It’s over, but not done.
At 11:46 a.m. Sunday, the Alaska Senate adjourned the fourth special session of the 29th Alaska Legislature.
Forty minutes later, Gov. Bill Walker issued a proclamation stating that the fifth special session will begin on July 11. On its agenda will be three items: Using the earnings of the Alaska Permanent Fund to pay for government operations, reforms to the state’s system of oil and gas drilling subsidies, and a suite of tax increases.
“I am absolutely convinced that if we don’t fix this now, then our challenges next year will be even more magnified,” Walker said in a press conference Sunday afternoon.
All three items were on the agenda for the fourth special session, too.
“I feel horrible about it. We didn’t get anything done,” said Sen. Dennis Egan, D-Juneau, after the Senate adjourned Sunday morning. “Alaska’s still in a deep fiscal strait and it’s got to be fixed.”
Despite 149 days of work so far, the Legislature has failed to pass measures that would balance Alaska’s state budget without deep draws from the state’s savings accounts. Walker proposed a 13-point plan to resolve the deficit, but lawmakers failed to pass any measures raising taxes or providing new revenue.
While lawmakers did cut hundreds of millions of dollars from the state budget — which is now down approximately 30 percent from two years ago — Alaska still has a $3.2 billion deficit in the fiscal year that starts July 1.
“It would’ve been nice to be able to complete (a fiscal plan), but to be fair, these are tough decisions,” said Senate Majority Leader John Coghill, R-North Pole. “There’s no easy decisions left, and so the House and Senate just could not agree on a methodology.”
Walker implied Sunday that the Legislature’s inaction means he will use his veto pen liberally before the budget takes effect.
“The size of government may be quite a bit different once this budget is complete,” he said.
He has 11 days to make vetoes before signing the budget.
Walker did not rule out cuts to the Permanent Fund Dividend, even when pressed on the issue.
“I’d say at this point, all options are on the table,” he said.
The biggest of the many stumbling blocks between the governor and Legislature was Senate Bill 128, which called for a 5.25 percent annual draw from the Alaska Permanent Fund. The draw, which would be from a five-year average of the Fund’s value, would pay for the Permanent Fund Dividend and provide money for state services.
“This doesn’t fix all the problem, but this is the cornerstone of it,” Walker said of the bill.
As a side effect of the bill, however, the Dividend would be cut as low as $1,000. Without SB 128, the dividend is expected to be about $2,000 this fall.
The Senate voted 14-5 in favor of the bill earlier this month, but the House Finance Committee voted 5-6 on Friday against advancing the bill to a vote of the full House.
Walker has previously said that preserving the full dividend is unacceptable. Without changes, he has said, the state will not have sufficient savings to take major action next year.
“Do we have to run out of savings before we fix the problem?” Walker asked rhetorically.
“The time to act is now, and we support the governor on that,” said Senate President Kevin Meyer, R-Anchorage, about the House’s failure to pass the bill.
The Senate’s adjournment kills two bills passed by the House in the final days before its adjournment. HB 4002, which passed the House in a 34-0 vote Saturday, calls for 10 years of medical benefits for the spouses and children of police and firefighters who are killed in the line of duty. The children must not be older than 19, or 23 if they are still attending college. The benefits cover any peace officer or firefighter who is a member of the Public Employees Retirement System. This includes many municipal officers, corrections officers and some volunteer firefighters statewide.
House Bill 246, which passed the House 30-6 on Friday, sets up an oil and gas infrastructure loan program under the state-owned Alaska Industrial Development and Export Authority. Under the bill, drilling companies would have been allowed to apply for low-interest loans as a subsidy instead of using the state’s controversial tax-credit incentive program.
Meyer suggested the two bills could be revived in the 30th Alaska Legislature, which will convene in January 2016.
Neither of the two failed bills made it onto Walker’s agenda for the fifth special session. That agenda is headlined by SB 128.
“I spoke with the governor this morning, and obviously the main bill that he wants is SB 128,” Meyer said.
The agenda also includes tax increases that gained no traction in the House and additional reforms to the state’s system of oil and gas drilling subsidies.
Walker said he has not decided whether to veto House Bill 247, passed by the Legislature during its fourth special session. That bill contains cuts to the state’s subsidy system but preserves a significant loophole that leads to an explosion in the state’s subsidy payments at low oil prices.
Some lawmakers, particularly in the House, said the bill does not cut the subsidy enough.
Walker could propose further cuts or veto the bill entirely as a means to force action.
“We’ll see when it’s time for me to sit down and focus on that piece of legislation,” he said.
Walker said he expects lawmakers to “do what they need to do” during the interim, including talking to constituents.
Asked whether the interregnum between special sessions could result in reduced support for SB 128, Meyer said he doesn’t think that’s likely in the Senate.
“I think the Senate’s pretty comfortable in the vote that they made, and we would make that same vote again in July,” he said. “I don’t think there’s any risk on our part of losing support in the Senate.”
He said he’s received more positive comments than negative ones since the Senate voted on SB 128, and he believes that some House members might change their opposition if they listen to constituents before the start of the fifth special session on July 11.
