Morris News Service-Alaska

Operating budgets pass; Legislature turns eyes to revenue

The Alaska Senate voted 16-4 on March 14 to approve an $8.73 billion state operations budget that includes $571 million in cuts and sets up the full Legislature to focus on long-term revenue sources. The Senate’s budget will be combined with an $8.66 billion version the House passed last week. A final, compromise version of the budget is not expected until the end of the legislative session, after lawmakers have figured out how to pay for it. With the state considering a $3.7 billion deficit due to low oil prices, the next question is whether to cover the deficit with savings from the $8.2 billion Constitutional Budget Reserve or to come up with additional revenue from taxes or the earnings of the Alaska Permanent Fund. As in the House, the Democratic-led minority on March 14 attempted to amend the budget to address what it saw as problems with the bill drafted by the Republican-led majority. Again, similar to the House proceedings days prior, all the amendments were resoundingly defeated. “This budget still leaves unscathed hundreds of millions of dollars in corporate welfare,” said Sen. Bill Wielechowski, D-Anchorage. “These are tough financial times for Alaska, but when the boat takes on water, you shouldn’t be throwing overboard foster kids.” Both the House and Senate cut $2 million in pre-kindergarten grants from the Department of Education, which follows Gov. Bill Walker’s budget proposal submitted to the Legislature at the start of the session. Walker was criticized by the minorities in the Legislature for the cut when his budget was released. Sen. Pete Kelly, R-Fairbanks and co-chairman of the Senate Finance Committee, said the thinner budget means the “people of Alaska are somewhat assured we’re somewhat committed to cutting the budget” before trying to raise more revenue. He also said the Senate is passing its version of the budget early, so it has time to consider revenue. “We’ve never even been close to operating on this timeline,” he said. In a March 15 press briefing Kelly reiterated the sentiment that has come from leaders of the majorities in both bodies that tax increases are almost certainly off the table until this year. The focus this year is on reducing spending and harnessing revenue from the Permanent Fund investment returns before taxes are used to close the deficit as a last resort. Republican leaders have said they are comfortable with running deficits for a couple years to see if oil prices rebound before tax increases are accepted. The exception to that is a change to the state’s oil and gas tax program. The state’s obligation for refundable tax credits has become a $500 million-plus budget line item in recent years. While Republicans have picked apart Walker’s legislation to overhaul the program and say drastic changes could further impact an industry that is already severely hurting from low oil prices, they have also acknowledged the state’s status quo outlay is unsustainable. Both budgets currently fund only the state’s absolute minimum obligation of $73 million for refundable credits this year, with the expectation that money will be added when changes to the program are finalized. Bills to raise Alaska’s fuel taxes, which are some of the lowest in the nation, are the only tax proposals of Walker’s suite of industry and personal tax increases to move out of committee so far. Meanwhile, Gov. Bill Walker said a fiscal plan is needed this year to address the multibillion-dollar deficit Alaska faces amid chronically low oil prices. “To continue to drag the black cloud of deficits over the top of the state of Alaska for the next several years is not a plan,” he said March 14, adding later, “The urgency is to do it this year so we can get on with our future.” The taxes are part of Walker’s New Sustainable Alaska Plan unveiled in December to balance the state budget with a combination of spending cuts and new revenue by 2019. The House and Senate budgets are similar in amount, but they differ under the hood. Speaking in the Senate Finance Committee last week, Kelly said the Senate decided to forego some budgeting strategies used by the House. To reduce the amount of money the Legislature needs to find this year, the House plans to roll money left over from last year into a handful of state trust funds, and then use those trust funds to pay for some operations. That plan, which includes $288 million in “found” money left in the Statutory Budget Reserve, was decried as a “shell game” by a pair of House lawmakers, and the Senate decided against the House’s approach. “It has been our intent to make the budgeting as simple or transparent as possible,” Kelly said. Instead, the Senate plan calls for