James Brooks

Legislature sends capital budget, $1,600 PFD and spending bills to gov

JUNEAU — The Alaska Legislature has approved legislation fixing the state’s four immediate fiscal problems, and now the final decision is up to Gov. Michael J. Dunleavy. On July 29, lawmakers passed two pieces of legislation that address this year’s Permanent Fund dividend, the governor’s operating budget vetoes, the capital budget and reverse sweep. • House Bill 2001 sets this year’s dividend at $1,600 per person and reverses all but $23.29 million of the $444 million in vetoes Dunleavy made to the state’s operating budget in June. The remaining vetoes include $20 million from the University of Alaska and travel reductions to many state agencies and departments. • Senate Bill 2002 funds the state’s capital budget with money from the Constitutional Budget Reserve and includes the “reverse sweep,” a procedural matter that prevents 54 state savings accounts from being automatically drained into the budget reserve. It also contains permission for the Legislature to spend $250 million from the Constitutional Budget Reserve on as-yet-undefined projects, such as wildfire fighting. The Legislature would be required to specify the spending at a future date. Legislation is not sent to the governor’s desk immediately when it passes the Legislature. Legislative drafters, lawyers and clerks first examine the bill before transmitting it to the governor. In addition, the leaders of the House and Senate have the final word on when a bill is transmitted, and they can hold on to legislation (though not indefinitely) before sending it to the governor. It remains unclear when the bills will be transmitted. “The Senate has every intent of getting the capital budget to the governor’s office as soon as possible,” Senate President Cathy Giessel, R-Anchorage, said by text message. “The money for roads, and funding for our UA scholars less than a month from classes starting, is too important, and will not be held up.” A spokesman for Speaker of the House Bryce Edgmon, I-Dillingham, was unable to answer questions before the end of the day on July 30. The current special session adjourns Aug. 6. According to the Alaska Constitution, if the Legislature is not in session, the governor has 20 days (Sundays excluded) to sign a bill, veto it, or allow it to become law without his signature, once it is transmitted to him. In a July 29 phone call with reporters, the governor said of the capital budget bill and reverse sweep that “we’re glad for that, and we’re glad because … it helps Alaskans.” The governor was less positive about the legislation setting the PFD amount and reversing many of his budget vetoes. In the same call, he referred to the bill as a “disappointment because the PFD was now taxed by almost 50 percent for every man, woman and child.” The governor has consistently maintained his view that the state’s budget should be balanced by cutting services and not raising taxes or reducing the dividend. In February, he introduced a proposal to do so in one year. He now believes that proposal should be implemented over two years. Even if the governor were to re-veto all of the budget items he vetoed in June, the state would not have a balanced budget if a full dividend were paid this year. The governor has said he will propose additional cuts next year.

