James Brooks

Alaska remains on course for statewide shutdown; second special session begins

After its first special session ended in failure, the Alaska Legislature is still searching for a way to avert a July 1 statewide government shutdown. On Monday, lawmakers are poised to renew debates on how to bridge a political gap between the coalition House Majority and the Republican-led Senate Majority. Gov. Bill Walker called both the House and Senate into special session on Friday, but after brief floor sessions, each body adjourned until Monday. Speaking to reporters Friday afternoon, Walker said he is confident that the Legislature can avert an economically catastrophic shutdown. For better or worse, however, the issue is largely out of his hands. Under the Alaska Constitution, the Legislature is the body that approves the state’s budget, and it’s the Legislature that must reach an agreement. “The worst thing we could do is have government shut down … and have even greater uncertainty out there than we have today,” Walker said. Walker does have the power to set the agenda for the special session, and his to-do list includes just one item: a state operating budget. Read the rest of this story here at JuneauEmpire.com.  

House ends special session with failed ‘Hail Mary’ on budget

It was a mic-drop moment on a trampoline. In a surprise Thursday night move, the Alaska House of Representatives attempted to avert a statewide government shutdown by forcing the Alaska Senate and Gov. Bill Walker to accept a take-it-or-leave-it deal. The Senate left it, and Alaska’s state government is now two weeks from shutting down. “Tonight was not an ideal end to the session,” said Speaker of the House Bryce Edgmon, D-Dillingham, shortly after the House adjourned. In a series of caucus-line votes, the coalition majority that runs the House inserted a version of the state operating budget, funded primarily with savings from the earnings reserve of the Alaska Permanent Fund, into the state’s capital construction budget. The House approved that combined budget and adjourned a special session called by Walker. With the House having left the special session, the Senate must accept the House’s version of things or reject it and end the special session with no deal. While the Senate took no official action Thursday night, Senate President Pete Kelly has left little doubt. In a statement, he said the Senate Majority is “deeply disappointed in the House Majority’s actions tonight.” In a series of caucus-line votes, the coalition majority that runs the House inserted a version of the state operating budget, funded primarily with savings from the earnings reserve of the Alaska Permanent Fund, into the state’s capital construction budget. The House approved that combined budget and adjourned a special session called by Walker. With the House having left the special session, the Senate must accept the House’s version of things or reject it and end the special session with no deal. While the Senate took no official action Thursday night, Senate President Pete Kelly has left little doubt. In a statement, he said the Senate Majority is “deeply disappointed in the House Majority’s actions tonight.” Find the rest of the story here at JuneauEmpire.com.  

Alaska lawmakers make small move toward averting government shutdown

JUNEAU — The Alaska Legislature will not call for the outsourcing of DMV licensing and administrative services to a private company. The decision came Tuesday as lawmakers took a small step forward in their effort to avoid a statewide government shutdown in the first week of July. Three Representatives and three Senators met in a brief conference committee to agree upon the budgets for the Alaska Department of Administration and the Alaska Department of Commerce, Community and Economic Development. The House and Senate have each approved different versions of the state’s operating budget for the coming fiscal year (which starts July 1), and the conference committee has been tasked with ironing out the differences. If the committee fails to complete its mission by July 1, state government will shut down. Separate negotiations are ongoing to determine how the state will pay for the budget being considered by the conference committee. “Two agencies have now been agreed upon completely,” said Rep. Paul Seaton, R-Homer and the House chairman of the conference committee. Senate President Pete Kelly called Tuesday’s action something that “could’ve been done back in April,” but said it’s something necessary if lawmakers have any chance of averting a shutdown. The most significant decisions Tuesday came in the budget for the Department of Administration, where conferees agreed to cut $442,600 from the department’s travel budget, reducing it to 2015 levels. The Senate had proposed the cut, citing the availability of teleconferencing. Conferees also agreed to remove a call for the state to “outsource administrative and licensing services to private sector business partners to the extent practicable.” That request had been made by the Senate. In the Department of Commerce, lawmakers approved a $50,000 grant to the Medallion Foundation, which aids aviation safety, and agreed to divert $15,000 in vehicle rental tax receipts to a seasonal position at the Tok Visitor Center on the Alaska Highway. Speaking during the meeting, Seaton said other departments’ budgets will come up quickly. “Expect that later this week. I do expect that we will meet again later this week,” he said. Once conferees agree on a compromise budget, it still must be approved by the House and Senate, and lawmakers must find a way to pay for it. • Contact reporter James Brooks at [email protected] or call 419-7732.

Walker pleads with Legislature for compromise

JUNEAU — A day after the Alaska House Majority rejected his compromise bid to avert a statewide government shutdown, Gov. Bill Walker said he still hopes that shutdown can be averted. “My message to legislators: If you can’t find further compromise in what I have presented, please, please develop your own compromise,” he pleaded during a June 6 press conference with the Capitol press corps. June 7 is the 21st day of a 30-day special session called by Walker to give the Legislature time to avert a statewide shutdown by agreeing upon a budget and a way to pay for that budget. The state’s fiscal year starts July 1. If lawmakers can’t reach a deal before that date, state services will all but end on Monday, July 3. Read the rest of the story at JuneauEmpire.com       • Contact reporter James Brooks at [email protected] or call 419-7732.    