spending about $342 million to pay down the state’s debt to the Teachers Retirement System and the Public Employee Retirement System. That will save between $16 million and $20 million per year in debt service payments, Kelly said. The Senate budget also provides more funding to the Alaska Seafood Marketing Institute and state tourism marketing than the House version does. The Senate budget provides more money for pre-kindergarten programs, and it does not fund a $30 million grant program for substance abuse treatment and prevention that was included in the House. The House version of the budget includes millions in inflation proofing for the Alaska Permanent Fund; the Senate version does not. The House version makes steeper cuts to the University of Alaska; the Senate version includes $100 million in undesignated cuts. According to a legal memo provided to Sen. Dennis Egan, D-Juneau, those undesignated cuts could be unconstitutional. The Senate budget could have included significant cuts to the state’s big-ticket construction projects, but each of the Senate minority’s amendments in that regard were defeated. The minority repeatedly suggested the state should divert previously authorized money for the Ambler Road, Knik Arm bridge, Susitna-Watana dam, and other construction projects to things like community revenue sharing, grants for seniors, and public broadcasting. Each time, the majority said no. The closest vote came when Egan proposed diverting money from an Anchorage road project to the Alaska Marine Highway and state revenue sharing, which sends money to hundreds of towns and cities across the state. “The marine highway system is not a choice or convenience ... it’s vital for our region’s commerce and transportation,” Egan said. Egan’s amendment was defeated 6-13, with the minority joined by Sen. Gary Stevens, R-Kodiak, and Sen. Bert Stedman, R-Sitka. Sen. Donald Olson, D-Golovin, walked out of the room for the vote. At the end of the floor session, Egan was one of the four votes against the full budget. “I just really am deeply disappointed in what they did to the marine highway system,” he said. “The ferry system has taken a disproportionate cut, and I really think they ought to be fairer. This story includes reporting from James Brooks of the Juneau Empire, Elwood Brehmer of the Alaska Journal of Commerce, and Becky Bohrer of the Associated Press.

Supreme Court rules setnet ban unconstitutional

The Alaska Supreme Court overturned a lower court ruling on Dec. 31, declaring a ballot initiative to ban setnets in certain areas of the state unconstitutional. Calling the initiative a “give-away program” that was designed to appeal to the self-interests of non-commercial fishermen, the court issued an opinion that put an end to a lengthy legal process that began in late 2013. Lt. Gov. Byron Mallott certified the ballot initiative last August after the initiative’s sponsor, the Alaska Fisheries Conservation Alliance, submitted 43,000 signatures in support of the measure, 36,000 of which were declared valid by the Division of Elections. The initiative would have almost exclusively impacted the Kenai Peninsula, where 735 setnet permits are registered alongside a large guided angler industry. Alaska residents hold more than 80 percent of the permits. After the initiative was filed in November 2013, then-Lt. Gov. Mead Treadwell rejected it in January 2014 as an allocative measure, which is prohibited by the Alaska Constitution. AFCA appealed and won a reversal in Superior Court that allowed it to begin collecting signatures. “I’m still shaking,” said Resources for All Alaskans President Jim Butler. Resources for all Alaskans, or RFAA, is a relatively new group formed to combat the setnet ban. “I very much appreciate the court’s effort to very methodically and step-by-step analyze the constitutional issues as well as the vision of the framers of the Alaska Constitution to get to their decision.” RFAA weighed in on the argument in March 2014 supporting the state’s assertion that the initiative was a prohibited appropriation of state resources. At the time, Butler said the idea of banning setnetting at the ballot box was bad policy. “The proposal to ban setnetters is particularly destructive because it doesn’t address the real reasons for declining king salmon populations and would instantly destroy 500 small Alaska family businesses and hundreds of other jobs,” Butler said at the time. The Alaska Fisheries Conservation Alliance released a statement saying its members were disappointed by the decision and referring to the signatures of more than 43,000 registered voters who signed to have the ban put on the ballot. “We are disappointed with the court’s decision to deny voters an opportunity to weigh in on the method