Legislative session to start Jan. 20
Lawmakers are gathering in Juneau for the start of the 2009 state legislative session. As the formal session kicks off Jan. 20, the big issue - no surprise - is money.
Unlike the last four years, when rising oil prices brought a gusher of cash to the treasury, prices are now down and legislators and executive branch officials are staring at possible big budget deficits.
On the political front, there is great curiosity as to how Gov. Sarah Palin, fresh from the national campaign stage, will treat the Legislature and how lawmakers will treat her proposals.
The governor had great influence over lawmakers in the past two sessions because of her immense popularity with the Alaska public. The rough-and-tumble presidential campaign, where Palin was Republican John McCain’;s vice presidential running mate, seems to have dampened her popularity in Alaska, according to recent polls.
Because of that, legislators may be more willing to be critical of the governor’;s initiatives.
It’;s a new Legislature - the 26th since statehood - which means that leaders like the House speaker and Senate president, as well as the chairman and members of legislative committees, are selected for the two-year term of the Legislature.
Leadership, committee chairs and members can be changed at any time by a majority vote, but that happens infrequently.
A batch of new legislators also will be sworn in when the session formally begins.
Alaska’;s congressional delegation also has a new look, with Sen. Mark Begich, Anchorage’;s former mayor and the state’;s lone Democrat in Washington, D.C., replacing veteran Republican Sen. Ted Stevens.
Begich is likely to give Alaska crucial influence with the Democratic majority in Congress and the new Obama administration, even if he lacks Stevens’; former seniority.
With Begich being sworn into office, Sen. Lisa Murkowski has become Alaska’;s senior senator. She is also now the ranking Republican on the Senate Energy Committee, which is of great importance to Alaska.
On the state level, however, what’;s foremost on peoples’; minds in Juneau is the revenue picture. Oil prices soared to $145 per barrel last summer and then fell to below $30 per barrel a few weeks ago.
If prices stay down, there could be a $2 billion deficit for the current fiscal year 2009, according to an analysis by the Legislative Finance Division.
Even if there is a modest recovery in oil prices the deficit could range between $500 million and $1 billion.
The good news is that the state has ample cash reserves. Legislators are likely to draw on savings and approve a budget somewhat smaller than last year’;s $4.8 billion in state general fund spending, but with no drastic cuts, out of concern for Alaska’;s economy.
Cash reserves include $6.7 billion in the Constitutional Budget Reserve, the state’;s main savings account, and another $1 billion in a separate budget fund, the Statutory Budget Reserve.
There’;s also another $1 billion in the state Education Fund, a reserve used to finance school district budgets ahead of the normal legislative appropriation cycle that typically ends when the Legislature adjourns, this year in April.
Legislators are unlikely to tap that fund, out of concern that it could disrupt the budgeting cycle for school districts.
Finally, there are several billion dollars in the Permanent Fund’;s Earnings Reserve Account that can legally be appropriated by the Legislature, because the earnings are not part of the principle of the fund, which is protected by the state constitution.
Using this money would probably be a last resort for legislators because of a likely adverse public reaction. Even though the earnings account is separate from the fund itself, it is close enough to get the public’;s attention.
The permanent fund’;s latest report indicates that the earnings reserve was worth $4.1 billion on Nov. 30, but changes in financial markets since then will have affected its value.
Money aside, there doesn’;t yet seem to be a lot on legislative agendas. Oil and gas legislation is likely to have less attention this year.
That was a top priority over the last three years as lawmakers grappled with oil tax and natural gas pipeline legislation.
Several legislators are interested in minerals taxes, and the state Department of Revenue has done background work to prepare for a debate in the Legislature over appropriate minerals taxation.
It’'s certain that bills will be introduced, but how much attention they get is uncertain at this point.