Legislative leadership rejects Dunleavy’s call to Wasilla

JUNEAU — Two weeks before an anticipated special session in Wasilla, the leaders of the Alaska Legislature say they are rejecting Gov. Michael J. Dunleavy’s plans in favor of meetings in Juneau and Anchorage. In an emailed announcement June 24, Speaker of the House Bryce Edgmon, I-Dillingham, and Senate President Cathy Giessel, R-Anchorage, said, “The Alaska Legislature announced today it will convene in Juneau on July 8th for the 2nd special session, with the majority of meetings to be held in Anchorage.” While lawmakers lack the votes to change the special session agenda or timing laid out by the governor in a June 13 proclamation, the leaders of the House and Senate believe they can change the location away from Wasilla Middle School. The legality of such a decision is a significant question. “Really, a lot of this is gray area. It hasn’t been tested,” Edgmon said by phone. Article II, Section 9 of the state constitution says, “Special sessions may be called by the governor or by vote of two-thirds of the legislators.” State law implementing that section says in part, “The legislature may call itself into special session if two-thirds of the membership responds in the affirmative to a poll conducted by the presiding officer of each house.” Currently, fewer than 40 of the Legislature’s 60 members support a change to the governor’s agenda. All 15 members of the Alaska House Republican minority support it, as do at least six of the 10 members of the Senate who voted in favor of a traditional Permanent Fund dividend this year. State law also says the governor can designate a location for the special session. The constitution does not grant the governor that power, and Edgmon said the doctrine of separation of powers trumps state law in this case. “The Legislature is exercising its right to the location,” Edgmon said by phone. “Although we are one vote short of the 40-vote threshold to call ourselves into our own special session agenda, the majority of legislators in both bodies considers it our right to determine the location and venue best equipped to conduct business on the Governor’s special session call, while providing the most access to as many Alaskans possible,” Edgmon and Giessel said in their joint statement. The decision to keep the agenda and timing but not the location is making the governor and some lawmakers unhappy. “I feel like the Legislative leadership is pulling an end run to try to move the venue when they don’t have the votes,” said Rep. Colleen Sullivan-Leonard, R-Wasilla and co-chairwoman of the Legislature’s nine-member Matanuska-Susitna delegation. Hours before the statement from Edgmon and Giessel, the delegation had issued a press release welcoming the Legislature to the region. “I think we probably need an independent legal opinion on this. To arbitrarily challenge the governor … I don’t know legally they can do that,” Sullivan-Leonard said. In the Senate, Senate Majority Leader Mia Costello, R-Anchorage, is among the lawmakers in favor of a Wasilla session. She echoed Sullivan-Leonard’s concerns about legality and added, “Frankly, we have a trust problem with the public already, and I think we should follow the law.” The governor came within a step of calling the House and Senate leadership criminal. “The Senate President and Speaker of the House admit they lack the votes to change the venue or call a special session of their own, yet they are committed to thwarting the law and the voice of the Alaskan people. This is all part of why Alaskans have lost trust in their lawmakers. How can we with a straight face expect people to follow the law when the legislative leadership ignores, breaks, and skirts the law at every turn?” he wrote in a prepared statement. The issue of the Permanent Fund dividend is the sole item on the special session agenda envisioned by the governor and the session envisioned by the House and Senate leaders. The governor supports a dividend paid using the traditional formula in state law. The Legislature’s leaders — despite dissent from many of their members — do not. According to revenue projections for the fiscal year that begins July 1, the state does not have enough revenue to pay both a traditional dividend and spending at levels proposed by the Legislature. (The governor may cut the budget via the veto process, and a final decision is pending.) With tax increases off the table and sufficient budget vetoes unlikely, that means lawmakers and the governor must spend from savings in order to pay the traditional dividend. A majority of the House is opposed to spending from savings for the traditional dividend, as is half the Senate. The governor supports it, however, and he chose Wasilla, a hotbed of support for the traditional dividend.

Dunleavy launches ‘massive’ plan to cut state spending

JUNEAU — Alaska Gov. Mike Dunleavy on Wednesday unveiled his proposal to balance the state’s budget without new taxes and without a reduction to the Permanent Fund dividend. “This budget is going to impact all Alaskans. It’s too massive not to,” the governor said in a televised news conference from Juneau. The state released a trove of documents detailing his proposal on the state Office of Management and Budget’s website Wednesday morning. Initial figures released by OMB show the governor is proposing to spend $9.1 billion in the fiscal year that starts July 1. That figure does not include the Permanent Fund dividend. If the governor’s $1.9 billion in dividend spending is included, overall spending is near $11 billion. Last year’s budget, not including the dividend, was $10.9 billion, according to OMB figures. The dividend last year cost $1 billion. The governor had said he would cut the budget by $1.6 billion, but based on dividend-included figures, spending in his plan will be down less than that because of the boost to the dividend. Health care and K-12 education, the largest components of the state’s budget, are cut under the proposal. The Department of Education is cut from $1.66 billion to $1.34 billion under the governor’s plan. The Department of Health and Social Services is cut from $3.25 billion this year to $2.47 billion, according to figures from the Office of Management and Budget. One of the biggest duties of Health and Social Services is overseeing the federal-state Medicaid program, which provides health care to more than 210,000 Alaskans, according to the latest figures from the state. Of those, almost 48,000 are covered by Medicaid expansion by an executive order signed by former Gov. Bill Walker. Dunleavy will not reverse that order at this time, he said Wednesday, but the state will work with the federal Centers for Medicaid Services to adjust benefits, he and Arduin said. Medicaid spending, which stands at $2.27 billion, will be cut by $714 million, according to OMB figures. About one-third of that cut is state money; the remainder consists of federal dollars the state will forego, according to OMB’s analysis. State support for the University of Alaska is cut 45 percent, from $327 million to $193 million, but the university is granted the authority to raise additional money through tuition, grants or other sources to make up the difference if it can. Arduin said about 625 full-time state jobs would be cut under the budget, and if part-time positions are included, that figure is above 700. Those figures do not include cuts at the University of Alaska. The governor’s proposal must be vetted and approved by the Alaska House and the Alaska Senate before it becomes official. That process is expected to take several months, and the timeline may be lengthened by the House’s ongoing inability to elect a leader, a prerequisite to officially consider legislation. “We know this is just the beginning. This is the beginning of the journey for this budget,” Dunleavy said. Groups and agencies affected by the budget cuts are expected to spend Wednesday and the next few days examining the governor’s proposal to see how it would affect them.  

