Alaska lawmakers pass budget compromise to avert shutdown

June 23, 2017

JUNEAU, Alaska (AP) — The Alaska Legislature, motivated by the threat of a government shutdown, approved a plan late Thursday to fund state operations for another year.

The proposal, advanced by budget negotiators and passed by the House and Senate, would continue to draw from savings to help fill the state’s multibillion-dollar deficit, something Gov. Bill Walker had hoped to avoid.

It also would fully fund K-12 education, provide $57 million for oil and gas tax credits and limit to $1,100 the size of this year’s dividend check Alaskans receive from the state’s oil-wealth fund, the permanent fund.

The Senate approved the proposal, 16-1, Thursday evening. The House approved it later, 31-8.

A three-quarter vote was needed in each chamber to take money from the constitutional budget reserve to help fund government services, thresholds that were met.

Several members who were out of town hustled back for the vote. Sen. Mike Dunleavy, who missed the Senate vote, said he did not understand why the vote needed to be rushed and expressed frustration with a lack of communication on the issue.

Sen. Dennis Egan, a Juneau Democrat, said while the budget is problematic he voted for it to prevent a government shutdown. Many of his constituents are state workers.

Sen. Shelley Hughes, a Palmer Republican, voted against the proposal, citing concern with the limited dividend. She also announced that she was leaving the Republican-led Senate majority caucus.

Rep. Paul Seaton, a member of the House and Senate budget conference committee that advanced the proposal, called the measure a compromise.

It came seven days into a special session called by Walker to focus solely on passing a state operating budget and averting a shutdown. The new fiscal year starts July 1. A special session can last up to 30 days.

Typically, lawmakers deliver a budget in April. But the budget became enmeshed in a dispute between the House and Senate over how best to address a deficit that has persisted as oil prices have remained low. That debate remains unsettled.

“I wouldn’t say it’s satisfying at all,” said House Majority Leader Chris Tuck, an Anchorage Democrat.

There had been general agreement about using permanent fund earnings to help fill the deficit, but the House majority coalition, composed largely of Democrats, and the Republican-led Senate disagreed on what else needed to be done during a drawn-out regular session and an earlier special session. They failed to finalize a proposal that would have established a structure by which draws from permanent fund earnings would be made.

Absent such a plan, Seaton, one of three Republicans in the majority coalition, said there was a desire to avoid simply using fund earnings as a “piggy bank.” Plus, he said, the earnings reserve account is a higher-yielding account than the budget reserve fund.

Tuck said the debate over the dividend may not be over and could be addressed further in the capital budget, which lawmakers will have to finalize at some point.

Earlier this week, S&P Global Ratings warned that if the state continued to significantly rely upon reserves to fund the budget, it would likely lower the state’s debt rating.

Walker on Thursday said he was pleased the conference committee compromised on an operating budget. “Now, it is time to compromise on a fiscal plan,” he said.

After passage of the budget, he added oil tax credits to the special session agenda, saying that issue must be addressed this year.

Lawmakers, as part of the budget, included non-binding language indicating their desire during the coming fiscal year to end the program of providing cashable credits for small producers and explorers. This came in the absence of legislation that would have ended the program.

While the House and Senate agree the state can’t afford cash credits, House coalition members wanted to go further in addressing oil taxes, leaving the two sides unable to come to an agreement on an oil tax credit bill previously.

House Speaker Bryce Edgmon said his members are resolved to do what’s right for the state but “weary.” Lawmakers have been meeting since January, either in regular or special sessions.

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