska LNG Project, which include North Slope producers BP, ConocoPhillips and ExxonMobil, and TransCanada Corp. would have to sign off on such a plan.

A statement issued March 31 by the combined House and Senate Majorities said the Legislature would have funded Walker’s review team and also agreed to stop pursuing HB 132 in return for the governor’s agreement to give the Legislature a detailed plan for an expanded state-led gas pipeline using the funds available to AGDC.

The plan would be inserted into the state budget as intent language, and Walker would have had to agree not to veto the language.

The governor did not accept the Legislature’s counter-proposal to his plan for a review team, so the Senate proceeded with its vote on HB 132.

House and Senate leaders will have to muster at least three more votes for an override, and while that will take some work there’s still two weeks left in the session for the Speaker of the House and President of the Senate to use persuasion.

Chenault said in an interview that he was open to Walker’s idea in concept. If the governor’s team of independent advisers could give him more comfort about the large industry-led project, it might be a good thing, Chenault said.

“It’s better to let him inside the house to look around than have him outside throwing rocks,” Chenault said.

The Speaker said the governor may pursue the idea of a review team on his own with the industry partners. It’s unknown who Walker may select, however.

Some of the governor’s former associates at the Alaska Gasline Port Authority, a municipal group he headed that was promoting a gas pipeline, may be involved. Rigdon Boykin, a former financial advisor to the port authority, has been hired by Walker, according to spokeswoman Grace Jang.

Boykin, formerly with Los Angeles-based financial firm of O’Melveny & Myers, advised the port authority from 1999 to 2005. While an advisor there he told Walker and other officials of the organization that a large gas project led by a quasi-public entity like the authority could be financed entirely by debt and with no requirements for an equity investment by the state or a private company.

Meanwhile, as the session heads to a close Walker appears now to have the edge in a veto override vote but he is taking a risk of a humiliating defeat on an issue that is essentially a matter of principle, though Walker’s critics call it ego.

In reality the state’s gas corporation, Alaska Gasline Development Corp., doesn’t have the funds in hand to fully develop a competing gas project plan, at least one that could move 2.5 billion cubic feet per day, a volume comparable to the industry-led project. The Legislature isn’t about to appropriate more money, either.

The AGDC board meets April 9 to decide what can be done on engineering a larger state gas pipeline with $180 million that is available to the state corporation.

Medicaid expansion

Meanwhile, the standoff may cloud other issues including prospects for the governor’s premier legislative objective this year, an expansion of the state’s Medicaid program.

Medicaid expansion faces an uphill fight in the Republican-led Legislature even without the leadership’s irritation with the governor over natural gas. The House Health and Social Services Committee under its chair, Rep. Paul Seaton, R-Homer, has been working on Walker’s Medicaid expansion bill, HB 148.

The committee reported the bill out March 31, the first movement for the governor’s bill. It now goes to the House Finance Committee.

Meanwhile the Senate Health and Social Services Committee, under its chair, Sen. Bert Stedman, R-Sitka, has been focusing mainly on Medicaid reform in Sen. Pete Kelly’s SB 74, although Stedman also held hearings on the Senate version of the governor’s bill, SB 78.

Walker’s bill would expand the state Medicaid program under the federal Affordable Care Act to include about 40,000 lower-income Alaskans who currently do not have medical insurance coverage. The expansion would also ease a problem of uncompensated care faced in Alaska by hospitals when medical services are provided to patients without insurance or means to pay.

Republicans in the House and Senate have been cool to the idea of expansion without first reforming the state program, which has grown in costs in recent years. Kelly had first considered including expansion along with reform in his SB 74 but dropped the expansion part just before the bill was introduced.

On April 1 the House committee was set to pass out an amended version of the expansion bill with amendments strengthening the reform features of the bill. The Senate committee is meanwhile working on combining and strengthening reform provisions from both Walker’s and Kelly’s bills. 

One innovative feature of Kelly’s bill, a provision establishing Health Savings Accounts, or HSA, for certain Medicaid recipients, may be dropped, partly over administrative complications in a proposal to allow 10 percent of a Medicaid recipient’s Permanent Fund Dividend to be used voluntarily to help fund the HSA.

While there are administrative complications a deeper issue may be senators’ reluctance to touch Permanent Fund Dividends, given the political sensitivity of the issue.

Meanwhile, a provision of the governor’s bill, a proposed new tax on health care providers, received pushback from at least one private physician practitioner in House hearings last week.

Dr. Ilona Farr, of Alaska Family Medical Care in Anchorage, told legislators the tax would disproportionately burden small private practices like hers. Medicaid pays only 72 percent of actual costs, she said, so a tax would only add to the costs.

Other health care providers appear to have accepted the tax idea, however, although details still need to be worked out and it would take separate legislation in 2016.

Democrats pitch budget idea: Raise oil taxes

As the Senate Finance Committee concludes it works on the state operating budget, two Democrats, Sen. Bill Wielechowski, D-Anchorage, and Rep. Les Gara, D-Anchorage, are pitching their solution to the state’s financial gap — a hike in state oil taxes.

In a March 31 press conference Wielechowski and Gara proposed increasing the state’s current minimum production tax of 4 percent to 12 percent for two years. The two would also end tax credits to the industry that will cost the state treasury $700 million next year.

Combined, the two steps would bring in $1.4 billion in additional revenue, they said.

“This will help extend the state’s savings and prevent dangerous budget cuts that will harm our economy,” the two said in a statement.

The state faces back-to-back deficits of $3.5 billion per year for the current fiscal year and fiscal year 2016, which starts July 1.

Spending is being reduced by legislative committees, with a goal of reducing the state-funded portion of the budget from about $6.1 billion in the current year to about $5.6 billion next year. The Senate is expected to vote on its version of the operating budget, House Bill 72 (which previously passed the House) on Friday, April 3.

Updated: 
11/19/2016 - 7:02pm

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