and means for harvesting,” said AFCA president Joe Connors in the written statement. Founding member Bob Penney is also quoted in the statement, he said he is “deeply disappointed because the Kenai Kings are the real loser here and it now seems their species will continue to decline. Maybe it’s time the federal government looked into this issue.” When reached by phone Jan. 2, Bob Penney said he was on vacation and had no comment on the decision. AFCA Executive Director Clark Penney, Bob Penney’s grandson, said the group is looking into the Endangered Species Act as another avenue to protect salmon caught by set nets. Clark Penney said the group’s focus was not just on Kenai River king salmon, but on protecting fish species that are targeted by ineffective means. “We see set nets as the least effective for taking their target fisheries,” Clark Penney said. Under the Endangered Species Act, a species can be listed as “endangered” or “threatened” when, according to the U.S. Fish and Wildlife Service, “it is determined to be endangered or threatened by destruction, modification, or curtailment of its habitat or range; overutilization for commercial, recreational, scientific, or educational purposes; disease or predation; inadequacy of existing regulatory mechanisms; other natural or manmade factors affecting its survival.” Unlike Pacific Northwest salmon stocks that do have ESA protection, the late run of Kenai River king salmon has never failed to meet its minimum escapement goal. The court’s case According to the court, commercial setnetters are a distinct user group who would be unfairly stripped of a public resource allocation — their part of the millions of salmon that return to Alaska each year — to another party’s benefit. Most of the members of AFCA are sportfishermen who would ostensibly see more salmon inriver where the commercial nets to be removed from the water; two board members, Connors and Derek Leichliter, are former set net fishermen. Banning setnets, the court wrote in its Dec. 31 ruling, would essentially devote salmon to a specific user group on the Kenai Peninsula, to the exclusion of another. “We concluded that the initiative in question was a give-away program because it was ‘designed to appeal to the self-interests of sport, personal, and subsistence fishers,’ in that those groups were specifically targeted to receive state assets in the circumstance of harvestable shortages,” the court wrote. The court also concluded that the ballot initiative would have narrowed the Legislature’s and Board of Fisheries’ ability to make allocations. “If (the initiative) were enacted, then neither the Legislature or the Board would be able to allocate any salmon stock to this significant, existing user group.” Much of AFCA’s legal justification for the ballot’s constitutionality rested on prior ballot initiatives that banned hunting or fishing methods and means. The court said the prior initiatives were either not equivalent to the setnet ban, or that their passage alone didn’t make them constitutionally sound. AFCA attorney Matt Singer had argued Alaska has a history of making resource-related ballot initiatives, such as aerial wolf hunting and bear baiting. The Supreme Court said the argument is invalid, as the user groups for salmon are more clearly defined. “Under the Limited Entry Act and its implementing regulations, commercial set netters must obtain gear-specific setnet permits, which are limited in number, hold significant value, and may be bought and sold,” the court wrote. “This makes commercial setnetters a far more cohesive, recognizable, and permanent group than individuals who hunt wolves using same-day aerial techniques and snares, or who hunt bears using baiting or feeding methods.” Singer had also argued that Alaska voters banned fish traps by voter initiative, which he said established both gear type restrictions and the resource as fair game for ballots. Indeed, voters did outlaw fish traps by ballot initiative in 1959. The Alaska constitution, however, had not been accepted at this point. “Ordinance 3 was approved before the Alaska Constitution went into effect and was thus not governed by the constitutional prohibition against appropriating by initiative,” the court wrote. Even subsequent resource initiatives are not equivalent to the setnet ban, the court ruled. Singer had cited several cases as evidence of the ban’s constitutionality. Two of these ballots, however, were held before salmon had been ruled a “public asset,” and therefore forbidden under the Alaska constitution’s ballot measure provision. Aftermath Several of the fishermen who weighed in on the Supreme Court decision said they are weary of Cook Inlet’s “Fish Wars.” But each blamed fishermen from opposing user groups