House majority rejects Gov's fiscal compromise

In a bid to avoid a state-spanning government shutdown, Gov. Bill Walker on Monday proposed a compromise to bring the Alaska Senate and Alaska House together. Walker’s compromise was promptly rejected by the coalition majority that runs the House. That leaves the state on course for a July 3 shutdown that would paralyze state services and commercial salmon fisheries at the peak of the season. In an evening press conference, Speaker of the House Bryce Edgmon, D-Dillingham, said the governor is on the wrong track with a proposal that would slash the state deficit from about $2.7 billion per year to about $300 million per year. He said the House Majority is continuing to champion a strategy that eliminates the entire deficit within three years. Unless the deficit is entirely eliminated, Edgmon said, Alaskans will continue to worry about how it will be balanced and what will need to be cut to make the budget balance. Find the rest of the story at JuneauEmpire.com.

Walker: Legislature in stalemate

Calling the Alaska Legislature’s current situation a “stalemate,” Gov. Bill Walker has announced that he will make a bid to avert a pending shutdown of the Alaska government. “A government shutdown is unacceptable, and compromise is essential. So my team and I have begun work on a compromise package from concepts currently on the table, and intend to present the compromise to all four caucuses next week,” Walker said in a statement Friday morning. “There is no reason lawmakers cannot complete their work within the current special session.” Walker called the Alaska Legislature into special session after it failed to pass a budget or close the state’s $2.7 billion deficit in a 121-day regular session. Now, only two weeks remain in that 30-day special session, and the state government will shut down Monday, July 3 if no agreement is reached. Even before July 3, the state will begin shutting down remote fishing management operations, endangering Alaska’s multibillion-dollar salmon fishery. It is unclear what compromise Walker will suggest, but deputy press secretary Jonathon Taylor said by email that “it will include legislation that is already on the table and is actionable under the Special Session call.” Find the rest of the story at JuneauEmpire.com.

Walker calls special session

The Alaska Legislature is headed into a special session. On Wednesday night, the Alaska House of Representatives and Alaska Senate adjourned the first regular session of the 30th Alaska Legislature without finishing a budget and without finding a way to pay for that budget. Minutes after the House and Senate adjourned, Gov. Bill Walker called lawmakers into a special session starting at 11 a.m. Thursday. On Walker’s agenda for the special session are a series of budget-related items and measures addressing Alaska’s prescription drug abuse epidemic. Walker has asked lawmakers to consider the state’s operating budget, its capital construction budget, a hike in the state’s gasoline tax, cuts to the state subsidy of oil and gas drilling, spending from the earnings of the Alaska Permanent Fund, and “an act or acts to increase an existing tax or to establish a new broad-based tax.” Read the full story at JuneauEmpire.com

Human Rights Commission nominee lone defeat for Walker in joint session

JUNEAU — The Alaska Legislature has refused to confirm the appointment of a transgender Fairbanks man to the state’s Human Rights Commission. The Legislature, meeting in joint session May 16, refused the confirmation of Drew Phoenix by a 24-35 margin. Phoenix was the only person among more than 100 gubernatorial nominees to not receive legislative confirmation during a marathon 4½-hour floor session. While the state of Alaska does not keep statistics on such matters, the Empire believes Phoenix would have been the first transgender individual in an Alaska appointive or elective position. Human Rights Commission members are unpaid. “Like all my nominees, Drew Phoenix was the most qualified for the position,” Gov. Walker told KTUU-TV through a statement by spokeswoman Grace Jang. “I thank him for putting his name forward, and for his willingness to serve.” Read the rest of the story at JuneauEmpire.com.     Contact reporter James Brooks at [email protected] or call 419-7732.    

Session reaches constitutional end with work far from done

JUNEAU — May 17 is the 121st and final day of the Alaska Legislature’s 2017 regular session. There’s more to come. Despite four months of work, lawmakers have not agreed upon a fix to the state’s $2.7 billion annual deficit. They have not agreed upon a budget to fund state government past June 30. They have not finished rolling back reforms to the state’s criminal justice system or taken steps requested by Gov. Bill Walker to fight the opioid drug abuse epidemic. They need more time, and there are two ways to get it. On their own, they can vote to give themselves more time. If two-thirds of the House approves and two-thirds of the Senate agrees, lawmakers can extend their session for 10 more days. As of May 12, Senate President Pete Kelly said he supported such an extension. Speaker of the House Bryce Edgmon said he supported an extension, too. Kelly leads a Senate bloc with enough votes to extend. Edgmon’s House bloc doesn’t have enough votes. In the House, an extension vote requires the support of the Republican House Minority. As late as May 15, House Minority Leader Charisse Millett, R-Anchorage, said the House Minority wants to see the Legislature settle upon a narrow agenda in exchange for its support of an extension. Without a focus on specific issues, the minority will not vote to extend. That doesn’t mean an end, because there is a second option. If the Legislature fails to act on its own, Gov. Bill Walker will call lawmakers into a special session, just as he has done the past two years. Walker’s special session — limited to 30 days — will be restricted to an agenda that he sets. Lawmakers will be limited to debating and voting upon topics that he selects. Furthermore, Walker could select a later start date for his special session, allowing the Legislature a brief break before resuming work. It is unclear if he would take that option or call the special session to begin May 18. In a special session, lawmakers would have two parallel tasks at the top of their agenda. The first would be deciding upon a budget for the coming fiscal year, which starts July 1. The second would be deciding how to pay for that budget. Lawmakers appear convinced that the state can no longer simply use savings to close the deficit. They are considering a program to automatically draw a portion of the earnings of the Alaska Permanent Fund, and they are considering changes to the state’s subsidy of oil and gas drilling. An income tax is no longer on the table, but a special session could allow lawmakers time to consider another tax, such as the school tax suggested by Sen. Click Bishop, R-Fairbanks. Even with an extension or special session, the Legislature — and every other Alaskan — faces two looming deadlines. If a budget is not signed by June 1, each state employee will receive a written notice stating that he or she will be fired in 30 days. If a budget is still not signed by July 1, state government will shut down, and those state employees will be laid off. — James Brooks, Juneau Empire Contact reporter James Brooks at [email protected] or call 419-7732.

