Overtime in Juneau: ‘Musk ox’ caucus causing headaches for House leadership

The bad news is that the Legislature is still in Juneau. The good news is that the jackhammers have showed up.

Major reconstruction work has restarted on the capitol building — this is phase two of a two-year project — and now an added pressure on legislators to get done is just the noise.

Streets are also blocked around the capitol too, making access difficult.

The betting now is that in a few days there will be a recess for lawmakers take a break and shift to Anchorage to reconvene, possibly in the controversial Legislative Information Office building on Fourth Avenue.

Being in the building for the extended session or a special session will be a political embarrassment for the Legislature in an election year but there seem to be few other alternatives as the capitol building itself will be uninhabitable for the summer.

If the session is just recessed and reconvened all the bills still pending remain active, and can be voted on. Once legislators actually adjourn, possibly to be called back in special session, all pending bills die.

Whoever calls a special session, typically the governor but sometimes the Legislature itself, sets out the agenda with specific bills listed.

At this point the key to final adjournment is agreement on the oil tax credit reform bill, House Bill 247 and Senate Bill 130. The House bill is tucked away in the House Rules Committee after having been sent there following a melee of floor amendments when the House leadership lost control of the Majority.

A dissident Republican faction — the “musk ox” caucus — joined with the House Minority of 12 Democrats and one independent, to muster majority votes of 21 and at times 22 votes in the 40-member House to tack on amendments making changes in HB 247.

Finally, by unanimous agreement, the bill was sent back to the Rules Committee to be reworked.  The Rules Committee scheduled but then cancelled meetings on the bill three days last week, a signal that the issue is still unresolved.

There are reports that a compromise is being put together but that there aren’t yet enough votes to support it on the House floor.

Meanwhile the Senate is working on its version, SB 130, but seems in no hurry given the disarray in the House. Even if the Senate voted and sent its version to the House an uncertain fate would await it.

The splitting and stability of the House Majority is raising concerns for remaining legislation.  The fracturing was evident also in voting patterns for confirmation of former Fairbanks borough mayor Luke Hopkins for a seat on the board of the Alaska Gasline Development Corp.

Hopkins was ultimately confirmed but the voting indicated that House rank-and-file Republicans were not following the lead of House Republican leaders after that body voted 22-17 to approve Hopkins.

Oil tax credit fight

The fight over the oil tax credit bill is how to modify the program, which has become very expensive, and yet still provide some help to explorers and independent companies in the middle of developing new projects.

If the program were just continued as is the cost would be about $700 million next year, in fiscal year 2017 starting July 1.

Gov. Bill Walker proposed slashing the tax credits affective this year but preserving a small program for explorers, for a cost of about $100 million next year.

Since then the battle has raged over ways of changing the credits with the House Resources Committee adopting a more gradual phase-out and the House Finance Committee reversing that back toward the governor’s proposal, at least partly. The Senate appears to lean toward a more gradual phase-out, at least for now.

Whatever the price tag when the dust finally settles will have to be added to the state operating budget, which is still pending. Those numbers are $4 billion for the House version, almost a $1 billion cut from this year, and $4.25 billion for the Senate version, a $750 million cut. A House-Senate budget conference committee is working to reconcile the differing budget bills.

Wherever the tax credit fight settles, that cost will be added to whichever version the budget conference committee decides to go with. The draw from cash reserves to cover the deficit will be pushed up that much more.

Controversy is raging over the oil tax credits because many legislators feel vulnerable — in an election year and with the state facing a $4 billion deficit — handing over several hundred million dollars in cash, as tax credit rebates, to oil and gas companies working on new projects.

On the other hand, if the Legislature just takes an axe to the credits and cuts off independent companies working on several new oil projects, about 30,000 barrels per day of new oil production that could be in the pipeline between 2017 or 2018 could be lost.

Permanent Fund earnings

While the tax credit bill is still in limbo things seem further along on the other big issue of the session, a mechanism to tap Permanent Fund earnings, in an orderly way, to help fund the budget.

