Leadership aims for common ground next session
Alaska’s leading lawmakers hope they can start to solve some of the longstanding, fundamental issues that challenge the state by improving a simple but crucial aspect of their work next session: communication.
At a forum hosted by the Alaska Chamber on Oct. 29 in Girdwood, House Speaker Bryce Edgmon and Senate President Cathy Giessel said regardless of specific policies, they want to improve their working relationships with top decision makers in the Governor’s Office when they convene in Juneau next January.
Both said that despite all parties spending months together in Alaska’s small Capitol building, they rarely if ever spoke with some of Gov. Michael J. Dunleavy’s closest advisors.
“Last year in the House we virtually had little to no relationship with the governor,” Edgmon said. “I never talked once with his chief of staff. I never met his (Office of Management and Budget) director other than on the street — things like that. I’m encouraged that the governor’s got a new chief of staff that’s got legislative experience.”
Dunleavy’s former chief of staff Tuckerman Babcock, who previously chaired the Alaska Republican Party, is known for his very conservative and uncompromising positions on many policy matters.
Former OMB Director Donna Arduin, who has held equivalent positions for several Republican governors across the country, routinely told legislators questioning the governor’s budget proposals in committee hearings that it was not the responsibility of her office to vet the impact of those ideas.
Policy goals aside, Giessel said that ideally next session would provide the public a chance to see the Legislature and the governor “actually working together, actually communicating. That would provide them, I believe, with something that’s been lost and that’s trust in government.”
Looking back at last session, she acknowledged she likely could’ve been more aggressive in pursuing a dialogue with Dunleavy and some of his cabinet officials.
Edgmon and Giessel spoke alongside Dunleavy’s current chief of staff and former Alaska Senate President Ben Stevens during the Alaska Chamber’s annual fall forum Oct. 29. Stevens was a policy advisor to Dunleavy prior to taking the role of chief of staff.
Dunleavy spokesman Jeff Turner said the governor was on a personal trip during the Chamber event.
Stevens noted it is common for governors during their first year in office to have an up-and-down relationship with legislative leaders, but said Dunleavy also acknowledges that if he would’ve had “more of an open-door policy,” better relationships could’ve been formed.
“The governor’s in a cooperative mood to try to work with the Legislature and see if we can come to a resolution” on some of the pressing issues facing Alaska, namely the state budget and Permanent Fund dividends, Stevens said.
Babcock said in a brief interview that he and Dunleavy decided early on that he would not be a primary conduit between the administration and the Legislature, though some governors do delegate that duty to their chief of staff.
Instead, legislative leaders had frequent discussions with Dunleavy’s Legislative Director Suzanne Cunningham and regular meetings with the governor himself during the session. Also, Giessel and Edgmon never requested to meet with him, according to Babcock.
“They’re just making excuses for how antagonistic they were towards the governor,” he said.
In spite of budget debates that stretched into August — more than a month after the fiscal year 2020 budget took effect — Dunleavy’s goal for next spring is that he and lawmakers can reach agreement on a balanced budget in the traditional 90-day legislative session, according to Stevens.
He said Dunleavy is going to continue to “face the budget head-on,” but at the same time the governor understands achieving his goals will require compromise.
“I think this concept — I don’t know when it occurred — but the concept in politics that compromise equates to surrender is not really conducive to an agreement,” Stevens added.
While there was a breakdown of communication between branches of government last session that largely left the state’s fiscal issues unresolved, legislative leaders seemed to form bipartisan bonds.
Giessel, a staunch Republican, said she considers the biggest success of last session being the two-way trust formed between her and Edgmon, a longtime Democrat turned independent.
“We formed a good basis of communication. I would also identify the positive communication I had with my minority leader, (Democrat) Sen. Tom Begich, which again, is probably shocking to some people. It’s shocking to me,” Giessel said. “I’m known as a fairly partisan Republican but yet on the positive, that communication really helped us move forward.”
Throughout the year Giessel and Edgmon have issued numerous joint statements and aligned the mostly Democrat House and Republican-dominated Senate majorities on a host of issues.
Deciding the dividend
The biggest issue facing lawmakers continues to be the PFD, which Edgmon forecasted would continue to be the “elephant in the room next session.”
Giessel said she’s looking forward to the report the bicameral Permanent Fund Working Group is expected to publish near the start of the session in January.
The eight-member committee formed last year has examined the history of the Permanent Fund and various ways lawmakers could approach changes to the PFD formula and their fiscal impacts.
“I have great expectations that the Permanent Fund Working Group report that they’re going to put together will provide a good basis for us moving forward on settling on the formula,” Giessel said.
The group is chaired by Republicans Rep. Jennifer Johnston of Anchorage and Sen. Click Bishop of Fairbanks, who have advocated for revising the PFD formula.
For Dunleavy, all other budgetary decisions precipitate from paying a full, statutorily calculated PFD. He primarily campaigned on paying full PFDs with minimal cuts to other state services at a time when budget forecasts indicated higher oil prices and production would provide most of the revenue to do just that.
However, when oil prices fell nearly 30 percent between the November 2018 election and his early December inauguration, Dunleavy chose to stick to his PFD promise at the expense of other appropriations in a decision that has elicited strong support and backlash.