Dunleavy plans to release amended budget in January

JUNEAU — Gov. Michael J. Dunleavy’s full vision for Alaska’s budget will wait until January. In an interview with reporters before the start of the holiday open house Dec. 11 at the Governor’s Mansion in Juneau, Alaska’s new governor said he will use a modified version of former Gov. Bill Walker’s budget in order to meet a legal deadline. State law requires the governor to publicly release a budget proposal by Dec. 15 each year. “We’re going to roll it out probably on the 14th,” Dunleavy said. “It’s going to have some slight changes from what the governor (Walker) did because we need a little more time to actually put our stamp on it and spend some time working through the details with the different departments.” Dunleavy said the document coming this week will be amended “in January.” Office of Management and Budget Deputy Director Laura Cramer confirmed Dunleavy’s schedule as accurate. The governor said Alaskans should expect his budget will follow his campaign promises. “Public safety is job No. 1, making sure we have a balanced budget, putting our resources to work so we can get people back to work, and paying a full dividend,” he said. When it comes to a “full dividend,” Dunleavy confirmed that he means a dividend paid on the statutory formula and the repayment of portions of the dividend vetoed by Walker and cut by prior sessions of the Alaska Legislature. That proposal is expected to cost about $4 billion. Earlier in the day, Alaska Permanent Fund Corporation executive director Angela Rodell told the Daily News that she is planning for a $2.9 billion draw from the Permanent Fund next fiscal year. That amount was set by the Alaska Legislature last year as part of a plan for sustainable spending from the fund. “Everything about this administration is going to be about making things sustainable over the long term,” Dunleavy said, but Permanent Fund trustees have repeatedly warned about the dangers of withdrawing more money from the fund than called for under a “rules-based” approach. Earlier this year, they approved a resolution asking elected officials to keep within the rules, the better to allow investment officers to reduce risks to the state’s investments. Even staying within those rules carries some risks. In 2017, an independent analysis found that the fund stands a 50-50 chance of losing value and a significant chance of losing all of its investment earnings, which are held in an account unprotected by the Alaska Constitution. Speaking on other matters Dec. 11, Dunleavy said he will leave Alaska Dec. 12 for Washington, D.C. and meetings with President Donald Trump, the Secretary of the Department of Transportation, officials of the Federal Emergency Management Agency and other federal representatives regarding recovery efforts following the Nov. 30 Southcentral earthquake. “We’re still in the process of plugging in a few more appointments,” Dunleavy said of his itinerary. He said he has not yet named a new commissioner for the Department of Military and Veterans Affairs and is “still working over that particular appointment.”

Stability amid new adminstration at Permanent Fund Corp.