Identical versions of a bill are now before the House and Senate Finance committees, HB 245 in the House and SB 128 in the Senate, combining ideas from proposals by the governor and Sen. Lesil McGuire. The governor and at least some of the Legislature’s leadership have signed off on the new approach.

What isn’t yet clear is whether there are enough votes from rank-and-file members of the House and Senate to pass the bill, however. The uncertainty over control of the House Majority casts a cloud on this, too.

If it were passed, the bill would create an endowment-type mechanism to draw annual sums from the Permanent Fund’s earnings reserve account that would total about $2 billion for FY 2017.

The Permanent Fund dividend would remain but pared to $1,000, or half the amount it would be under the status quo. However, this would at least preserve the dividend. If nothing is done the state’s cash reserves will be gone in three to four years. There will be no dividend then because there will be no money for it.

Crime bill still active

Most legislators are sitting around in Juneau waiting for their leaders to get adjournment negotiations done but hearings were also being held in House Finance Committee late in the week on one other important bill, Senate Bill 91, on criminal justice reform.

This is bipartisan legislation largely led by Sen. John Coghill, R-Fairbanks, the Senate Majority Leader. Most inmates in Alaska’s prisons are there for low level, nonviolent crimes, and many are simply waiting for trial.

SB 91 would allow for alternatives to prison for low-level offenses and would also beef up counseling and inmate “re-entry” programs to reduce recidivism.

There are big potential savings to the state budget if prison population growth is slowed or reduced. If trends continue a new state prison will be needed in 2027, a major expense. SB 91 aims to reduce the need for it to be built.

No real obstacles appear to be facing the bill and it is unclear why it hasn’t passed yet. It may be that House members want to show they are doing their due diligence on this important measure as Senate committees did earlier. It will very likely be approved in the end.

Rural Power Cost Assistance

Another bill still pending in the extended session, but likely to be passed in the end, is Senate Bill 196, a proposal by Sen. Lyman Hoffman, D-Bethel, to allocate surplus earnings of the Power Cost Equalization Fund.

A House-Senate conference committee was conducting hearings late in the week, seeking to reconcile differences in versions passed by both bodies.

The PCE Fund totals almost $1 billion and is like an endowment to support subsidies for residential electricity in small communities around Alaska.

The subsidy pays the differences between an average of electrical rates paid in the state’s Railbelt large communities and the actual cost of producing power in the community, which can be high if it is in a remote location.

About $40 million a year is needed for the PCE support and typically the investment fund earns more, so there is a surplus. Hoffman’s bill would allocate any surplus to, first, a new “community assistance” program that replaces current community revenue-sharing, and secondly to fund the state’s Renewable Energy Fund, which provides grants for renewable energy projects in small communities. Any money left after those goes back into the PCE fund itself.

Hoffman’s purpose with SB 196 is to provide protection for the PCE fund by providing a framework to fund several programs. Absent that the $1 billion fund would be vulnerable to a raid by legislators seeking money for other programs, Hoffman said.

State employee merit, step increases

A House bill that was introduced just last week, HB 379, has raised a lot of eyebrows. It would void merit and step increases in pay due this year to state employees, and for every future year until oil reaches $90 per barrel for a full fiscal year.

Sponsored by the House Rules committee, the bill had one hearing, in House Finance, late in the week.

The Alaska Chamber is lobbying for passage of HB 379.

Step and merit increases are provided for in state law and can be changed. They are not part of state employee contracts negotiated by public employee unions that normally contain agreed-on changes to health plans and for cost-of-living adjustments, or COLAs. There are no increases in COLAs being proposed in contracts this year, however.

The bill is obviously aimed at a big constituency for the Legislature’s minority Democrats and is seen as a bargaining ploy to secure the House Minority’s needed votes to withdraw funds from state reserves to balance the FY 2017 budget.

The bill faces an uncertain future, however. Even if it were to pass the House it faces a dubious reception in the Senate.

Tim Bradner is a correspondent for the Journal. He can be reached at [email protected].

04/26/2016 - 7:51am