Senate kills income tax

The Alaska Senate on Friday voted 15-4 to kill an income tax proposed by the House, all but ensuring the Alaska’s multibillion-dollar deficit will not be solved this year. Most of those in opposition said they refuse to raise taxes on Alaskans during a recession. “The Senate enthusiastically ended discussion, at least for this year, on the idea of penalizing them for having a job,” Senate President Pete Kelly, R-Fairbanks, said after the vote. “It’s not good for the economy, it’s not good for Alaska, it’s not good for our future. Most of all, it’s not needed.” Another senator, Sen. Shelley Hughes, R-Palmer, compared the state government’s spending habits to an opioid addict. Read the rest of the story at JuneauEmpire.com.       Contact reporter James Brooks at [email protected]

Bill allowing Uber, Lyft becomes leverage near session’s end

JUNEAU — A divide between the House and Senate has stalled a push to bring ride-sharing services like Uber and Lyft to Alaska. Senate Bill 14, allowing Uber, Lyft and similar companies to operate in Alaska, needs only a vote of the full House and the signature of Gov. Bill Walker to become law. Those actions seem unlikely to happen, even as many lawmakers say they support the idea. Instead, the House is effectively starting the legislative process anew by advancing its own version of Uber legislation from the House Labor and Commerce Committee May 10. SB 14 meanwhile remains in the House Rules Committee, awaiting a final vote. “It’s been there for a month under the control of the House leadership that could’ve put it on the floor, and you have to ask them why they haven’t done that,” said Sen. Mia Costello, R-Anchorage and the sponsor of SB 14. Read the rest of the story at JuneauEmpire.com.

House waiting on Senate to pass fuel tax increase

JUNEAU — With one week remaining in the Legislature’s regular session, a core piece of the state budget is still receiving no public attention. The rough-draft budgets approved by the House and the Senate take for granted that the Legislature will hike the state’s gasoline tax, but legislation enacting that hike hasn’t been considered for more than two months. “We all understand that this is the mechanism that this is logical for us to go forward,” said Rep. Paul Seaton, R-Homer and co-chairman of the House Finance Committee. “That hasn’t happened yet, but it doesn’t mean it won’t happen at all.” At the start of this year’s legislative session, Gov. Bill Walker proposed tripling Alaska’s motor fuel tax by 2018. From 8 cents per gallon of gasoline at the pump today, the tax would rise to 16 cents this year, then reach 24 cents next year. Alaska’s gas tax would go from the lowest in the nation to merely below the national average. Read the rest of the story at JuneauEmpire.com.      

Oil issues stall Legislature

In your car, oil acts as a lubricant. In the Alaska Legislature, it’s a clotting factor. With 12 days remaining until the Alaska Legislature’s 121-day constitutional limit, debates over the state’s subsidy of oil and gas drilling are the key item blocking further progress on a fix to Alaska’s $2.7 billion annual deficit. “That really is the direct problem we’re having with the Senate over this past week,” said Rep. Les Gara, D-Anchorage, on Friday. On Friday morning, Speaker of the House Bryce Edgmon, D-Dillingham, and House Majority Leader Chris Tuck, D-Anchorage, confirmed that the coalition House Majority remains committed to the idea of putting all four “pillars” of its deficit fix on the negotiating table at the same time. Not all of those “pillars” are yet ready for negotiations, which is why the Legislature has not yet reached a deal. The House’s deficit plan includes spending from the Alaska Permanent Fund’s investments, modest cuts to the budget, an income tax, and cuts to the state subsidy of oil and gas drilling. The Senate has proposed its own deficit-fighting plan. The Senate Majority’s proposal includes spending from the Alaska Permanent Fund’s investments and steeper cuts to the budget. The Senate plan does not entirely fix the deficit, but that’s a feature, not a bug, Senate leaders say. Having a continued deficit — one small enough to be sustainably covered by the state’s savings accounts — will pressure the Legislature to keep spending low. Meanwhile, oil prices are expected to gradually recover, mending the state’s finances. As Gov. Bill Walker said in late April, there are two philosophies in the Legislature when it comes to the deficit: “Are we going to fix it, or are we going to try to get through it?” he said. With the House viewing the deficit as something to fix, and the Senate viewing it as something to survive, this year’s action will be decided at the compromise table. The House and Senate have each proposed different versions of a Permanent Fund spending plan, and those different versions are ready for negotiation. Likewise, the House and Senate have proposed different amounts of budget cuts, and those are ready for negotiation as well. The Senate has firmly rejected an income tax, and the Senate Labor and Commerce Committee has canceled all hearings on House Bill 115, the version of the tax passed by the House. That leaves House Bill 111, which has passed the House and has been revised by the Senate Resources Committee. Gara called that version “a beautiful deal if you’re an oil company.” HB 111 will be revised still further in the Senate Finance Committee, which has scheduled hearings from Tuesday through Saturday. Sen. Anna MacKinnon, R-Anchorage and co-chairwoman of the Senate Finance Committee, indicated that the committee is open to compromise on the issue. Asked Friday morning, Gara responded that “their compromise is their position” and not a true compromise. Wednesday, May 17 is the 121st day of the regular session and the Legislature’s constitutional limit. If lawmakers haven’t finished their work by then —something that appears likely — they can add 10 days of extra time with a two-thirds vote of each house. If they still haven’t finished, they can call themselves into special session for 30 days, or the governor can. By that point, time will be running out quickly. If a budget is not approved by July 1, state government will shut down. Contact reporter James Brooks at [email protected]

