On eve of fifth special session, Walker done appealing to legislators

Round five starts Monday, July 11.

Including last fall’s “gasline special session” when the Legislature approved a buyout of TransCanada Corp.’s interest in the Alaska LNG Project, the pending special legislative session is the fifth in less than 15 months and is beginning to resemble a heavyweight fight between the Legislature and Gov. Bill Walker.

However, it’s far from déjà vu all over again.

Last month the Senate passed a version of the governor’s vision to restructure how the Permanent Fund’s investment earnings are used: from just paying dividend checks to splitting the revenue between PFDs and general government services as the state continues to grapple with budget deficits well in excess of $3 billion.

The Senate’s vote was by a wide 14-5 margin, meaning the House is Walker’s sparring mate this time.

And it’s a House divided.

Last special session — the fourth of the 29th Alaska Legislature — the House Finance Committee vote on the Permanent Fund legislation that ultimately killed the bill was split almost every way possible for as many different reasons as there are committee members.

Sources within the Legislature told the Journal some of the votes against Senate Bill 128 were less about legislators disagreeing with the necessity of the bill and more about them following constituent sentiment.

Retooling the Permanent Fund to put a significant dent in the annual budget deficit — SB 128 would add about $1.8 billion per year to spendable state revenue and roughly cut the current deficit by half — also means a future with dividend checks that are likely half of near-term projections. That is, unsurprisingly, unpopular.

Rep. Tammie Wilson, R-North Pole, said repeatedly and defiantly in committee meetings and on the House floor that she will never vote to change the PFD.

Other majority members said they needed to see more budget cuts before they could ask their constituents to accept potential PFD reductions.

House Minority Leader Rep. Chris Tuck, D-Anchorage, said in an interview that only demanding a Permanent Fund plan is not a comprehensive fiscal plan and that calling the Legislature back so soon after the last session ended unceremoniously in late June will simply “embolden people against his plan.”

Walker has pushed for personal and industry taxes also, but his main focus has been on the Permanent Fund, given it is the single biggest way to fill the deficit and there is little appetite to pass additional taxes on top of that.

Tuck suggested revisiting the idea in next January’s regular session, after the November elections when the Legislature could look much different and lawmakers could be refocused without a pending election to worry about, particularly in the House, which has two-year terms.

He emphasized the Legislature’s original budget cuts that took several hundred million dollars out of the 2017 budget, although some were one-time savings, as well as the omnibus criminal justice and Medicaid reform bills that will hopefully save significant money long-term as evidence of the Legislature’s successes.

“We’ve done a lot of work this year trying to save money in the budget,” he said.

On the positive, Tuck said he thinks the dissolving caucuses, at least in the House, is a good thing.

“It doesn’t mean the system is breaking down; it means it’s coming together,” Tuck said, as factions of each caucus have joined forces this year on contentious budget issues.

The difference with this round, Walker said in a July 6 interview, is that he took away as many of the “excuse du jours” that legislators have used against the Permanent Fund bill as he could when he rolled out a state budget with $1.3 billion in vetoes June 29.

Walker said legislators told him in private meetings they needed him to take the political heat for steep budget cuts and reducing this year’s PFD from about $2,000 to $1,000 per Alaskan.

He did it.

Walker cut the dividend appropriation in half; cut the 2017 fiscal year oil and gas tax credit appropriation by $430 million to the statutorily required amount of $30 million; and among other agency reductions, cut combined education funding by nearly $70 million.

“Now we’re going back to go back to and see if those that said, ‘You do this; we’ll do that,’ we’ll see how that goes. If nothing happens in this session and they gavel in, gavel out, I will have an address to the state because at that point it’s clear that the legislative process is not going to fix this problem,” an at times exasperated Walker said.

To legislators who have said the governor needs to do more to gain public awareness on the state’s budget crisis: “Trust me, I’ve got the public’s attention as a result of what I did (with the vetoes). All eyes are focused on me as a result,” Walker said.

To legislators hesitant to make a politically unpopular vote to change how the PFD is paid: “They owe it to their constituents that Alaska has a future. So while some are fighting for a dividend check I’m fighting for Alaska’s future. I’m looking at the next 10 years, the next 15 years, the next 50 years for Alaska.”

To those in the oil industry that have been sharply critical of the second straight year of credit payment vetoes: “Remember, my fiscal plan was to pay off all those credits in totality. That’s still available, but we need to have a fiscal plan as well.

“They pushed back to me and I pushed back to them. My push back to them was, ‘What are you doing to help on the fiscal plan in Alaska? What are you doing other than just fighting for your slice of the pie? What are you doing about the rest of the pie?’”

While the version of tax credit reform that ultimately passed the Legislature and was signed by Walker was milder and more gradual in fading out some of the credits than his original proposal, the administration’s bill had a $1.5 billion appropriation to pay all past and future expected credit obligations.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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