Politics

Gov. Walker plants budget flag, but will legislators climb the hill?

Gov. Bill Walker this week unveiled his wide-ranging plan to close Alaska's budget deficit before an enthusiastic audience of business leaders, union officials, and Native corporation executives. But there was scant attendance from state legislators, who have the final power to approve Walker's ideas, tweak them or kill them off.

In interviews Thursday, lawmakers and observers offered a range of opinions about the plan's fate, with some saying it presented a good starting point and others saying the proposed budget cuts are just a fraction of those needed before Alaskans will accept the income tax and smaller Permanent Fund dividends Walker is proposing.

Lawmakers from both parties said they would entertain Walker's plan to restructure the Permanent Fund to generate more revenue for state government. That would cut this year's $2,000 dividend in half, but the governor says it's necessary to keep the state from ultimately eliminating the entire dividend program to cover future deficits.

But several others interviewed said that political pressures could leave the Legislature at the end of its 90-day session next year having only made cuts to spending — measures that Walker and state fiscal experts say fall far short of what's necessary to close the $3.5 billion budget gap, unless new money comes in from other sources.

"I think it's a good possibility that that's all they'll do," said Alan Austerman, a former Republican legislator from Kodiak who co-chaired a fiscal policy caucus during a budget crisis 15 years ago. "It's an election year."

Lawmakers in the Republican-led House and Senate majorities were quick to say their focus during the legislative session, which begins in January, would still be on budget cuts. Walker's plan would cut the state's $4 billion agency operating budget by about $100 million, or 2.5 percent. But Senate President Kevin Meyer, R-Anchorage, said his caucus is contemplating cuts as large as $700 million.

"We want to lead with reductions and not with taxes," he said in a phone interview.

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Those cuts, he added, could come from areas like the state's oil tax credit program, the criminal justice system and Medicaid, which costs the state more than a half-billion dollars each year to provide health care for low-income Alaskans.

The Senate aims to take up the state budget early in its session, then move on to Walker's ideas to raise more money to pay for government, Meyer said.

Walker's Permanent Fund proposal — restructuring it as an endowment that takes in oil revenue — "sounds pretty good," Meyer added. But he said lawmakers probably won't have time to address all the pieces of Walker's fiscal plan, which will be outlined in nine distinct bills.

Rep. Lynn Gattis, R-Wasilla, said it's unlikely any legislators from the Mat-Su, a conservative stronghold, would approve of taxes or smaller dividends without steeper budget cuts first. In phone calls and emails since Walker's introduction of his plan Wednesday, the message from constituents, Gattis said, has been "loud and clear": "I'll be damned if I let you reach into my pocket and take my PFD until you make substantial cuts."

Lawmakers this year cut the state's agency budgets by $400 million, or about 9 percent. But Gattis joked that she was nonetheless so shocked to see Walker's budget proposal for next year, with its smaller reductions, that she thought he'd been affected by Alaska's newly legalized marijuana.

"Somehow, he got into it — that's all I could think," she said.

Other legislators were more measured in their comments. Rep. Bryce Edgmon, D-Dillingham, a member of the Republican-led majority, said he liked how Walker's proposal put "everything on the table," though he acknowledged the full package will face an "uphill battle this year."

Walker's fiscal plan will need approval from three-quarters of the House and Senate, and Edgmon said many of his colleagues want to fix the budget problem solely through cuts or by increasing taxes on the state's oil industry — ideas favored by farther right- and left-wing legislators, respectively, that Edgmon called "one-dimensional."

But some legislators, he added, are interested in a "more balanced approach" with "measurable steps" taken in this year's legislative session.

"I'm certainly doing what I can to promote that message," he said. He added new pressure from the state's business community might help prod the Legislature to take steps that "none of us thought were possible."

Rep. Adam Wool, D-Fairbanks, echoed Edgmon in describing his own view as "holistic," saying he and his colleagues need to look at the "whole enchilada."

Wool, a bar owner, said he found Walker's proposed alcohol tax boost problematic. But the Permanent Fund endowment model, he added, is "definitely worth looking at."

While some of his Democratic colleagues favor closing the budget gap by raising taxes on Alaska's big oil producers, Wool said with oil prices at historic lows, he's not sure enough money could be raised that way.

"I'm not saying we shouldn't look at oil taxes — I'm sure there's some validity to that," he said. "It's the same thing as people saying, 'Let's not look at taxes until we look at all the cuts.' I don't think that's the right approach."

Lawmakers will ultimately end up taking many of the steps outlined in Walker's proposal, said Bruce Botelho, the former Democratic state attorney general who coordinated the governor's transition, because "there are few realistic alternatives."

The question, he added, is how long it will take to implement the whole package. Most of it will likely have to wait until the 2017 legislative session, Botelho said — after the 2016 elections — which Walker "certainly" recognizes.

"What's important is the governor has planted a flag at the top of the hill," Botelho said. "He's hoping, in part, to provide some political cover, but also hoping there will be some others that will rally to the flag."

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Another observer, former Anchorage Republican Rep. Andrew Halcro, said a solution to the state's budget crisis will require legislators to embrace the problem.

"The only way this problem gets solved is if lawmakers show the leadership to fix it themselves," said Halcro, who now works in the administration of Anchorage Mayor Ethan Berkowitz, a former Democratic legislator.

But, Halcro added, there are political impediments to the compromises that would likely be required — the threat of primary challenges in next year's election, for example, fueled by conservative, anti-tax groups like Americans for Prosperity.

The governor's income tax proposal, Halcro predicted, will be "completely dead," while it's also unlikely the Permanent Fund restructuring will pass. The debate in Juneau, he added, is not about doing "the right thing."

"This isn't about a math problem," Halcro said. "For the 60 men and women in the Legislature, this is a political problem — and they're looking at the potential repercussions of the votes that they take."

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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