for igniting tension between user groups. “I think there are many people in the sport fishery, the guided industry, the commercial salmon harvester and even the personal use fishery who want to collaborate and find a way to make things work in this complicated fishery,” Butler, a longtime Cook Inlet setnetter, said. “There are others who see that as a risk, because if we can collaborate and get along — their particular opportunity might not develop the way they want it to be. I think this (threat of a ban was) inherently a divisive approach at solving a complex problem.” Butler said Resources for All Alaskans and the commercial fishing community didn’t want a fish war. “We’ve existed in this community for 100 years. The concept of a fish war is new and it’s because of increasing demand and we need to talk about that because there are plenty of fish for everybody. We just need to cooperate and not put people out of business to accomplish that goal because there’s no need to,” he said. Connors, who is the President of the AFCA board as well as a fishing charter and lodge owner on the Kenai River, said he saw inflexibility and an unwillingness to change from many commercial set net fishermen in Cook Inlet. “Sooner or later people just have to kind of come to the realization that they can’t fish the same way they did 50 years ago,” Connors said. “I know when I commercially fished, I used to catch Dolly Vardens — the sea run ones — and keep pounds of them in my freezer on the boat. So there’s just a lot going on out there and it’s not good and it’s not conservation-minded. So unless the attitude of, ‘We should kill, kill, kill as much as we can, as quick as we can, changes ... the fight will keep going.’” Butler said he believed the people who spearheaded the effort to ban set nets in certain areas of the state would continue their fight. “I am under no illusion that the people who have promoted this (ban) are done by any stretch of the imagination. I just don’t see that,” Butler said. “It’s no news to anybody that there’s a few influential people who see this (ban) as a very important part of their life’s mission or their view of the world.” Despite his frustration with the set-net fishery, Connors said he saw promising changes being made by commercial set net fishermen in the Cook Inlet. He referenced large operations — like Gary Hollier’s family sites where more than 20 nets are typically in the water, or Greg Johnson’s family sites where 18 nets are typically fished. Both families cut nets on some or all of their sites to shorter depths in 2013 in an effort to reduce harvest of king salmon. Connors also spoke highly of Brent Johnson, who owns another large family operation in Clam Gulch, and Brent Johnson’s “selective harvest modules,” which are designed as a type of fish wheel that, in theory, allows Johnson to keep fish alive long enough for him to release those he did not intend to target. Connors said he is encouraged by those efforts to change the way set net fishermen target salmon. Many fishermen said they hoped a more fruitful dialogue between user groups could happen now that the threat of a ban had been lifted. Snug Harbor Seafoods Co-owner Paul Dale, president of the Alaska Salmon Alliance — a fisheries trade organization representing seafood processors and commercial fishermen on the Kenai Peninsula — said it had been difficult to have constructive conversations with users who wanted to abolish his way of life. “Who wants to negotiate when someone is holding a gun to your head? It really stymied dialogue between commercial and sportfishing,” Dale said. Connors said negotiations between the two groups had been difficult long before the initiative process began. “Now it’s gone, it’s gone. Now it’s not looming,” he said. “But that was out of frustration. We were totally frustrated in a sense because of what we were seeing. We were seeing incredible killing of king salmon. (Set netters would say), ‘Well, we’re allowed to kill all of those,’ and yes you are, but it’s not your money fish. Why not develop an incredibly efficient sockeye fishery and do everything you can not to kill the other fish? I think there will still be fish wars because what I’m thinking now is that (the decision) will only cause (set netters) to become more aggressive because they just won.” Despite their misgivings, Connors, Dale and Butler all said they hoped more normal dialogue could resume among competing user groups in the Cook Inlet. “We are so fortunate and so blessed to have this tremendous resource, the notion of a war is appalling if you think about it,” Butler said. DJ Summers can be reached at [email protected] Rashah McChesney can be reached at [email protected]
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