JUNEAU — The Alaska Legislature is lurching toward its Wednesday deadline with no consensus on an operating budget, oil tax reforms, or any of the other major deficit-reduction bills introduced by Gov. Bill Walker.
A last-ditch idea floated by Senate Republican leaders to balance the state budget with billions of dollars from the Permanent Fund earnings reserve account — which could put residents' future dividend checks in doubt — faces skepticism from moderate Republicans in the House and opposition from the governor, who hasn't ruled out a veto.
Instead, it appears increasingly likely lawmakers will have to resolve all the major issues before them in a special session in Juneau, where pressure will build to pass comprehensive financial reforms and a budget with a much smaller deficit to avert a government shutdown July 1.
"We have a hell of a lot of people in this state relying on us, and I don't know why we just can't move things forward faster," said Sen. Dennis Egan, D-Juneau. "We're using Clydesdales instead of Kentucky Derby horses."
Others were more patient and optimistic. Labor leader Vince Beltrami and GCI President Ron Duncan, two co-chairs of a coalition pushing for an endowment-like restructuring of the Permanent Fund to help pay for state government, Alaska's Future, said it appeared to be simply a matter of time before the Legislature took that step.
"They're close, and all the right pieces are on the table," Duncan said in an interview with Beltrami at Juneau's IBEW hall, just down the street from the Bill Ray Center — where lawmakers are keeping temporary offices and holding committee hearings while the Capitol undergoes renovations. "They just have to figure out how to put them together."
Duncan noted lawmakers had already passed two major pieces of legislation that should help reduce future state spending on criminal justice, and on its Medicaid health-care program.
But after four full months in Juneau, lawmakers Tuesday were still facing a big, stark slate of unresolved policy problems. They include:
- Unfinished budget proposals offered by the House and Senate that would spend in the range of $5 billion, with slightly more than $1 billion in revenue to pay for them leaving a $4 billion hole to fill. If the money to cover the gap doesnt come from the Permanent Funds earnings reserve, it will likely come from the Constitutional Budget Reserve a separate account with constitutional restrictions that put it off-limits without votes from members of the House Democratic minority.
- Competing House and Senate proposals to address cash subsidies for small oil producers projected to amount to $775 million next year, as well as an existing tax-credit program for large North Slope oil producers.
- Identical plans from the House and Senate finance committees to restructure the Permanent Fund to generate an estimated $2.4 billion in revenue for state government, while guaranteeing PFDs of $1,000 for each of the next three years approaching the $1,400 average over the last decade, but sharply reduced from last years $2,072 check.
- Tax proposals from Walker aimed at further reducing the deficit, including a tax on personal income, and tax increases on natural resource extraction and consumption.
All of those proposals have progressed most of the way through the legislative process. But the Legislature has been unable to reach agreement on them, with disputes between and within its two chambers, slowing lawmakers' negotiations to a crawl.
After an initial oil-tax proposal by the Republican-led House majority failed on the House floor in mid-April, it took a full month before moderate majority members could negotiate a compromise version that passed last week with support from the Democratic minority. That version has now been dismantled by the Republican-led majority in the Senate.
When lawmakers hit the 121-day constitutional deadline Wednesday — 31 days after the softer 90-day deadline set by a 2006 voters initiative — they have two options: They can adjourn, and wait for Walker to call a special session with a limited agenda, which he's said he wants in Juneau. Or they can extend their session for up to 10 days.
The 10-day extension requires a two-thirds vote by both the House and Senate. And the leader of the 13-member House Democratic minority, Anchorage Rep. Chris Tuck, said Tuesday his caucus plans to oppose an extension — effectively foreclosing that option, since the 40-member House has been missing one Republican, Anchorage Rep. Mike Hawker, who's been receiving treatment for cancer.
The looming question for lawmakers Tuesday and Wednesday is whether Republican legislative leaders have the votes to pass a budget paid with the Permanent Fund earnings reserve.
That could buy lawmakers more time to negotiate a compromise on Permanent Fund and tax legislation without facing the pressure of a government shutdown July 1 — the start of the state's next fiscal year.
"It's not my option, but maybe it's the option that's out there," said House Speaker Mike Chenault, R-Nikiski.
Leaders in the Republican-led Senate majority, with its relatively cohesive 16 members in the 20-member chamber, have expressed interest in passing a budget balanced with the earnings reserve.
But House Democrats are opposed to the idea, saying that spending billions from the earnings reserve would threaten future dividends.
And Homer Republican Rep. Paul Seaton, one of the leading figures in a six-member moderate faction within the House majority, also expressed skepticism in an interview Tuesday.
He said it was "questionable" whether House GOP leaders could get the necessary 21 votes to pass a budget balanced with the Permanent Fund earnings reserve.
"All the people that have testified for the last several months have said, 'Don't kick the can down the road,'" Seaton said. An earnings-reserve funded budget, he added, would do just that.
Chenault said he didn't know whether he could muster the necessary votes. But, he added, "I think people are frustrated."
"After 30 days of sitting here, not getting any movement, they may be open to that option," Chenault said.
The earnings reserve plan also faces opposition from Walker, who could veto it.
But, as Chenault put it, "He'd be hard-pressed to veto a fully-funded budget." That move would leave the state without a budget for the next fiscal year, raising fears of a government shutdown while lawmakers try to negotiate deficit-reduction compromises in a special session.
Walker was in the Bill Ray Center talking to lawmakers Tuesday, and his opposition to the earnings reserve plan was part of his message, he said in a brief interview.
Walker's communications director, Grace Jang, said in a follow-up email it was "too soon to say" whether the governor would veto a budget covered by the earnings reserve.