JUNEAU — New Alaska Gov. Michael J. Dunleavy has made sweeping changes to the management of state agencies since taking office Dec. 3, but in the first meeting of the Alaska Permanent Fund Board of Trustees since his term began, stability was the word of the day. “Stability is going to be critical,” said new Department of Revenue Commissioner Bruce Tangeman, who, along with Natural Resources Commissioner Corri Feige, took his seat as a corporation trustee Dec. 11 in Juneau at the start of the corporation’s regular quarterly meeting. Tangeman said that when it comes to the Dunleavy administration and the Permanent Fund Corp., “there’s no grand plan coming out of the gate.” No one at the corporation, whose headquarters is in Juneau, received resignation requests sent to more than 800 state employees by the new administration, and CEO Angela Rodell remains at the helm as she was under the Walker administration. The corporation also was not included in the administrative order issued by the governor last week. That order broadened the powers of the Office of Management and Budget, allowing it to absorb the budgetary machinery within various state agencies. During his campaign for governor, Dunleavy pledged to “pay Alaskans back the money owed to them after three years of dividend cuts.” Doing so would cost $3,733 per dividend recipient. Multiplied by the 593,000 recipients mentioned by interim dividend division director Anne Weske in October, the cost is $2.2 billion. Dunleavy also pledged to use the traditional dividend formula enshrined in state law, then put it into the Alaska Constitution. That formula would result in a dividend of just more than $3,000 in 2019, for a total of $1.8 billion. The $4 billion price tag for Dunleavy’s dividend plan would rise if there are more recipients. In an interview after his election win, the governor said he would look to the Permanent Fund — and specifically the reserve account that contains its investment earnings — to pay for the idea. That will require spending above and beyond the sustainable plan approved by Alaska legislators last year. According to figures presented Dec. 11 to the corporation’s board of trustees, the corporation will make $2.93 billion available to lawmakers for appropriation in the next fiscal year, which starts July 1. Rodell told the Daily News that so far, the corporation has not changed its expectations and is not planning to make more money available. We “need to see bills and legislation” before changing investments, she said. Earlier this year, the corporation’s board of trustees renewed their request for Alaska’s elected officials to abide by a “sustainable, rules-based approach” for spending from the Permanent Fund. Trustees have also requested the Legislature continue to provide inflation-proofing payments to the fund. In 2017, the Fund’s performance suffered when lawmakers briefly considered using the Permanent Fund to balance the state’s deficit and avoid a more politically difficult maneuver to spend money from the Constitutional Budget Reserve. The prospect of needing to come up with billions of dollars for the state treasury caused fund managers to pull money from longer-term investments into more liquid ones, hurting returns. Chief Investment Officer Marcus Frampton told trustees Dec. 11 that since lawmakers passed their sustainable-draw plan, the fund has been providing the state treasury with money on an installment basis rather than a lump multibillion-dollar sum at the start of the fiscal year. That allows the Permanent Fund to hold on to investments longer than it might otherwise, increasing earnings. “If you can keep an extra $100 million in the fund for nine months, it’s worth it,” Board of Trustees chairman Craig Richards said. The state treasury department has also allowed the Permanent Fund to vary its payments based on the needs of the treasury. When oil prices are higher than expected, it has delayed asking the Fund for money the Legislature appropriated. That allows fund managers to hold on to investments slightly longer. “If there were huge volatilities in the amounts, that could be really challenging to manage. I think that’s worth Revenue keeping in mind,” Frampton said.