The PFD is one of the issues that has united Giessel and Edgmon; both contend the state cannot afford to pay dividends at the amounts the current law calls for. Edgmon recalled public hearings the House Finance Committee held across the state following the release of Dunleavy’s budget plan, which would’ve cut approximately $1.2 billion in state spending and pulled another roughly $400 million in municipal tax revenues into state coffers.
“We thought we heard resoundingly from the general public that they wanted a balanced approach,” he said. “They value the dividend but they also value public education, transportation, public safety, health care services and having stability in government.”
With legislative leaders at odds with an entrenched governor over the PFD, it’s unclear at this point how the upcoming session will be different than the last.
Dunleavy’s willingness to reverse about half of the more than $400 million he originally vetoed from the state operating budget was a big step towards improving his relationship with the majority of legislators but there’s still a lot of repair work to do, according to Edgmon.
Education funding, spending cap, oil taxes
On other issues, Stevens said reaching a resolution on education funding procedures could hopefully lead to important discussions about what reforms are needed to the state’s K-12 system.
Dunleavy and the Legislature are currently involved in a lawsuit over whether the Legislature’s decision to forward-fund education across gubernatorial administrations is allowed by the Alaska Constitution.
“We’ve gotten over and over reports that our outputs from the education system are diminishing in terms of comparison to national standards and national test results, so I think that’s probably one thing that we find out and agree upon early depending on the outcome of that case,” Stevens said.
A school administrator prior to running for office, Dunleavy repeatedly said last spring that his administration would be putting forth a K-12 education reform package that didn’t materialize.
Edgmon, who in 2017-2018 led a caucus that pushed for oil tax changes and rejected a state spending cap, acknowledged those positions likely aren’t workable in the current situation.
As for a spending cap in state law, he noted legislators have taken to invoking the constitutional authority that generally allows them to bypass statutes relating to appropriations. That means a constitutional amendment, or amending the current constitutional spending cap is in order, he said, though those have very high hurdles for success.
Constitutional amendments require a two-thirds vote from both the House and Senate before they can be put up to a public vote.
Giessel concurred with Edgmon, adding that a revised constitutional spending cap proposed by Dunleavy is in the Senate Finance Committee and will likely be heard, and tweaked, during the session.
Stevens called a new constitutional spending limit “a foundational part of a true fiscal plan,” contending Anchorage’s municipal tax cap — a limit on the revenue side of the ledger — has effectively limited spending increases in the city.
Alaska passed a constitutional spending limit in 1982; it capped overall state General Fund spending on things other than debt service and PFDs at $2.5 billion at the time. However, allowances for inflation and population growth mean the state would have to spend somewhere near $12 billion to hit it today, Edgmon estimated, roughly twice the current budget.
The trio also laid to rest rumors that the legislators or the governor would attempt to preempt a voter initiative to raise oil taxes by doing it themselves, likely at a lesser rate than the initiative calls for.
The Fair Share Act sponsors estimate their voter initiative, which was certified by the Division of Elections Oct. 15, would raise approximately $1 billion per year in new revenue.
The panelists all noted changing Alaska’s oil tax system is an issue that historically has required two years of debate to get new lawmakers educated on the exceedingly complex and contentious matter and vet all the ramifications of such a significant policy change in addition to pre-session analyses with consultants that haven’t happened this year.
“Be wary of the initiative process to generate revenue, because, what’s next?” Stevens said.
Many in the public believe higher oil taxes are a means to pay for higher PFDs, Edgmon surmised. He went on to say that adding another major issue to what is almost assured to be another tense time in Juneau wouldn’t be fruitful.
“Quite frankly there are some differing world views with the Dunleavy administration and the Legislature that still exist. We have to get past that. To through oil taxes on top of that — I don’t know where it takes us,” he said.
Budget gap widens
Though lawmakers aren’t going to voluntarily add to their workload, it appears a variety of factors are combining to add to the budget deficit they will have to deal with when the session starts Jan. 21.
First, Alaska North Slope oil prices and production are both tracking below expectations for the first four-plus months of the 2020 fiscal year. While North Slope production typically peaks in the winter and early spring, that is the same time of year when oil markets are at their softest.
Legislative Finance Director David Teal told a gathering of the Alaska policy group Commonwealth North Nov. 1 that lower-than-expected oil revenues are likely to result in an $85 million deficit this fiscal year, which will be covered out of the $2.2 billion Constitutional Budget Reserve — the state’s lone remaining savings account.
Teal noted further that this year’s capital budget was also funded via $142 million from the CBR, which is not a long-term solution. Additionally, the Legislature took $30 million from the Power Cost Equalization Fund to pay for higher public safety and corrections costs related to criminal justice reforms last session; mandatory public employee pension payments could increase by up to $100 million; and the state’s Medicaid bill could be $75 million more than was budgeted for after Dunleavy vetoed a portion of Medicaid funding without making major changes to the underlying program.
“You’ve got to cut $150 million from the budget to stay even,” Teal said.
If accounting for full PFDs, it all adds up to another projected annual deficit of $1 billion or more.
Elwood Brehmer can be reached at [email protected].