Gov. Walker orders special session after Legislature fails to reach budget deal

JUNEAU — The 121st day of the Alaska Legislature's session started with a lot of questions: Would lawmakers help people who wanted Uber and Lyft and pass the ride-hailing bill? Comply with the federal Real ID Act's mandates for driver's licenses so Alaskans can more easily visit military bases or fly on airlines? Give manicurists a reprieve from tough new licensing requirements?

One thing, though, was obvious from the start of the day — the last one allowed under the Alaska Constitution before lawmakers would have to vote for an extension, or rely on Gov. Bill Walker to call them back for a special session, which he did after 9 p.m.

Before the special session begins, there would be no breakthroughs on a broader plan to fix Alaska's $2.5 billion deficit, or on the state budget.

Lawmakers didn't even appear to be trying — and more than one took a break to pose for a photo with the visiting Mrs. Alaska.

About 9 p.m., the Alaska Senate adjourned until next January. A short time later, the House gaveled out. Then Walker called them into special session starting Thursday.

Walker, in a brief interview in his office after signing his special session proclamation, said he was "actually encouraged" by the passage in the House and Senate of deficit-reduction bills, even if the two chambers hadn't yet agreed on a single version.

"So far as I can tell, everybody is still talking," he said.

The House spent the day passing bills that are priorities of individual members, from a measure to ban wolf hunting in two areas near Denali National Park and Preserve to legislation boosting training and limiting workloads for state social workers.

Senators, after passing the ride-hailing bill, retreated to their offices for much of the day, some of them tuned to the House on their TVs. They returned to the floor in the evening to debate giving a final stamp of approval to their own criminal justice legislation when a modified version returned from the House.

"We just keep watching them on the floor, and not quite sure what direction they're going or where they're going to end," said Eagle River Republican Sen. Anna MacKinnon, referring to House members.

By 8 p.m. Wednesday, legislative leaders hadn't announced an agreement to extend the session, a move that takes a two-thirds vote in the House and Senate. That made it increasingly likely that Walker would have to call lawmakers back for a special session to close out the competing budget and deficit-reduction plans approved by each chamber.

Both House and Senate leaders had said they were inclined to vote for an extension. But members of the 18-member House Republican minority — which could, in effect, exercise veto power in the 40-member House — were skeptical.

Anchorage Republican Rep. Chris Birch said he thought the Legislature would focus better in a special session, where work would be limited to bills Walker places on the agenda.

"I mean, we spent two and a half hours on flippin' wolf trapping this morning," Birch said in an interview. "We're dealing with all this nonsense when we should be dealing with budgets, first and foremost."

Lawmakers did repeal the requirements for manicurists, and they were expected to take up a bill to make the state Real ID compliant before midnight. Walker's administration said the Real ID legislation needed to pass by Wednesday to meet a federal deadline.

The state budget bills never came up on the House or Senate floor Wednesday — and the House hasn't even passed its own version of the state capital budget yet.

The spending bills remain snarled in the two chambers' broader deficit-reduction fight, which hasn't budged much since the start of the session.

The Republican-led Senate majority is proposing to close most of the $2.5 billion deficit with spending cuts for schools and the state university system combined with diverting some of the Permanent Fund's investment earnings to government instead of dividends. The Senate would rely on savings accounts to cover the remaining deficit, which is still projected to be hundreds of millions of dollars under its plan.

The largely Democratic House majority coalition wants to fill the full deficit with a restructured Permanent Fund combined with higher oil taxes and a reinstated state income tax.

Members argue that the income tax — which would take more from high-income residents — makes for a fairer deficit-reduction plan. That's because relying solely on the Permanent Fund for new revenue would hit poor residents disproportionately, since dividends make up a larger share of their income.

Each chamber has passed its own versions of budget and deficit-reduction bills. But the two majorities haven't resolved the differences between them, like the $1,250 dividend in the House proposal compared to the $1,000 in the Senate's, or the Senate's nearly $100 million in cuts to schools and the university system, which the House opposes.

The Senate even took the unusual step last week of voting down the House income tax proposal, a rare moment in which a bill comes to the floor to be defeated.

Since then, there have been no public signs of progress in negotiations between the two chambers' leaders, who in interviews Wednesday said they were waiting for their counterparts to relent.

Asked at a Wednesday news conference about how lawmakers were advancing key bills, House Speaker Bryce Edgmon, D-Dillingham, said "that's a question that, I think, is primarily for the Senate."

"The House has sent its major pieces over to the Senate and we are not going to negotiate against ourselves," Edgmon said. "We're waiting for the Senate to come forward and demonstrate that they can put a package together that's not strictly just reducing Permanent Fund dividends."

Asked what work the Senate was doing Wednesday, MacKinnon, co-chair of the finance committee, responded: "The Senate successfully concluded all of our business on Day 90."

"We're passing their bills. They're not passing any of our bills," added Kodiak Republican Sen. Gary Stevens, who joined the interview in a fifth-floor hallway. (Both the House and Senate passed legislation Wednesday that was sponsored by members of the other chamber.)

Walker has pushed for budget reforms and lawmakers were expecting the call to a special session. MacKinnon said she believes a more limited agenda "will focus the conversation for everyone."

"We need to resolve our differences and come together for Alaskans," she said.

But it's unlikely that lawmakers will strike a deal anytime soon, according to Jim Duncan, head of the Alaska State Employees Association, the largest state workers' union.

"We don't see the Legislature getting anything done before June 1," said Duncan, who spent more than two decades in the Legislature himself.

Union officials, Duncan said, are telling members it's "quite possible" they'll get mailers giving them a month's notice about a potential layoff — which would be sent June 1 if lawmakers haven't passed an operating budget by then. The state's fiscal year begins July 1, and if there isn't a budget and appropriation by then, the administration is barred by the Alaska Constitution from spending any money.

But Duncan downplayed the potential of lawmakers flirting with a government shutdown, which he said would hurt them politically.

"By mid-June, the pressure really comes down," he said. He added: "Somewhere, there's a compromise."