Walker unveils budget; Dunleavy names budget director

Gov. Bill Walker unveiled the first “balanced budget” draft of his four-year term Nov. 26, but it will be up to Gov.-elect Mike Dunleavy to decide whether to implement it. Walker didn’t release exact numbers, but according to figures presented to the Anchorage Chamber of Commerce and in a spreadsheet released to the Anchorage Daily News, his budget appears to increase state spending by about $330 million for the fiscal year that begins July 1. That money would partially come from oil: The state is forecasting oil prices to average $76 per barrel during the current fiscal year, which ends June 30, and $75 per barrel next fiscal year. “Through over a billion dollars in cuts and the restructuring of the Permanent Fund and a little bit of relief on oil price, this year’s budget is a balanced budget, and that’s what we’ll be handing off in a week,” Pat Pitney, Walker’s director of the Office of Management and Budget, told Chamber members. It’s unclear how much, or if any, of the plan will be taken up by Dunleavy, who takes office Dec. 3. Under state law, the sitting governor is responsible for sending a budget proposal to the Legislature by Dec. 15. “Typically, they don’t stay the same, and that’s certainly appropriate,” Walker said. Walker isn’t the first governor to publicly unveil a budget before leaving office. Frank Murkowski did it in 2006. Incoming Gov. Sarah Palin promised to cut that proposal by $150 million, only to eventually sign an operating budget that increased spending and was the second-largest in state history at that point. Walker himself received a transition budget from departing Gov. Sean Parnell, who is now an adviser to Dunleavy. The governor’s budget proposal is always raw material for the legislative meat grinder. State lawmakers have their say on the budget and can take it in radically different directions from what was proposed by the governor. Walker’s announcement, given that Dunleavy will have his own opinions, amounts to a first draft of a first draft. And that’s before the real world enters the picture. When lawmakers ended their legislative session this year, they approved a budget of $11.2 billion. At the time, the Alaska Department of Revenue estimated that North Slope oil prices would average $63 per barrel and that production would average 526,600 barrels per day between July 1, 2018 and June 30, 2019. At those prices and production levels, the state was expected to have a deficit of about $693 million. So far, production has been only slightly below that estimate. Prices have been much higher, even with the recent dip. Through the end of last week, they’ve averaged $75.46 per barrel, more than enough to erase the deficit. “We will now expect a surplus,” said Sheldon Fisher, Alaska’s commissioner of Revenue, to the Chamber crowd. Walker is proposing to spend $230 million of that surplus on deferred maintenance projects across the state. He called it an effort to generate construction jobs and said that when combined with matching funds, it could generate as much as a billion dollars in economic activity. Other spending increases would go toward public education and public safety. In addition to oil, Walker and his advisers talked about the importance of Senate Bill 26, the Permanent Fund plan approved by the Legislature. That plan, signed into law earlier this year, calls for a regular transfer of money from the Permanent Fund’s investment earnings to the state’s accounts. That transfer can be divided between state services and a dividend however lawmakers wish. This year’s transfer was $2.7 billion. Next year’s will be $2.9 billion, thanks to the rising value of the fund. Walker is proposing an $1,800 Permanent Fund dividend, which would cost $1.17 billion. Dunleavy proposed a larger amount while campaigning for governor. “That will be a decision that the Legislature will have to make and the administration will have to make going forward,” Fisher said. Dunleavy taps consultant as budget director Donna Arduin is a little bit jet-lagged, but she’s ready to work. On Nov. 26, Arduin, president of the financial consulting firm Arduin, Laffer & Moore Econometrics, was one of four officials named by Gov.-elect Mike Dunleavy for his new cabinet. Arduin will serve as the director of the Office of Management and Budget. The other three appointments: • Jonathan Quick, chief of staff to Kenai Peninsula Borough Mayor Charlie Pierce, as commissioner of the Department of Administration. • Adam Crum, executive vice president of Northern Industrial Training, as commissioner of the Department of Health and Social Services. • Jason Brune, Cook Inlet Region Inc.’s senior director of land and resources, as commissioner of the Department of Environmental Conservation. The four follow the appointment of John MacKinnon as commissioner of the Department of Transportation and Public Facilities, Corri Feige for the Department of Natural Resources and Tamika Ledbetter for the Department of Labor and Workforce Development. As Arduin’s name was announced by press release, she was settling into a transition office six floors below the Juneau headquarters of the Office of Management and Budget. “I’ve done this many times before in other states. It’s what I’m passionate about,” she said of budget work. Arduin was living in northern Michigan when she got the call from Dunleavy, she said, and she was fewer than 48 hours removed from her arrival when the governor-elect announced her appointment. Arduin has a reputation as a budget fixer for Republican governors. She was deputy director of the budget for Michigan Gov. John Engler in the early 1990s, then joined New York Gov. George Pataki in 1995. Florida Gov. Jeb Bush named her his budget director after he won election in 1998. She moved across the country in 2003, becoming budget director for Gov. Arnold Schwarzenegger, but left that job after 11 months of shepherding the celebrity governor’s then-new administration. In 2005, she joined Arthur Laffer, an adviser to President Ronald Reagan, and created Arduin, Laffer & Moore Econometrics. Laffer is known as the father of supply-side economics. As a consultant, she has advised Republicans across the country, including Florida’s Rick Scott and Marco Rubio. In her various roles, she has favored libertarian and Republican approaches to fiscal policy, including broad tax and spending cuts. Her approach has garnered critics. In California, legislators were outraged by proposals to cut social services, and in Florida, the Sarasota Herald-Tribune published a detailed story in 2014 focused on controversial work performed by her firm. Talking Nov. 26, Arduin said she has worked all over the country, but Alaska has an advantage in that it is a relatively new state, and it is easier to change things. “Alaska has some unique opportunities to build some things anew,” she said. She said she is familiar with states that have drastic fluctuations in revenue, thanks to her experience with California’s income tax system. She said she wants to change the state’s “structural deficit” and provide fiscal stability. Summed up, that goal is straightforward: “Have predictability for dividends and those who rely on state money every year,” she said.