House approves income tax

It was tax day. On April 15, the Alaska House of Representatives voted 22-17 to impose Alaska’s first income tax in 37 years. Juneau’s two Representatives, Democrats Sam Kito III and Justin Parish, voted yes. House Bill 115 heads to a reluctant Senate, and its legislative future is uncertain. Nevertheless, lawmakers on Saturday acknowledged their action was unprecedented in Alaska’s modern history. Speaker of the House Bryce Edgmon, D-Dillingham, called it “a very extraordinary day in Alaska’s history.” “I think this is one of the most important votes that I or the other members will ever cast,” said Rep. Jonathan Kreiss-Tomkins, D-Sitka. Seventeen Democrats, three Republicans and two independents voted yes. Seventeen Republicans voted no, and Rep. Mark Neuman, R-Big Lake was excused absent. After the vote, Senate President Pete Kelly, R-Fairbanks, released a prepared statement calling the tax “absurd on its face” and added, “As I’ve said many times, the only thing standing between Alaskans and an income tax is the Senate.” If HB 115 is approved by the Senate and signed by Gov. Bill Walker, single Alaskans making between $14,300 and $50,000 per year will pay 2.5 percent of their adjusted gross income to the state. Alaskans making more money will pay a higher rate. A single Alaskan making $50,000 per year will pay $992.50. Someone making $100,000 per year will pay $2,992.50. A couple earning $100,000 per year will pay $1,985. A couple earning $200,000 per year will pay $5,985. Since 2012, lawmakers have cut more than 44 percent from the state’s overall budget, according to figures from the nonpartisan Legislative Finance Division. Despite those cuts, the state still faces a $2.8 billion annual deficit, brought about by depressed oil prices. The coalition majority in the House has introduced a four-part plan to erase that deficit by 2020. The parts (or “pillars,” to use the majority’s jargon) include cuts to the operating budget, cuts to state subsidies for oil and gas drilling, spending from the earnings of the Alaska Permanent Fund, and some kind of “broad-based tax,” jargon that this year means an income tax. The tax is expected to generate only $687 million to pay down the deficit — and that not until fiscal year 2020 — but supporters said it is necessary to balance the burden of fixing the problem. “HB 115 will balance and spread the impact equitably,” said Rep. Paul Seaton, R-Homer and a coalition member of the Alaska House Finance Committee. “This will complete the comprehensive, sustainable fiscal plan that so many Alaskans have asked us to do.” Speaking on the floor, Rep. Andy Josephson, D-Anchorage, said passing the tax is necessary to pass other components of the deficit-fighting plan. “A number of my colleagues are not going to support a dividend-only cut. They want a balanced plan. A balanced plan. And I can’t blame them,” he said. Rep. Justin Parish, D-Juneau, said no one likes the idea of a tax, but he’s willing to support one to avoid greater budget cuts that will harm Alaskans. One in three Juneau jobs are funded directly by state or local government, according to figures from the Juneau Economic Development Council. Parish’s voice broke as he spoke about how some students in the Juneau School District don’t get enough to eat. “At this point, cuts are our most damaging option economically and — oh my goodness, there’s no comparison — morally,” Parish said. Members of the House Republican Minority constituted all 17 “no” votes Saturday, and most said they had no interest in raising taxes when Alaska is in a recession. That recession, like the state’s deficit, has been driven by falling oil prices. “I think ultimately this is going to lead to a smaller economy for the state of Alaska, and I don’t think a smaller economy is good for anybody,” said Rep. Dan Saddler, R-Eagle River. Rep. David Eastman, R-Wasilla, said he was wearing black in honor of the day. Rep. Lora Reinbold, R-Eagle River, added that she does not feel that state government has been sufficiently cut. “We have not cut to the bone. … There is so much to still cut,” she said. Rep. Lance Pruitt, R-Anchorage, was among those who pointed to the irony of passing the tax bill on federal tax day (the deadline is officially Monday, because tax day falls on a weekend this year). “I find it also ironic that it’s the same day the Titanic went down,” Pruitt said. According to a statewide poll conducted by the Alaska Chamber of Commerce at the end of February and start of March, a majority of Alaskans remain opposed to an income tax. The sole region of the state to support the tax is Southeast Alaska, where the poll found 51 percent of residents support the idea. Outside the Capitol on Saturday morning, as legislators prepared to vote, a small group of protesters had gathered to request President Donald Trump release copies of his income tax statement. Among them was Marian Call of Juneau, who said she wished she’d organized a “please tax me” rally instead. Call pointed out that Alaska’s state government is still majority-funded by oil revenue, and she feels that an income tax would force state government to become more accountable to ordinary Alaskans. “Whoever pays the bills owns the house, and I want to own the House,” she said as she aimed a thumb at the Capitol. Contact reporter James Brooks at [email protected]

