Solving deficit in ‘revenue’ session challenged on multiple fronts
Alaska legislators will convene in Juneau Oct. 23 at the behest of Gov. Bill Walker but indications are their time together could be brief.
Senate Majority Leader Peter Micciche, R-Soldotna, said his caucus will be in Juneau for the necessary formalities of the 30-day special session but will hold most of its committee meetings in Anchorage.
Micciche expressed frustration over the situation in a brief interview. He said Senate Republicans asked Walker starting about five months ago to hold informal meetings with them and leaders of the Democrat-controlled House Majority on the hope the three sides could work out a compromise deal to fix the state’s ongoing budget problems.
Those meetings never materialized, according to Micciche, so the sides are not any closer to filling the state’s $2.5 billion-plus budget deficit for yet another year.
The Senate Majority decided to hold most of its meetings during the special session in Anchorage so the public in the state’s largest city would have more direct access to their legislators in a place where the message isn’t “filtered,” Micciche said.
House Minority Republicans have pushed to move the special session to Anchorage, similarly claiming it offers the public more opportunities to provide input on issues and would save the state money because legislators from Anchorage and some from the Mat-Su area would not be able to claim per diem at the full rate they would get while in Juneau.
Walker has said legislators can hold committee meetings wherever they choose, but as long as the capitol is in Juneau that’s where he intends to hold legislative sessions.
Walker’s spokesman Jonathon Taylor wrote in an email simply that “the governor and member of his administration have been meeting informally with leadership from both houses on (fiscal issues) frequently, both during and outside of the regular and special sessions.”
House Speaker Bryce Edgmon, D-Dillingham, said in a subsequent interview that he was surprised to hear of the comments from Senate Republicans, stressing his caucus has had regular discussions with officials in the governor’s office about the state’s fiscal issues.
He added that House leaders have had “good, constructive dialogues” with their Senate counterparts over the summer but the topic of meetings to reach a fiscal compromise was never broached by the Republicans.
“We have been willing to meet anywhere, anytime with them and the governor,” Edgmon said.
The House will conduct its work from Juneau, according to Edgmon.
An Oct. 18 press release from the House Majority references a Legislative Affairs Agency calculation that an Anchorage special session would cost the state nearly $1 million and be about $220,000 more expensive than Juneau primarily because the Legislature would have to rent space in Anchorage.
The former Downtown Anchorage Legislative Information Office building served as a second capitol of sorts in 2015 and 2016 before the Legislature vacated the building last fall. The Midtown Anchorage LIO purchased last year for $11 million is not set up to handle all 60 legislators and staff.
Regardless of who is where, Edgmon said ideally the Legislature would “get SB 54 passed and really take a hard look at a long-term fiscal solution” for the state during the special session.
While it was first dubbed the “revenue special session,” Walker added Senate Bill 54 to address the rash of low-level crime that is plaguing the state to the call in addition to his modified head tax proposal.
The Senate passed SB 54 last spring. The bill would roll back some of the sentencing provisions in the omnibus criminal justice reform legislation, Senate Bill 91, that passed the Legislature with strong bipartisan support in 2016.
On the other ever-pressing issue of the state’s continuous budget imbalance, things don’t seem to have changed much.
Senate Republicans continue to demand further budget cuts instead of enacting a broad-based personal income tax. The House Majority still insists such a tax is essential for a comprehensive fiscal fix to offset the more regressive nature of the other tools.
That’s because the legislation to draw roughly $2.5 billion per year from the Permanent Fund’s income account — the single largest way to resolve the deficit, which passed both bodies but still needs to be reconciled — is likely to lead to smaller Permanent Fund Dividend checks than the current formula and would hit low-income Alaskans the hardest.
Walker has generally supported the House Majority’s position, but has also indicated he wants the deficits resolved above all else and the exact means are negotiable.
The 1.5 percent payroll tax under the governor’s latest plan is capped at $2,200 per person or twice the previous year’s PFD amount.
The House will consider it, according to Edgmon, who called it “a starting point,” noting no bill makes it through the Legislature without changes.
He stressed that besides the philosophical reasons for his coalition’s support of a broad-based tax, increasing fixed costs to the state will mean next year’s budget will have to be several hundred million dollars larger just to remain at the status quo.
“Where will that money come from?” Edgmon asked.
He said he hopes the Legislature can reach a fiscal deal this fall, allowing it to focus on other issues during the regular session starting in January and ideally setting it up to adjourn on time in April, he said.
Budget fights in the Legislature have forced Walker to call special sessions each of the last three years to get a budget passed before the state government would shut down on June 30, the end of the state fiscal year.
Edgmon acknowledged the challenge of reaching such an agreement in the coming weeks, but said not doing so puts the Legislature on a path to either completely drain the Constitutional Budget Reserve — the state’s last remaining savings account — or make an unstructured draw from the Permanent Fund Earnings Reserve Account next spring to fill the deficit, which would set a very bad precedent, he said.
“We have less than a year’s worth of reserves left,” in the CBR, Edgmon noted.
Administration officials have said the roughly $2 billion that is expected to be in the CBR at the end of the current fiscal year should be left to cover a state emergency or other unexpected expenses that could crop up.
Legislators have not objected to that stance but so far have not been able to come to agreement on another option.
Elwood Brehmer can be reached at [email protected].