Deal struck on capital budget

The Legislature is headed back to Juneau. Don’t expect lawmakers to stay long. On July 27, the Legislature will convene what is expected to be a one-day special session to pass the state’s capital construction budget. “We have conducted a straw poll, and the 27th is the day,” Senate Majority Leader Peter Micciche said by phone Thursday. The capital budget funds road construction and building projects across Alaska, and most of its funding will come from the federal government, but it — like the state’s multibillion-dollar operating budget — was caught in the political divide between the Democrat-led House Majority and the predominantly Republican Senate Majority. An agreement between those two sides has now been reached. The Legislature failed to pass the capital construction budget before the July 1 start of the state fiscal year, and that failure has begun to have consequences. For example, the Alaska Department of Transportation has long planned a $40 million effort to rebuild nine miles of the Haines Highway. The project was supposed to go out to bid in late July, but with no capital budget, it hasn’t. Aurah Landau, a spokeswoman for the DOT’s Southcoast Region, said that if the Legislature delays the capital budget until July 27, the project will be delayed. Other projects have also been affected, according to a list provided by DOT. Those include the effort to replace the ferry Tustumena, and projects to renovate roads and bridges from Ketchikan to Fairbanks. During this year’s regular legislative session, the House passed one version of the capital budget; the Senate passed another Informal negotiations between the House Majority and Senate Majority have reached the harvest phase, and lawmakers will take formal action next week. “We wouldn’t risk coming down if we didn’t feel like there was a comfortable agreement,” House Minority Leader Charisse Millett, R-Anchorage, said by phone. She said her caucus was preparing to arrive in Juneau by the evening of July 26, ready to start work the next day. Under the Alaska Constitution, the approval of two-thirds of the Legislature is necessary to call a special session. Gov. Bill Walker could also call a special session, but he is required to give 30 days’ notice beforehand. If lawmakers call themselves into action, they can act more quickly. Micciche said allowing informal negotiations outside of session will allow lawmakers to conclude their work quickly next week. Unlike during the first and second special sessions this year, lawmakers will not be collecting per diem payments while waiting for a small group of negotiators to finish their work. “I think it’s a better operating philosophy, instead of being in special session, to do the one-dayer or two-dayer,” Micciche said. I think when we get to the end of the regular sessions, these remaining conference committee-type issues —it doesn’t require the entire Legislature waiting in Juneau doing technical sessions.” Details of the compromise capital budget have not been officially released, but legislators familiar with the compromise said it does not include a boost to the Permanent Fund Dividend. Members of the House suggested including money in the capital budget to raise the dividend to $2,200 per person, but that idea was rejected by the Senate. The agreement will also decide the future of funding for several Alaska megaprojects, including Juneau Access and the Knik Arm Bridge. Gov. Bill Walker has said the state will not advance Juneau Access, but funding for the road north out of Juneau has not yet been recommitted to other projects. According to an outline of the deal obtained by the Alaska Journal of Commerce, the capital budget will look a lot like the version that passed out of the House Finance Committee in mid-June. It is likely that half of the money remaining for the Juneau Access project will be reappropriated to other projects in the Lynn Canal area, as well as to fund a new school for Kivalina — a court-mandated project. Similarly, half of the remaining funds for the Knik Arm crossing are to be divided amongst the Kivalina school, state ferry maintenance and other highway projects, according to the draft budget deal. There is $5 million in state funds for the Knik Arm crossing and $47 million in Juneau Access funds available to be moved to other projects, according to DOT. The plan would use about $122 million from the Statutory Budget Reserve Fund, which has $288 million left in it. The agreement is also expected to determine how much money the state will spend on cashable tax credits to oil and gas explorers and small producing companies. It would add $20 million to the $57 million approved for oil and gas tax credit payments in the operating budget, bringing the total between the two to the statutory calculation of about $77 million, according to the outline. Last week the Legislature passed a bill immediately ending cash outlays for the credits, but the state still owes almost $1 billion in already-outstanding subsidy claims. Additionally, the deal would not pull any of the roughly $100 million the Alaska Gasline Development Corp. has to advance gasline projects. An amendment quietly added to the Senate’s capital budget — largely a political statement — would’ve pulled $50 million from AGDC for other state expenses. House Finance Co-chair Paul Seaton, R-Homer, said in May when the move was made that the AGDC money would be duplicative, as the programs it would’ve supported were already funded in early versions of the operating budget. Seaton also said his caucus did not want to pull the rug out from under the administration’s pursuit of the Alaska LNG Project by taking back the previously appropriated money. Contact reporter James Brooks at [email protected] Journal reporter Elwood Brehmer contributed to this report. He can be reached at [email protected]

