Alaska lawmakers begin special session with plans to avert July 1 government shutdown

JUNEAU — State legislators convened in special session here on Thursday, the day after their 121-day regular session ended without agreement on the budget needed to keep the state functioning past July 1.

On the last day of the regular session, the state Senate approved a $6.2 billion spending plan that includes $1.5 billion for this year’s Permanent Fund dividend. That’s enough for a dividend of between $2,300 and $2,400 per recipient.

The Senate’s plan must be compromised with a smaller House spending plan that does not include a dividend amount. Late Wednesday, the House and Senate each appointed three negotiators to reach a deal on behalf of the 60-person Legislature. On Thursday, they opened the special session and many lawmakers promptly left the Capitol for their home districts.

If negotiators finalize a deal, those legislators will return to the Capitol, approve the deal and gavel out until a second special session in August, legislative leaders said.

“There’s a general hope that maybe we can be out by the end of next week,” said one of the negotiators, Rep. Neal Foster, D-Nome.

“My fingers are crossed, but I’m not optimistic today,” said Senate Minority Leader Tom Begich, D-Anchorage.

If lawmakers don’t create a compromise plan before June 1 — and if that plan isn’t approved by Gov. Mike Dunleavy by that date — many of Alaska’s 14,000 state employees will receive contractually obligated notices warning them that they will be temporarily laid off one month later.

Angela Rodell, director of the Alaska Permanent Fund Corp., said that agency will begin preparing to shut down and leave Alaska’s $78.6 billion sovereign wealth fund under passive management.

“That may be coming,” she told corporation trustees Thursday afternoon.

Foster said the impending consequences make fast action critical.

“We need to get this done because we don’t want pink slips going out to the state workers,” he said.

“That’s absolutely the goal,” said Senate President Peter Micciche, R-Soldotna.

Lawmakers see three main obstacles to a quick solution.

Before the regular session ended, senators combined the state’s major budget bills into a single fat document that Sen. Natasha von Imhof, D-Anchorage, nicknamed the “turducken.” That sped the budget process in the Senate, but it will take at least two — and possibly three — days to untangle that 150-page document for House negotiators, Foster said.

Second is the handling of more than $1 billion in federal economic aid approved by Congress earlier this year in the $1.9 trillion American Rescue Plan. Lawmakers need to agree on a way to spend the $500 million available this year. A similar amount will be available next year.

Third is the Permanent Fund dividend. The House didn’t include a dividend in its budget plan; the Senate allocated an amount that would break a spending cap approved in 2018 and violate state law. A lawsuit is expected if legislators go above the spending cap.

A fourth obstacle could also exist. Unless lawmakers approve a procedural vote known as the “reverse sweep,” several state programs will be automatically defunded, including some college scholarships and subsidies for rural electrical power. The procedural vote requires three-quarters of the House and three-quarters of the Senate.

House Minority Leader Cathy Tilton, R-Wasilla, said she doesn’t yet know whether part or all of the 18-member House Republican minority will support the reverse sweep.

She said she’s worried that budget negotiators could try to make the Permanent Fund dependent upon approval of the reverse sweep. If that happens, she said it could create problems.

“Those kinds of things can force the hands of the minorities, but if it does I don’t consider that working with a minority,” she said.