With a threat of PFD cuts, governor calls Legislature back for another special session

Alaska Gov. Bill Walker on Sunday made good on his threat to call lawmakers back to Juneau for another special session on his deficit-reduction package, demanding they return in July to consider tax and Permanent Fund legislation.

The second special session of 2016 will come after five months of work in a regular and first special session, which failed to yield legislative consensus on the big pieces of Walker's package.

The July 11 start date is smack in the middle of election season, giving lawmakers little incentive to work for the the full 30 days allotted — which would end just a week before the Aug. 16 primary.

But at a Sunday afternoon news conference in his Juneau office, Walker suggested he'd create that incentive by vetoing key pieces of the state budget, like Alaskans' Permanent Fund dividend checks, which would force lawmakers to either pass new legislation to restore them or vote to override him.

Walker's Permanent Fund legislation is the biggest piece of his deficit-reduction package; it would close more than half of next year's $3.2 billion deficit by converting the fund into an endowment. It would also produce smaller dividends than last year's.

The Senate passed a rewritten version of Walker's legislation in a 14-5 vote earlier this month, but the House adjourned Saturday night without bringing the bill to the floor, after it was rejected by the finance committee.

At the time, one House Finance Committee member, Anchorage Republican Rep. Lance Pruitt, said he knew that changes to the Permanent Fund will be needed in the next few years, but added that his constituents weren't yet on board.

"When the budget comes to me and I've addressed the financial situation of Alaska through the budget, in some ways it'll get some Alaskans' attention," Walker said Sunday. "I am in a situation that things that I anticipated would be done legislatively have not been, and therefore I have the opportunity — I have the obligation — to do some things as governor with the budget. So I think that will bring a focus to it."

Asked directly if he planned to veto a portion of the dividend, Walker responded that Alaskans will find out by the start of the state's next financial year, saying: "We'll look at every item individually and decide between now and July 1 what items get vetoed and what does not."

Lawmakers reacted to Sunday's news with emotions ranging from resignation to dismay.

"I support the governor. I think he's right to force us to make tough votes. It's our job," Rep. Andy Josephson, D-Anchorage, said in a statement Sunday. He added: "What's happened this session, thus far, is professionally embarrassing."

Palmer Republican Rep. Shelley Hughes, who's facing a three-way GOP primary for a Mat-Su Senate seat, said Walker's special session call was a "mistake."

"I think the people have spoken," Hughes said in a phone interview. "I think the legislators acted accordingly, and I'm disappointed the governor doesn't understand that people don't agree with this."

[What's actually happening in Juneau? Here's a walk-through.]

House Speaker Mike Chenault, R-Nikiski, said he will take Walker's call seriously and plans to start making phone calls to his colleagues next week, to "see if we can come up with some kind of plan to move forward."

But, Chenault added, he'll still need Walker's help to advance the governor's legislation. Chenault can't force House members to take votes, he said in a phone interview.

"You've got to bring them along, and they've got to be able to understand it and push the button because they're the ones who make the decisions for their constituents," Chenault said.

Senate President Kevin Meyer, R-Anchorage, didn't respond to a request for comment Sunday. Neither did North Pole Republican Sen. John Coghill, the majority leader.

Walker issued his new special session call shortly after the Senate adjourned Sunday, which officially concluded the first special session convened by the governor last month. The Legislature passed a budget this year that would reduce the deficit to $3.2 billion from $4 billion, but it failed to approve any of Walker's proposals to raise new revenue, including the Permanent Fund legislation and measures to institute a personal income tax and increases on existing taxes on mining, commercial fishing, gas, alcohol and tobacco.

Walker is asking lawmakers to return to Juneau in July to work on three deficit-reduction bills, saying that otherwise the deficit will exhaust Alaska's primary savings account in two years without a rebound in oil prices. That, he argues, will force lawmakers to cover the budget gap with the Permanent Fund's earnings reserve account — a move that could reduce residents' dividends.

"We absolutely cannot delay a year," Walker said Sunday, speaking next to a poster depicting a near-empty "state of Alaska savings tank." He added: "The cost of delay is unacceptable to Alaskans."

Of Walker's three special session bills, one is his latest attempt to restructure the Permanent Fund — similar to his bill that failed in the House this week.

Another is omnibus tax legislation that adds a new proposal for a statewide sales tax to Walker's previous proposals to establish a personal income tax and increase some existing taxes. A spokeswoman for Walker said the omnibus package could also be separated, as lawmakers asked at the start of the first special session.

Walker's third bill will address oil taxes. That could presage a veto and redo of House Bill 247, the bill geared toward reducing oil companies' cash subsidies that narrowly passed two weeks ago after months of debate.

HB 247's approval came over objections from Walker, as well as minority Democrats and some moderate Republicans who said it preserved a costly tax loophole for the state's biggest oil companies. But Walker said Sunday that he hadn't decided whether to veto HB 247 or not.

With lawmakers set to return to Juneau in three weeks, their re-election campaigns will begin in earnest in the interim.

One incumbent, Anchorage Democratic Rep. Ivy Spohnholz, on Sunday announced a fundraiser headlined by former U.S. Sen. Mark Begich; one of her Democratic colleagues, Anchorage Rep. Les Gara, chimed in with a Facebook post encouraging supporters to donate even if they can't attend.

"Bluntly, with special sessions Ivy will need donations even from folks who cannot attend fundraisers because of date conflicts," Gara wrote. "Our fundraisers will be fewer than we'd like this summer."

Hughes, the Palmer Republican House member running for a Senate seat, said she wouldn't object if House leaders held a few technical meetings during the special session, in which only a few members must be present. She's not on the House Finance Committee, and could monitor from home, she said.

She added: "We will weather it fine."

Walker, at his Sunday news conference, acknowledged he wasn't exactly excited to bring lawmakers back for more work, after two months of extra work beyond what was supposed to be the end of the regular session in late April.

"We're all weary of this," he said. "But I think Alaska's future's worth it."

Related: Alaska House quits without floor votes on governor's Permanent Fund, tax bills