Legislature averts shutdown, but more work remains

The morning after the Alaska Legislature averted a statewide shutdown, you could find more tourists than legislators in the Capitol. Though the Legislature’s second special session continues, work has all but stopped as lawmakers seek to decompress after months of budgetary debate and discussion. “I think that one thing that all of us in the Capitol can agree on is this has probably been the single most contentious legislative session that most of us have experienced,” Speaker of the House Bryce Edgmon said Thursday night. “I think we have more work to do. I think both sides understand that,” said Senate Majority Leader Peter Micciche, R-Soldotna, shortly afterward. “I think the Legislature needs to take some time off, cool down, come back together and work out solutions to the remaining issues that have to be dealt with this year.” Those issues include a capital construction budget and the state’s multibillion-dollar deficit. Despite five months of work, the Legislature passed no bill that addressed that deficit. Read the rest of the story here at JuneauEmpire.com.

Alaska Legislature averts shutdown with nine days to spare

With nine days to spare, the Alaska Legislature has averted a statewide government shutdown. At 1:04 p.m. Thursday afternoon, a joint House-Senate conference committee approved a compromise budget that funds state government past July 1 using savings from Alaska’s Constitutional Budget Reserve. The Senate voted 16-1 just before 9 p.m. to approve the deal, and the House followed suit, 31-8, just after 10 p.m. “This is very much a compromise budget, and that’s what we’ve been down here working on,” said Rep. Paul Seaton, R-Homer and House chairman of the conference committee. “No one got what they fully wanted. We had to concede; they had to concede, and we came up with this compromise package,” said Sen. Lyman Hoffman, D-Bethel and Senate chairman of the conference committee. Every vote against the budget was cast by a Republican who said they wanted to see greater budget cuts. “We just can’t keep spending money like this,” said Rep. Tammie Wilson, R-North Pole. “At some point, we have to cut back just like private business has done.” Even though the conference committee spent more than a month negotiating Thursday’s compromise, there was anxiety down to the final hours about whether enough members of the House Republican Minority would support the deal, which pays for the budget using the state’s Constitutional Budget Reserve. A three-quarters vote of the House and a three-quarters vote of the Senate is required to use that reserve, and the Coalition House Majority has only 22 members. In the end, even with Rep. Steve Thompson, R-Fairbanks, excused absent, nine members of the minority voted for the deal and the spending from the CBR. “I’m not going to try to destroy the budget to score political points,” said Rep. Dan Saddler, R-Eagle River. Gov. Bill Walker also must approve any compromise; he could veto it if he deems it incomplete. In a brief statement Thursday, he indicated that was unlikely to happen. “I am pleased the conference committee has compromised on an operating budget, which means we are one step closer to averting a shutdown of government services. Now, it is time to compromise on a fiscal plan,” Walker said in a brief prepared statement. Read the rest of the story here at JuneauEmpire.com.

