Alaska News

Republicans roll out new budget offer, but Democrats say it's no 'compromise'

The Republican-led majority in the Alaska House on Wednesday unveiled a new budget proposal that it called a compromise, even as Democrats greeted it with derision because they played no part in drafting it.

That set the stage for the minority House Democratic caucus to withhold their support for the plan, which Republicans need to clear a three-quarters voting threshold required to access a state savings account that holds money that could pay for the package.

The clash could drive Republican leaders toward another backup budget plan relying on an accounting maneuver with the Alaska Permanent Fund -- but it was unclear whether that plan has the support required to pass, either.

The result was continuing uncertainty about the fate of the state's budget, 128 days after the Alaska Legislature first convened its "90-day session" in Juneau and just a month before a potential government shutdown if a deal isn't reached.

In a news conference in their Anchorage offices, where the muffled chants of education advocates on the sidewalk below trickled into a glass-walled meeting room, House Republicans maintained that both of their budget proposals were viable.

"One of these has to work, or we're going to start laying people off," said the chairman of the House Rules Committee, Rep. Craig Johnson, R-Anchorage. "I don't think I would be willing to sit here today in front of you floating a proposal I didn't think had a chance to pass. Both of these, I think, have a chance to pass."

But in a committee hearing afterward, members of the House Democratic minority offered a string of amendments -- all of which were defeated -- to fix what they viewed as deficiencies in the budget bill that contains the Republicans' "compromise" offer.

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"It's like a compromise between a bunch of Republicans that didn't involve us," Rep. Les Gara, D-Anchorage, said in an interview afterward.

Leaders of the Republican-led House Finance Committee unveiled their proposal -- technically a substitute bill for an existing budget measure -- in a hearing Wednesday morning.

The measure adds about $17 million in spending to a budget plan accepted earlier this year by the Republican-controlled majorities in the House and Senate, but not by Democrats.

It restores some money cut from the state's education budget, but not as much as Democrats have pushed for. It also would restore state employees' pay raises next year, but that's funded using $30 million from other unspecified cuts that the administration of Gov. Bill Walker says would likely lead to layoffs.

The compromise offer leaves out other Democratic demands, like expansion of the public Medicaid health care program to cover about 40,000 uninsured, low-income Alaskans and additional money for the state's ferry system.

The Republicans are seeking to break what House Finance Committee co-chair Rep. Mark Neuman, R-Big Lake, on Wednesday called a legislative "stalemate" over the budget.

The state's annual spending package is now a month overdue as the Republican-led majorities in the House and Senate try to negotiate a deal acceptable to the Democratic minority in the House, whose support is needed to reach a three-quarters voting threshold required to tap billions of dollars in a state savings account called the Constitutional Budget Reserve.

The state needs the money to cover a multibillion-dollar budget deficit that arose this year after a crash in the price of oil. Oil taxes and royalties account for the majority of Alaska's revenues.

Over the past month, the three groups of lawmakers have debated competing $5 billion budget plans. The difference between the proposals pushed by the Republican-controlled Legislature and by Walker is only about $54 million in general fund spending, about 1 percent, though it has proven insurmountable.

The negotiations have pulled Chenault in two directions as he attempts to find a deal that bridges the deeper cuts favored by Senate Republicans, the more moderate cuts proposed by his own Republican caucus in the House, and additional funding and cuts to oil-tax credits sought by House Democrats.

In a news conference Tuesday afternoon, Chenault said the restored money for education and for state workers' raises contained in the offer were "items that my caucus could agree to."

"You can call it compromise, you can call it whatever word you would like to use," Chenault said. Democrats, he added, "are not going to get every issue that they have on their plate -- that's not how negotiations work."

Senate President Kevin Meyer, R-Anchorage, said in an interview that his caucus would "seriously consider" the House Republicans' proposal if it got the Democratic support needed to access the billions of dollars in the state savings account.

That support seemed unlikely, however, based on Democrats' reactions to the offer from Chenault's caucus.

"Usually, when you talk about having a compromise, you're sitting down with the other side," Rep. David Guttenberg, D-Fairbanks, said in a hearing on the proposal Wednesday morning. "That didn't happen -- one side decided what the compromise is, and (is) telling the other side: 'Here's what your compromise is.' "

In an interview later, Gara pointed out that the offer from Chenault's caucus only rolled back steeper cuts -- to education and to the state employee raises -- that were initially proposed by the Senate's Republican-led majority. Those cuts weren't included in House Republicans' own budget package passed earlier this year.

"I don't think it's a compromise -- it's worse than it was when it was on the House floor," Gara said.

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Chenault's caucus appeared intent on moving forward with its proposal nonetheless. The House Finance Committee passed the bill at the conclusion of its hearing Wednesday, and the full House heard the measure in a floor session later in the evening, in advance of a vote on Thursday.

If the bill fails to draw Democratic support, House Republicans said they were likely to take up another measure that could allow them to tap the state savings account with a simple, 21-member majority -- without the three-quarters supermajority that would require Democratic approval.

That lower voting threshold takes effect under the state Constitution if certain fiscal conditions are met, such as a dire situation in which in revenues drop, leaving the state with no other sources of money. That might be the case this year were it not for billions of dollars in the Permanent Fund earnings reserve, a pot of money separate from the fund's principal that can be tapped by the Legislature.

House Republicans propose to meet that constitutional condition by transferring about $5 billion from the earnings reserve to the principal, putting the money out of reach. They maintain that the move is unlikely to affect the payment of Alaskans' annual dividends, though Democrats disagree.

In his news conference Wednesday, Chenault characterized the proposal with the Permanent Fund transfer as potentially "the only option we have other than laying off every state employee," and he said there could be enough support for it to pass.

But six members of Chenault's 26-member caucus signed a letter last week saying they were opposed to the plan, in part because its potential impact on Alaskans' dividends hadn't been fully evaluated.

None have indicated that they've changed their minds, which could leave Chenault one vote short of the simple majority he needs to pass the proposal.

One of the six breakaway members of Chenault's caucus, Rep. Neal Foster, D-Nome, said he wasn't sure what would happen if the secondary plan went to a vote.

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"I have asked so many people on that -- I don't know. I initially thought for sure it couldn't happen," Foster said in an interview. Now, he added: "I don't even think anybody really knows."

Another member of Chenault's caucus, Rep. Shelley Hughes, R-Palmer, said she'd support the plan if it were the only budget option that could draw enough support. She said in an interview that her constituents would support the transfer of the Permanent Fund money to the principal.

"Moving money off the table from sticky fingers of politicians would be more appealing to them" than additional concessions to Democrats, Hughes said in an interview. "I think they'd be fine with it."

One other hurdle for the budget proposal involving the Permanent Fund transfer is Gov. Bill Walker, who could decide to veto it.

His spokeswoman, Grace Jang, wrote in an email Wednesday that Walker "prefers the Legislature compromise in good faith to obtain the supermajority vote necessary to access the Constitutional Budget Reserve."

"The threat to sweep nearly all the Permanent Fund earnings reserves at the last minute to avoid a compromise is unfortunate," Jang wrote.

Nathaniel Herz

Anchorage-based independent journalist Nathaniel Herz has been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at natherz.substack.com

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