Ending its regular 120-day session without a budget plan in place, the Legislature was called back into its first special session of the year by Gov. Bill Walker.
The body’s regular session expired last week, with unresolved questions on how to address a multibillion-dollar spending deficit. Led by a mostly Democratic majority, the solution put forward by the House consisted of an income tax with some cuts, as well as changes to the state’s oil tax and credit structure. Maintaining its majority in the Senate, Republicans put forward a proposal to utilize a percentage of Permanent Fund earnings, while instituting deeper cuts to state spending than the House was comfortable with.
With the regular session ended inconclusively, a special session will be used to finish a spending plan. Special sessions last up to thirty days, and are used to address items put forward by the governor.
Per Walker’s proclamation, Alaskan lawmakers will have eight bills to consider over the next month. These include SB 23, the capital budget with supplemental appropriations; appropriations bills HB 57 and 59, concerning operating and mental health budgets, loans and funds; HB 60 or Senate Bill 25, regarding a motor fuel tax and transportation maintenance fund; HB 111, addressing credits against the oil and gas production tax; HB 159 or SB 79, bills addressing the prescription of opioids and their monitoring; and SB 26, setting an appropriation limit and restructuring the Permanent Fund.
Walker has directed legislators to also look at an act or acts to increase an existing tax, or to establish a new broad-based tax for the purpose of generating new revenues.
In Wrangell last weekend, Rep. Dan Ortiz (I-District 36) felt the list covered all the necessary issues. “Those are all things that have to be addressed,” he said.
There was common ground between members of the House and Senate on restructuring the Permanent Fund, tying its Earnings Reserve Account to a percentage draw based on market value averages. Both chambers produced bill versions based on the concept, which eventually gave way to a Senate version, SB 26.
Sen. Bert Stedman (R-District R) had also put forward a percent-of-market-value approach, which called for a leaner draw than SB 26. That version proposes a 5.25-percent draw each year, 75 percent of which would go toward operational spending. The remaining 25 percent would fund resident’s dividend payments.
“While I have concerns about the size of the draw and split between the people’s
dividends and government spending, in principle I support the POMV approach,” Stedman commented in an update, released to the public late last week.
However, sticking points that ultimately prevented a budget plan from passing the two politically divided chambers will remain heading into the special session.
Ortiz explained creation of new tax revenues and the extent of continued cuts was one.
“In a bigger way, funding for schools, funding for elderly services, Pioneer Homes, things like that. We continue to take reductions in that area, or whether we have some sort of broad based new revenue source, new tax, those are really our only two choices,” said Ortiz.
“The other sticking point is oil tax credits and where we should go with that,” he added, with differing versions in the House and Senate to
reconcile during the upcoming session. “Oil tax credits are a big issue. It’s dividing us right now.
“I think that no matter what program we go with on HB 111 both sides agree that cash-flow credits – paying cash for companies’ exploration costs – is not going to happen in the future,” said Ortiz.
The representative expressed hope that a resolution would be reached by the end of the special session. Stedman was more cautious, noting it likely that more than one may be needed before a deal is struck. While the special session buys some additional time for a budget deal, the senator warned only so much time was available to gain.
“Aside from the 30-day limit, the next real deadline we face is the beginning of the fiscal year, which is on July 1. We are required by the Constitution to pass a budget by July 1, and we are going to get it done,” he said.
Another anxiety is the state’s savings it can draw from. From nearly $17 billion in reserve savings in 2012, those accounts have been drawn down to about $4 billion. At the start of the legislative session in January Alaska was looking at running up about $3 billion in expenses more than it was bringing in. While enough funds technically remain in reserve to cover the year’s spending, Stedman noted the state cannot run its accounts down to zero. “I don’t think we should allow our savings to go below $2 billion,” was his opinion.
Ortiz will return to Wrangell next week for a meeting with constituents, in a town hall meeting set for Monday at 7 p.m. A meeting place has not been set yet, but the representative can be contacted ahead of the meeting at 465-3824.
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