Budget deal imminent

The Alaska Legislature is close to a deal to avert a statewide government shutdown, legislative leaders say, and an agreement could come as quickly as Thursday. “I think we, the Senate, should be done tomorrow. If it hits the floor, we’ll be done tomorrow,” said Senate President Pete Kelly, R-Fairbanks, in a Wednesday interview with the Empire. “I think tomorrow will be a good day. I’m anticipating we’ll be out of there by the weekend. I think we’re that close,” said House Minority Leader Charisse Millett, R-Anchorage, on the same day. In a brief hallway conversation, Speaker of the House Bryce Edgmon said he agrees with what Kelly said. Edgmon, busy in meetings and negotiations all day ─ members of the Senate Majority were seeing entering and leaving his office ─ did not have time for a more detailed conversation. “I couldn’t say we have an agreement between leadership yet. That just hasn’t happened,” Kelly said early Wednesday afternoon, but one appeared imminent. “I think you never know until you see a vote,” said Rep. Les Gara, D-Anchorage. “I would say that it seems like people are working with each other well.” The Legislature must approve a state operating budget before July 1, the start of the state’s fiscal year, to avoid a shutdown of state services. Read the rest of this story here at JuneauEmpire.com.

S&P puts Alaska back on credit watch negative

JUNEAU — A stopgap budget deal in the Alaska Legislature would avert a statewide shutdown, but it would still have consequences, a national credit rating firm warned June 20. In a new report, Andrew Little of S&P Global Ratings wrote, “If Alaska uses a significant amount of its reserves again and remains structurally imbalanced, we would likely lower (its) rating.” S&P is one of America’s “big three” institutional credit rating agencies. Just like your personal credit score, a higher rating means lower borrowing costs. Governments with better credit ratings are perceived to be at lower risk of default or delayed payments. In return, they tend to pay lower interest rates. In a prepared statement, Speaker of the House Bryce Edgmon said the Alaska Legislature “must do more than just pass the FY18 budget this year. We need new and more diversified revenues for Alaska.” The coalition House Majority led by Edgmon has continued to push for a long-term fix for Alaska’s $2.7 billion annual deficit, even as a government shutdown looms. The predominantly Republican Senate Majority, meanwhile, has said the Legislature’s priority should be a stopgap budget that uses savings to fund state services for one year. Members of the majority now say Alaska’s deficit is a problem for later. S&P’s report suggests it favors the House’s angle, if not its exact plan, for solving the deficit. “As noted in our prior reports, without structural fiscal reform in the 2017 legislative session, we would likely lower the state debt ratings,” Little wrote. As late as December 2015, Alaska had top marks from all three credit rating agencies. In January 2016, citing declining oil revenue and the lack of a fiscal plan, S&P lowered Alaska’s rating one notch. Moody’s Investment Services followed suit in February 2016, and Fitch Ratings in June 2016. Moody’s doubled down with a second downgrade in July 2016, but the other two rating agencies have not yet followed suit. According to a January 2017 presentation by S&P, 15 states have a AAA bond rating. Thirteen have an AA+ rating (the second-highest), and 13 have an AA rating (third-highest). Illinois has the lowest bond rating of any state, six steps below AAA. Gabriel Petek, the person in charge of S&P’s state ratings, wrote in an April column published by the Congressional newspaper The Hill that “U.S. states have entered a new era characterized by chronic budget stress.” Alaska isn’t alone in facing a credit rating crunch: Since January 2016, S&P has issued 11 state credit rating downgrades and just two upgrades, Petek wrote.

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.

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