Big issues loom, but legislators make progress on budget

JUNEAU — The Legislature passed day 40 in its 2012 session Feb. 24, with 50 days left to go before the required April 15 adjournment. The big issues, mainly oil taxes and school funding, are percolating mostly in the background, but lawmakers are making steady progress on their major responsibility, developing the state budget for the next fiscal year, which begins July 1.

House Speaker Mike Chenault said work in the House Finance Committee and its budget subcommittees are on schedule with a proposed state operating budget expected to be before the Finance Committee in the first week of March and for the budget to be passed to the Senate in mid-March.

Meanwhile, the Senate Finance Committee is doing its own review of agency budgets, which is awaiting the House-proposed version and is also a developing an initial draft of a state capital budget. That budget is expected to equal the current year capital budget of about $2.8 billion, with approximately $1.8 billion in state funds.

Traditionally the House develops the first draft of the operating budget and sends it to the Senate in March. The Senate develops the capital budget and sends its proposal to the House, usually in early April.

The differences are worked out in budget conference committees that are appointed as the session nears its end in mid-April.

In a briefing by House leaders Feb. 20, Chenault said House members are waiting to see the Senate’s version of proposed changes to the oil and gas production tax. The House passed its proposal, House Bill 110, last year, and in the last two weeks the Senate Resources and Finance committees have been listening to consultants and the Department of Revenue while working on their own proposal.

Chenault said he had been told the Senate would unveil its proposal on or about Feb. 24. Consultants Pedro van Meurs and PFC Energy appeared before the Senate committees in several review sessions last week.

ConocoPhillips Alaska Inc. and BP Exploration (Alaska) Inc., two North Slope operating companies, also were before the Resources Committee to discuss their views on the current business climate for industry investment.

Meanwhile, a bill reinstituting a coastal management act was introduced in the House Feb. 17 by Rep. Alan Austerman, R-Kodiak. The bill as written is very close to the pending citizen-sponsored ballot proposition reinstating the program that will be before voters in the November elections unless the Legislature passes a bill that is substantially similar.

Austerman, the House Majority Leader, said he is still assessing the views of fellow majority members in the House.

“The discussion is wide open. There are pros and cons being discussed. The legislation speaks for the initiative that reinstates the program dropped last July. The effort behind the initiative shows a lot of support for coastal management,” Austerman said in the House majority briefing. “We will request a hearing for the bill, and the sooner the better.”

Despite that, there doesn’t seem to be much stomach in the Legislature for taking on another major controversial issue in the middle of the 90-day session with items like oil taxes and school funding also pending.

In comments the previous week, Gov. Sean Parnell said he prefers to let the question go to the ballot in November. “Let the voters decide,” Parnell said.

The state coastal management program ended in mid-2011, when the Legislature failed to adopt a bill extending the program beyond a scheduled sunset date. Parnell had proposed an extension of the existing program.

Rural legislators had pushed for changes to the program to give coastal communities a stronger voice, which the governor opposed. After a bruising fight in the Legislature in the closing days of the 2011 session, a hard-worked compromise failed and the program ended.

If coastal management goes to the ballot and is passed, it will take some time for a new program to be set up and certified by the federal government. The Legislature can make changes to laws enacted by ballot proposition in two years. One advantage of passing a bill in lieu of the ballot proposition is that the Legislature can change it in the following year.

One of the more difficult sections in the proposed ballot proposition language is that it would include federal air and water quality permits issued by the Department of Environmental Conservation under a reestablished program.

This is a hot-button item for the governor and many of the state’s resource industries because it would greatly complicate the issuance of these permits, which are administered by the state under authority delegated by the U.S. Environmental Protection Agency.

The permits are complex enough, and to bring them under coastal management would require an additional level of review and scrutiny that would cause delays, as happened in the 1980s and 1990s before Gov. Frank Murkowski changed the program with a “DEC carve-out,” taking the federal permits out of the program.

Another possibility is that coastal districts reestablished under the program could set their own regional air and water quality standards that could conflict with the state’s, and which might not be set up using scientific methodology used by the state and EPA in setting requirements.

Such a balkanization of air and water quality standards would be a huge concern for resource industries, state officials said on background.

Besides oil taxes, the other contentious question before lawmakers in 2012 is school funding, which is shaping up to be a bruising fight in the final month and a half of the session.

The governor’s comments made last week in a briefing for reporters that a bill that passed the Senate increasing school aid was the “ultimate giveaway” to schools has ignited an uproar among educators and Democrats in the Legislature.

House Minority Leader Rep. Beth Kerttula, D-Juneau, said, “I was just astonished to hear the governor call this the ‘ultimate giveaway’ in view of what he has proposed for oil taxes.”

Democrats have criticized Parnell for “giving away” $2 billion a year in reduced taxes for industry without guarantees that there will be new investment.

The Senate bill, however, highlights a deeper difference in the Legislature, and with the governor, over the form of increased education funding. The Senate proposes three years of increases to the formula under which state aid is distributed to school districts, the Base Student Allowance, or BSA.

House leaders, and the governor, are wary of increasing the formula because it would lock in the increases as the state approaches a time of leaner budgets as oil production is in decline.

“I don’t think we’re that far apart (on the need for additional funding), but the question is how we get there,” Chenault said.

Kerttula said there are “discussions” under way on arriving at agreements on funding, “but we appear to be light years away from the governor, in view of his comments,” she said.

School districts are pushing for more money because rising energy costs and basic inflation has eaten into budgets, diverting money from classrooms. Layoffs of teachers and staff are pending in several districts around the state.

The position of House leaders, so far, and of Parnell is in favor of one-time appropriations to deal with specific issues like energy or other costs rather than increasing the basic formula.

However, Austerman said there is a lot of sympathy in the House for increased funding over three years so school districts have the security of knowing what funding they will have.

“The questions are really in the dollars,” he said.

Supporters of the BSA increase argue this kind of “silo” funding hamstrings school administrators, reducing their flexibility.

As to another comment by the governor, that schools should show some improvement in performance before being given more money, Chenault said there has indeed been an improvement in high school graduation rates in several regions.

“Some people are saying we should reward only those schools who improve, but does that mean we deny funding to schools that don’t improve?” Chenault asked. “That will just buy us another lawsuit,” like the Moore case involving rural schools, which was just settled.

Still, the question remains on how well high schools are preparing students for colleges or technical careers.

“Fifty-three percent of incoming freshmen at the University of Alaska have to take remedial courses,” Chenault said. “Thirty percent of the ‘Alaska Scholars’ have to do remedial work.”

The Alaska Scholars are university students who graduate in the top 10 percent of their high school graduating class, and who can attend the state university with free tuition.

Chenault said the remedial education is costing about $12 million a year, half of that borne by students themselves through tuition.

Updated: 
11/07/2016 - 2:31pm