House approves Permanent Fund bill with tax contingencies

For the first time in state history, the Alaska Legislature has chosen to spend the Alaska Permanent Fund on something other than dividends. On Wednesday, the Alaska House of Representatives voted 22-18 to approve Senate Bill 26, which takes a portion of the Permanent Fund’s investment earnings and applies that money to Alaska’s $2.8 billion annual deficit. As a side effect, the Permanent Fund Dividend would drop to $1,250 starting this year. “This gets us a long-term, sustainable fiscal plan,” said Rep. Neal Foster, D-Nome and co-chairman of the House Finance Committee. The Alaska Senate voted 12-8 on a different version of SB 26 earlier this year, and negotiations are expected between the House and Senate to reconcile the differences. One of the biggest of those differences is a requirement that the Legislature also enact “a broad-based tax, directed to education” and “the version of House Bill 111 that passes out of the House of Representatives.” Rep. Ivy Spohnholz, D-Anchorage, said that requirement “is what actually allows me to vote for this in good conscience,” because if the clause holds up, it would mean the burden of resolving the deficit doesn’t come entirely from reduced dividends. Under the “four-pillar” plan proposed by the coalition House majority, SB 26 would erase about $1.8 billion from the deficit. An income tax would generate anouther $650 million, and the remaining deficit would be solved with budget cuts ─ including from the state’s system of oil and gas tax credit program. That kind of comprehensive approach is seen as necessary to avoid a repeat of what happened last year. In 2016, the Senate passed a Permanent Fund spending plan similar to this year’s version, but that bill died in the House Finance Committee. Republicans and Democrats on the committee said they couldn’t vote for the plan without additional reductions in state spending and the oil industry tax credits. Without those reductions, lawmakers said at the time, they would effectively be taking money from Alaskans' dividends and giving it to government and oil companies. Seventeen Democrats, three Republicans and two independents voted for Senate Bill 26 in the House on Wednesday. All 18 members of the House’s Republican minority voted against it, and for a variety of reasons. “SB 26 … it is a sustainable plan, but for big government,” said Rep. Lora Reinbold, R-Eagle River. “There is basically nothing in this bill that I can support,” said Rep. Cathy Tilton, R-Wasilla. House Minority Leader Charisse Millett, R-Anchorage, said she wanted to see more of the minority’s ideas incorporated into the proposal. “I have no confidence in this piece of legislation. It’s bad for Alaska,” she said. Rep. Lance Pruitt, R-Anchorage and a minority member of the House Finance Committee, wanted to see spending-cap language from the Senate’s version of SB 26 kept in the House version. That didn’t happen. “It essentially has no effect to control us,” Pruitt said of the House’s version, “to control the Legislature and government from spending that money.” The Senate had proposed a spending cap and a reduction in the draw from the Permanent Fund if oil revenue suddenly surges. The House version removes that spending cap and doesn’t reduce the draw as much, even if oil prices rise. Randy Hoffbeck, the state’s revenue commissioner, warned that the House’s approach could make the state’s cashflow more volatile. Rep. Mark Neuman, R-Big Lake, said he’s concerned about what will happen to the economy if dividends decline. “I think that the people can spend that money a lot better than the government can,” he said. He added that the state may have a deficit, but it can balance that deficit through further cuts, and the state’s remaining savings accounts can tide things over until the cuts are made. “I do not see this as a crisis,” he said. Members of the majority disagree. The state’s principal savings account, the Constitutional Budget Reserve, could cover the deficit for two more years, but if no significant changes were made before that deadline, the state would be forced to turn to the Permanent Fund savings account that also pays dividends. Without a deficit fix, dividends would decline, and the state would again be forced to cut its budget unless oil prices unexpectedly rebounded. “I think we’ve cut enough,” said Rep. Justin Parish, D-Juneau, who pointed to studies from the Institute for Social and Economic Research. That institute, at the University of Alaska Anchorage, forecast earlier this year that 33,000 jobs would be lost if the Legislature attempted to balance the budget through cuts alone. “At the crossroads we’re at right now, we have two options: we either go into a 10-year recession, or we stabilize the economy,” said Rep. Geran Tarr, D-Anchorage. SB 26 returns to the Senate. Lawmakers there will vote later this week on whether to accept the changes made by the House. They are expected to reject those changes, setting up a negotiation between the House and Senate on a final deal. Contact reporter James Brooks at [email protected] or call 419-7732. Journal reporter Elwood Brehmer contributed to this report.

Dunleavy quits Senate Majority caucus

Dunleavy is done. Sen. Mike Dunleavy, R-Wasilla, abruptly left the Alaska Senate’s governing caucus on Thursday evening, citing differences with the caucus’ approach to Alaska’s $2.8 billion budget deficit. “Right now, I am a caucus of one,” he said after joining minority Democrats by voting “no” on the version of the state operating budget approved by the Senate Majority. That lone vote will have big consequences for both Dunleavy and the majority. Before Dunleavy’s departure, the Alaska Senate Majority was a supermajority that included 14 Republicans and one Democrat, enough votes to accomplish every major procedural action in the Legislature without any minority support. Now, the majority will be one vote short of what’s needed to spend from Alaska’s Constitutional Budget Reserve, the multibillion-dollar savings account that it is relying upon to balance the state’s budget. If it can’t get that vote, it can’t enact its budget plan. Dunleavy’s action also has personal consequences. The Senate operates in what’s known as a “binding caucus.” Members are required to vote in one bloc on budgetary items or they lose their caucus membership. Members of the majority are rewarded for following the caucus line, even if they disagree with a particular decision. Dunleavy was chairman of the Senate’s State Affairs Committee, and he likely will lose that position because of his budget vote. He’ll also lose some of his legislative staff, and he may lose some of his other committee assignments. “There’s a price for anything you do,” he said after the vote. Dunleavy has typically been at the conservative end of the Senate Majority. He voted no on the budget because he believes the state should erase its deficit through service cuts, and not through new taxes or cuts to the Alaska Permanent Fund Dividend. The Senate Majority’s plan doesn’t include new taxes, but it does include slashing the dividend from an estimated $2,300 this year to $1,000, then diverting some of the Permanent Fund’s earnings to cover the deficit. “I’ve been the odd man out on the Permanent Fund issue,” he said. Dunleavy called himself the “odd man,” but he might easily have been joined by others. Before the final vote on the budget, Sen. Shelley Hughes, R-Palmer, spoke at length about how difficult it was for her to vote “yes,” and she was clearly torn about whether to follow Dunleavy’s action or not. “For me, it would actually be easier to vote no,” she said before voting yes. Dunleavy said after the fact that he spoke with Hughes and Sen. David Wilson, R-Wasilla, before making his decision. “I’m actually glad they stayed in the caucus,” he said, and Hughes confirmed in her floor speech that Dunleavy spoke with her before his decision. In addition to Dunleavy’s thoughts on the budget this year, it is possible that an event coming in 2018 factored into his action Thursday night. There have been persistent rumors in the Capitol and elsewhere that Dunleavy may run for governor when Gov. Bill Walker’s first term expires in 2018. (Walker has not said if he will run for re-election.) “I’m not going to dismiss it,” Dunleavy said of those rumors, “but that’s not what this is.” Contact reporter James Brooks at [email protected] or call 419-7732.

