Senate passes capital budget

Richard Mauer

JUNEAU -- After days of tinkering, the Senate's $2.6 billion capital spending bill shot out of the Finance Committee on Wednesday morning and landed on the Senate floor, where it paused only long enough to see two amendments fail before passing unanimously.

A long working day later, but with daylight still streaming through the Finance Committee windows, the senators took up a new version of the oil tax bill they've been discussing since last year. This time, after only slightly more talk than was expended on the capital budget, the oil tax bill also whisked from the committee toward the Senate floor.

Finance co-chairman Bert Stedman said the Senate president, Gary Stevens, decided against rushing the tax bill through the Senate on Wednesday night and instead held it for the 11 a.m. session Thursday.

Members of the Republican and Democratic wings of the bipartisan coalition that runs the Senate wouldn't commit themselves after the committee adjourned over whether they thought the bill would pass the full Senate on Thursday. But it's unlikely that the committee would have moved the measure without assurances it had a substantial majority behind it.

As the Legislature bumps toward its Sunday adjournment, the two bills were proof, if anyone needed it, of how quickly a chamber can act on big legislation when deals are cut and time is running out.

The passage of the capital budget and the expected vote on oil taxes come amid an atmosphere in the six floors of the Capitol laden with talk of special sessions, leverage and even hostage taking -- the legislation kind. With so many parties involved -- the governor, the House leadership, the Senate leadership, divisions within the ruling coalitions and minorities in each chamber who aren't completely powerless because of potent allies they have -- the end games are challenging to plot.

Gov. Sean Parnell told The Associated Press about his ideas for a special session limited to oil taxes, the budget bills, his scholarship bill and a small-diameter gas line proposal -- depending on what remains to be passed after Sunday. House Speaker Mike Chenault was largely in agreement during an interview Wednesday afternoon.

With deals already cut on capital spending, and the operating budget open to deal making in a conference committee, the biggest unknown now is how the House will react to the oil-tax bill, assuming it passes the Senate.

Leaders in the House had dismissed earlier versions of the Senate bill as not cutting taxes deeply enough, but now that they are about to actually see a measure, will those complaints soften? Will a deal be cut to accept most of the Senate bill in return for the Senate holding its nose and passing a favorite of the Republican leadership in the House, House Bill 9? That bill, introduced by Chenault himself, moves the state closer toward constructing the "bullet line" gas pipeline from the North Slope to his district in Kenai, but Senate leaders have said it's wasteful.

Chenault, in the frank interview with the Daily News and KTUU-Channel 2, acknowledged that the big outstanding bills can be used as leverage in a final deal -- not the least because the House will have possession of the oil tax bill and the Senate would be holding the gas line.

The capital projects bill (Senate Bill 160) and the tax bill (Senate Bill 192) were both steered by Stedman, a Republican from Sitka. But the issues in each measure couldn't be more different.

In the capital budget, Stedman had an agreement with the governor and House leadership. He took the governor's $1.9 billion spending plan as the base then added $721 million, allocating earmarks across the state. Under the three-way deal, the House gets to add another $300 million.

In a bit of a whoopsie, the initial version of the Senate bill, released Saturday night, had only $5 million for a pier replacement in Kodiak in the senate president's home district. That grew to $18.1 million in the version released Wednesday morning. Earmarks for the districts represented by a fellow member of the Finance Committee, Sen. Donald Olson of Nome, also grew substantially.

Because it was a zero sum game, the money had to come from somewhere, and Stedman took much of it from projects in areas he represents. But those had been overrepresented in the first version, at least by straight dollar amounts.

Oil taxes were another matter.

The House passed a bill last year cutting oil taxes that was supported by Parnell, who said that "meaningful" reform was needed to encourage industry to invest in projects here rather than other states or countries with lower taxes. House Democrats who opposed the bill as a giveaway to industry -- they said it would cost the state treasury about $2 billion a year -- were too few in number to amend or stop it. But the House measure, 110, came up against a wall in the Senate's bipartisan coalition led mainly by Republicans from fishing communities and Democrats from Anchorage and Fairbanks.

The Senate bill spent time in the Resources committee before hauling up in Finance, where international consultants with databanks of industry financial information ran different proposals through computer simulations to see how they would affect state revenues and industry profits. Stedman had to walk a fine line to keep support from Senate Democrats who didn't want to give away tax revenue without some guarantee that industry would invest more in Alaska, and Republicans, who said the state was discouraging the industry.

The version that made it through the committee Wednesday sought to accomplish many things -- encourage development of new oil fields by providing extensive tax relief, and to encourage more production in old fields through other tax incentives. An oil company that did nothing but "harvest" oil in an old, declining field would pay the most taxes.

Sen. Lesil McGuire, an Anchorage Republican who favored lower taxes, said she would vote for the measure on the Senate floor. The bill didn't do enough to encourage more development in old fields, she said, but it was a good compromise.

Sen. Hollis French, an Anchorage Democrat who watched the committee from the sidelines, said he wanted to study the bill overnight before deciding.

As would be expected, industry lobbyists and representatives were in the audience. Damian Bilbao, head of finance for BP Exploration (Alaska) who had testified several times before the committee, noted after the session that the Finance committee's own consultants suggested the cuts might not be enough in some parts of the bill to encourage oil companies to spend their money in Alaska rather than other jurisdictions.

"We have to go back and do our own analysis, but we're not optimistic from what we heard from their own experts," Bilbao said.

McGuire said the bill had flexible components that would allow the House to make some changes and find a place for compromise.

But whether the House would just attempt to tweak the measure, or go for a full head-butt with the Senate, may not be known for a while.

"If they send it to us, we're going to give it the proper process," said Chenault, the House speaker, before he had a chance to look at the measure. "I don't see any way we pass that out in the three or four days that are left in the session."

"At this point, I'm kind of like the Senate," Chenault added. "They spent two years on an oil tax bill and I'm going to take the time it needs for my folks on the House side to be comfortable."

Reach Richard Mauer at or (907) 500-7388.

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