House ‘working on’ votes to approve income tax

JUNEAU — Does the Alaska House of Representatives have the votes to approve Alaska’s first income tax since 1980? “We’re working on it,” Speaker of the House Bryce Edgmon, D-Dillingham, told reporters at an April 4 press conference. With time winding down in the Alaska Legislature’s 121-day limit, the coalition House Majority’s plan to erase Alaska’s $2.8 billion annual deficit appears to be in trouble. The coalition leaders are backing House Bill 115, which includes a statewide income tax and spending from the earnings of the Permanent Fund to erase much of the deficit. A separate measure, House Bill 111, would increase oil production taxes and cut oil drilling subsidies to deal with remaining parts of the deficit. Now, some of the coalition’s members are wavering on the income tax. “I’m still not a 100 percent ‘yes’ when it hits the floor,” said Rep. Jason Grenn, I-Anchorage, on April 4. Rep. Dan Ortiz, I-Ketchikan, also declined to say that he is a firm “yes” vote. “Parts of House Bill 115 will change and need to change,” he said. The House Majority has 22 members: 3 Republicans, 17 Democrats, and 2 independents. If Ortiz and Grenn aren’t certain “yes” votes in a vote of the full House, that would leave the majority one vote shy of the 21 needed to pass the bill. In addition to serving as members of the majority, Grenn and Ortiz are members of the powerful House Finance Committee, which is still considering HB 115. With Grenn and Ortiz uncertain, the committee abruptly canceled an April 4 hearing that had been scheduled to pass the bill to a vote of the full House. Committee co-chairman Paul Seaton, R-Homer and author of HB 115, said the cancellation came because legislative staff needed more time to re-draft the bill to incorporate amendments passed April 3. Rep. Cathy Tilton, R-Wasilla and a member of the Finance Committee, doesn’t believe that. “I think they’re having a hard time, or it would’ve already went,” she said. Tilton is a member of the House’s Republican minority, and other members of that caucus also believe the majority is having problems finding enough votes for a bill that contains an income tax. “Being canceled today is a good indicator,” Tilton said. While the income tax is favored by a majority of Southeast residents, according to statewide polling, it remains unpopular in the rest of the state. It is unclear whether a single member of the Republican minority will vote in its favor. “They don’t have the votes for 115,” said Rep. Lance Pruitt, R-Anchorage and a minority member of the Finance Committee. Grenn said his principal concern is how the income tax relates to trusts: How would it affect someone who relies on a trust for their income? “I need to be comfortable explaining that,” Grenn said. “It doesn’t affect very many people, but those it does affect, it affects in a big way. That could be a big thing that could make the bill not worth it.” Ortiz said he expects only that the bill will change before it leaves the committee. Leaving the committee is a significant milestone. That would show that it has the support of Grenn and Ortiz and would be likely to pass. “I think so,” said Rep. Les Gara, D-Anchorage and vice-chairman of the Finance Committee, when asked whether the bill is likely to pass a floor vote. “I’ve counted wrong before, but I’m pretty confident.” Contact reporter James Brooks at [email protected] or call 419-7732.

Senate passes Fund, spending cap bill on close vote

Lawmaker after lawmaker said the Senate does not relish the idea of touching what has long been a political third rail — the Permanent Fund — but they see no other alternative. The Alaska Senate has approved a sweeping reformation of the Alaska Permanent Fund that generates billions to fix the state’s budget deficit but halves the Permanent Fund Dividend. “Alaska has a problem, and that problem is that our revenue doesn’t meet expenses and we’ve been drawing from our savings account for the past five years,” said Sen. Anna MacKinnon, R-Eagle River and co-chairwoman of the Senate Finance Committee. “We don’t have a lot of choices left,” MacKinnon said. Opposition to the bill came from members of the Senate’s Democratic minority and from the Republican senators who come from the Matanuska-Susitna Borough. Sen. Bill Wielechowski, D-Anchorage, who initiated a lawsuit against the governor back in 2016, offered an impassioned and lengthy speech about how SB 26 is a de facto tax of $1,000 on every Alaskan. Because the same amount is taken from everyone, “this plan taxes the secretary at a much, much higher rate than the millionaire CEO,” Wielechowski said. Wielechowski and Sen. Mike Dunleavy, R-Wasilla, proposed amending the bill on the floor, but no amendments passed. Judging by the amount and volume of public testimony against the proposal, the idea of spending a portion of the Permanent Fund remains unpopular among Alaskans. “The public has told us they want us to keep our hands off the Permanent Fund,” Wielechowski said. “I think the people are not going to be real happy with this plan,” he added during a press conference after the bill’s passage. In a special advisory vote held in 1999, the last time the Legislature seriously considered using the earnings of the Permanent Fund, 83.25 percent of voters said no. While the vote wasn’t binding, the Legislature retreated from the idea. Business groups, meanwhile, have testified in favor of the proposal. Among those offering letters of support were the Resource Development Council, Associated General Contractors and Northrim Bank, which said in a letter, “Passage of this legislation will go farther than any other action to prove that we have the means to balance our budget and regain the confidence of the market.” Details of the proposal Senate Bill 26, which passed in a 12-8 vote, advances to the House for consideration. It will become law only if the House and Gov. Bill Walker also approve. The bill does not touch the constitutionally protected principal of the Permanent Fund. Instead, it spends some of the money the Permanent Fund earns when that principal is invested, money that is currently deposited into the fund’s $10.6 billion earnings reserve. If approved by the House and signed into law by the governor, SB 26 would take 5.25 percent of “the average year-end market value” of the Permanent Fund and its earnings reserve combined. That average is calculated using five of the previous six years, a technique designed to moderate big swings in the investment markets. In fiscal year 2018, that formula would generate $2.5 billion per year for dividends and government services. Seventy-five percent of that figure would be applied to Alaska’s $2.7 billion budget deficit, dropping it to $819 million, according to calculations by the nonpartisan Legislative Finance Division. The remaining 25 percent would pay dividends. The bill requires the Permanent Fund Dividend to be $1,000 in 2017, 2018 and 2019. Speaking on the Senate floor, Sen. Gary Stevens, R-Kodiak, said that amount is close to the long-term average dividend amount. Without the bill — or any vetoes by the governor — the dividend is expected to be more than $2,000 per person. After 2019, the value of the dividend is expected to gradually rise above $1,000, but it would fall if the Permanent Fund’s investments do worse than expected. That system would stay in place for three years, then the draw would decline to 5 percent of the average value. The Permanent Fund is expected to earn an average 7 percent return on its investment, and the reduction in the draw is designed to provide a safety measure and help the Senate create one of its longstanding wishes — a smaller government. Spending cap included In addition to the spending measures, SB 26 includes a $4.1 billion spending cap of dubious effectiveness. It’s dubious because one Legislature cannot bind a future Legislature through statute. It’s the same reason Legislatures have repeatedly violated the law calling for a 90-day Legislative session: The law isn’t legally binding. Only a constitutional limit can bind the Legislature, and Republican lawmakers have proposed an amendment that would strengthen the spending cap that already exists in the Alaska Constitution. That measure would have to be approved by voters to become effective. Dunleavy, speaking in opposition to SB 26, said he feels the Senate is “putting the cart before the horse” by not requiring greater budget cuts and greater surety before its passage. “I think immediately we have to work on the constitutionalization of that fund,” he said. In addition to the spending cap, SB 26 includes a provision to automatically reduce the Permanent Fund draw if oil revenue tops $1.2 billion per year. For every dollar of oil revenue above that figure, a dollar will be removed from the Permanent Fund draw. According to figures provided by the Alaska Department of Revenue, that limit will be reached in fiscal year 2019, when oil revenue is expected to reach $1.34 billion. By fiscal year 2026, oil revenue is expected to reach $1.56 billion, a figure that would reduce the Permanent Fund draw by some $360 million. House action ahead In the House, lawmakers are considering a similar but wider-reaching bill. House Bill 115, now in the House Finance Committee, calls for a 4.75 percent draw from the Permanent Fund, lower than the Senate’s proposal. In a significant difference from the Senate plan, HB 115 also includes an income tax, something the Senate has been reluctant to consider. The Legislature has been in this position before. The Senate last year approved a Permanent Fund bill that died in the House during the Legislature’s extended summer special sessions. The Senate Bill 128 passed the Senate in a 14-5 vote on June 6. “I’m still concerned the same thing will happen again this year,” said Sen. Dennis Egan, D-Juneau. Egan voted for SB 26 but changed his vote on reconsideration and will go into the books as a “no”. HB 115 and other measures proposed by the House are intended to completely eradicate the state’s deficit within a few years. The Senate, which is expected to propose deeper budget cuts than the House, does not have a plan to eliminate the entire deficit. That worries some lawmakers. “If this bill passes, we in the Senate are going to wash our hands of this budget crisis issue and claim victory that we’ve fixed the problem,” said Sen. Donny Olson, D-Nome. Vote tally Yes: Bishop, Coghill, Costello, Giessel, Hoffman, Kelly, MacKinnon, Meyer, Micciche, Stedmans, Stevens, Von Imhof (12) No: Begich, Dunleavy, Egan*, Gardner, Hughes, Olson, Wielechowski, Wilson (8) *Sen. Dennis Egan, D-Juneau, voted for the proposal on the first vote, but upon reconsideration changed his vote to “no”. The governor joined the crowd in the Senate gallery as the vote neared. “I was very pleased with the outcome,” he said after the fact. This story originally appeared on the Juneau Empire.

House set for marathon budget session

JUNEAU — The Alaska House will begin a lengthy budget slog today by considering the first of what are expected to be hundreds of budget amendments from individual lawmakers. Asked how many amendments the 18-member House Republican Minority might offer, Minority Leader Charisse Millett, R-Anchorage, said, “That’s a great question.” She proceeded to talk about a juice cleanse she is trying. House Majority Leader Chris Tuck, D-Anchorage, said lawmakers’ amendments remain confidential and their personal property until presented on the floor, so he doesn’t know how many there will be. “The hope is that it’s not such a large number of amendments that we have to spend days on the House floor,” said Speaker of the House Bryce Edgmon, D-Dillingham. The coalition House Majority has proposed an undesignated general fund budget of $5.07 billion. That’s actually 2.6 percent more than the amount proposed by Gov. Bill Walker in December, but much of the increase is because lawmakers have proposed increasing the Permanent Fund Dividend. If dividend spending isn’t included, the proposed budget is $4.2 billion, about 0.7 percent above Walker’s figure. Some of the additions included $2.1 million more for the Alaska Marine Highway System and $1.2 million for pre-kindergarten programs. If it seems strange that lawmakers would call for more spending when Alaska faces a $2.7 billion annual deficit and dwindling savings accounts, realize that the budget presented by the House is only a first step. The Senate is formulating its own budget proposal, one that calls for hundreds of millions of dollars in cuts, and the two plans must be reconciled before the Legislature gavels out for the year. Each budget acts as a bumper, with the eventual compromise somewhere between. “Ultimately, we’re going to conference with the Senate, which is going to come through with a much lower number,” Edgmon said. Before today’s floor session, Republicans in the House minority proposed more than 230 cuts to the majority’s budget, but few were accepted. Rep. Lance Pruitt, R-Anchorage and a member of the Finance Committee, voiced his displeasure before the committee moved the budget to the floor on Friday morning. “Thanks for proving to the public that we can’t get along,” he said. “There is no bipartisanship in this building,” he told Finance Committee chairman Paul Seaton, who is also a Republican. Some of the defeated amendments are expected to reappear on the House floor, where individual lawmakers may make budgetary suggestions that are subject to an up-or-down vote of their colleagues. It’s not a quick process. “One amendment can be an hour debate sometimes,” Tuck said. Edgmon said he is scheduling the House to have daily floor sessions — an act that will put all other House business on hold — until the budget is passed. “We’re going to go as long as it takes,” he said. James Brooks can be reached at [email protected]mpire.com.

Fuel tax hike might be stretched to 2019

A proposed hike in the state’s gasoline taxes might not reach full potential until 2019, according to a new draft of the proposal. On Feb. 21, the Alaska House Transportation Committee heard details of a new version of House Bill 60 drafted by committee staff. As introduced by Gov. Bill Walker, HB 60 would triple Alaska’s lowest-in-the-nation gasoline tax. The state tax on a gallon of gasoline is 8 cents today. That figure hasn’t changed since 1970, though the Legislature has added other per-gallon fees. Taxes on jet fuel, aviation gasoline and marine diesel would also be tripled. Home heating oil is not included in the tax. Under HB 60, proceeds from the 24-cent-per-gallon tax would be designated to different parts of the Alaska Department of Transportation. Taxes collected on gasoline would go to highways. Taxes on aviation gasoline would go to airports. The original version of the bill called for the tax to be doubled to 16 cents per gallon on July 1 this year, then increased to 24 cents per gallon on July 1, 2018. The new version doesn’t increase the tax to 24 cents until 2019, something that Rep. Adam Wool, D-Fairbanks and co-chairman of the House Transportation Committee, said is designed to give taxpayers a chance to adjust “instead of going boom-boom, year after year.” The draft version presented Feb. 21 also would allow commercial fishermen to apply for a 3-cent-per-gallon rebate from the state. That provision was inserted by Rep. Louise Stutes, R-Kodiak and the committee’s other co-chair. Lawmakers will consider amendments to this new version of the fuel tax and, if they agree, are expected to send it to the House Finance Committee as soon as Thursday. While other proposed tax increases are tied up in debates about the state’s overall budget situation and may not see significant movement until the very end of the Legislative session, Wool and other lawmakers consider the fuel tax a separate issue. Because it only raises between $40 million and $80 million per year (about 3 percent of the state’s $2.7 billion deficit) and because the money it raises is designated for transportation, there has been little organized opposition to the proposal. Even the tax-averse Senate Majority has characterized the fuel tax hike as a “user fee” rather than a true tax. The most significant opposition to HB 60 has come from large airlines. On Tuesday afternoon, representatives from Alaska Airlines sat down with the Empire and said their company would pay 45 percent of all proceeds generated by the tax hike. That’s because jet fuel for international flights is exempted from state taxes, and Alaska Airlines is the largest single motor fuel consumer in Alaska. (UPS and Delta Airlines have also opposed the hike, but for different reasons, and UPS has said it doesn’t oppose the increase in the gasoline tax.) Joseph Sprague, senior vice president of communications and external relations for Alaska Airlines, said his company is planning to spend $100 million on a new Anchorage hangar and 11 new rural airport terminals by 2020. Because those terminals are used by other airlines at rural airports, Sprague said Alaska Airlines believes it’s already investing in infrastructure — and infrastructure investment is the stated goal of the tax hike. In other words, Alaska Airlines feels the state is double-dipping. Sprague said the company’s position is “challenging” because it will suffer if Alaska fails to balance its budget and plunges deeper into recession. Alaska Airlines supports a business organization called Alaska’s Future that advocates spending some of the earnings of the Alaska Permanent Fund to partially balance the budget. “We will support that,” said regional vice president Marilyn Romano. She said the company has met with Gov. Bill Walker to explain its position on both the fuel tax and the overall budget picture. “He understands that this is not personal; it’s business,” Romano said. “He knows that we actually support almost everything he’s trying to do. With the exception of this one area.”     Contact reporter James Brooks at [email protected] or 419-7732.    

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