JUNEAU — The Alaska Legislature is blitzing through this year's budget work at a pace not seen in recent times, with the House and Senate both set to take their first votes on spending plans by early next week.
But with 40 days to go in this year's session, lawmakers still haven't answered the other multibillion-dollar question: How to pay for the budget once it passes.
Legislators in both parties acknowledge that they'll have to use some of the earnings of the Alaska Permanent Fund to help pay for government, which would lead to reductions in residents' annual dividend checks. But they still haven't settled on the details of just how the fund should be restructured. They've also been slow to push forward the slew of tax increases on resource industries and consumption that Gov. Bill Walker wants to use to help close the budget gap.
GOP leaders who set the Legislature's agenda in both chambers say they're trying to get the budget out of the way so that they can make room for debate on the revenue-producing legislation.
"It clears the decks," Sen. Pete Kelly, R-Fairbanks and co-chair of the Senate Finance Committee, said in a news conference Monday. "We can have that discussion."
But the slow progress of Walker's tax bills is raising fears among House Democrats. While with most legislation their concerns can be ignored by the majority, Democrat votes will be needed to pass a budget if it's not balanced and relies on money in a key state savings account, the Constitutional Budget Reserve. It takes three-fourths of each legislative house to draw from the reserve.
The House minority Democratic caucus won't vote for a budget that only relies on earnings from the Permanent Fund to reduce the deficit, said Rep. Chris Tuck, D-Anchorage, the minority leader. His caucus wants reductions to Alaskans' dividend checks to be balanced with contributions by the oil industry and others, he said in an interview Monday.
"We're not saying that the Permanent Fund isn't part of the package, but going strictly after the Permanent Fund is lazy work," Tuck said. "We think that everybody should have a role in helping us get out of this fiscal mess."
Lawmakers this year are expected to withdraw money to cover this year's deficit, estimated at more than $3.5 billion, from the $8.2 billion Constitutional Budget Reserve.
But it's obvious that the fund won't last forever, and Walker and legislative leaders agree using it isn't sustainable.
To cover the gap, Walker has proposed budget cuts combined with bills to restructure the $52 billion Permanent Fund; institute a small personal income tax; and levy increased taxes on commercial fishing, mining, cruise ships, oil production, motor fuel, tobacco and alcohol.
Since the start of the session in January, GOP legislative leaders have been focused on finding areas to cut the budget even deeper than Walker proposed.
They've held hearings on Walker's Permanent Fund and tax proposals — 10 bills in total. But none have made it yet to the floor of either the House or Senate, and top lawmakers say they still aren't sure what the final mix of revenue-producing bills will look like — or how far it will go to close the budget gap.
One thing appears clear: support has coalesced around using some of the earnings of the Permanent Fund to pay for government, even though such a measure would cut into residents' dividend checks.
Several lawmakers have proposed competing schemes to restructure the fund, which Walker says that based on investment returns could be tapped for $3.3 billion annually on a sustained basis. The Permanent Fund earnings, when combined with oil revenues, would help pay for his proposed $5.6 billion budget.
"I now know there will be something — I can say that with certainty," said Sen. Lesil McGuire, R-Anchorage, whose Senate Bill 114 would use 4.5 percent of the Permanent Fund's annual value to help pay for government operations, including an annual dividend of $1,000 or more.
The details of how the Permanent Fund will be restructured, however, won't be worked out until after the budget passes.
Tuck said his caucus would have preferred that the debate over the Permanent Fund and tax proposals to occur as part of the Legislature's budget process.
Republican legislative leaders haven't ignored Walker's tax proposals entirely. They've held hearings on each of his eight tax measures and plan to give them more attention in the House and Senate finance committees after a budget passes.
But some of the legislation has been met with outright hostility.
An increase in the state's fish tax has been bottled up in the House Fisheries Committee by Rep. Louise Stutes, R-Kodiak, while the House Resources Committee still holds Walker's proposed tax increases on oil companies after more than a dozen hearings, some of which featured attacks from company executives.
GOP leaders said they needed to go through the process of proposing cuts to the state budget before they were ready to seriously entertain the tax proposals.
"'Cuts first' is the resonating sentiment of the people," Kelly said. "We have to go through this threshold of permission, which is the cuts, to get to the revenue discussion."
Asked about the pace at which the Legislature was handling his budget and revenue proposals, Walker responded with a prepared statement sent by his communications director, Grace Jang.
"Much is at stake right now. The future of our state hangs in the balance, and the decisions that are being made during this legislative session will shape what Alaska will look like for years to come," the statement quoted Walker as saying. "The time to act is now. It is imperative that Alaska be placed on sound fiscal footing this session."
In an interview, Senate President Kevin Meyer, R-Anchorage, downplayed the significance of the tax measures, saying they would generate comparatively little income when compared to the proposals to restructure the Permanent Fund.
Walker's income tax, for example, would raise some $200 million annually, while his proposed increase in the motor fuel tax would raise another $45 million, with an additional $40 million coming from increased alcohol taxes and $12 million from an increased mining tax.
The governor's legislation to address oil taxes and oil tax credits, meanwhile, would result in a $500 million swing.
Meyer said lawmakers will not close the full budget gap this year. But he said it was possible they could pick some of the taxes that he described as "low-hanging fruit," like the increases to the tobacco and motor fuel taxes.
Somehow relying on Permanent Fund earnings to help close the deficit, he added, is inevitable — though Meyer said he doesn't know exactly how that plan will fall into place. It will likely be a "hybrid" proposal, Meyer said, combining elements of Permanent Fund legislation that's already been proposed by McGuire and Walker.
House Speaker Mike Chenault, R-Nikiski, used an awkward metaphor to describe his caucus' budget process this year, with different committees vetting each piece of legislation before sending them up to the finance committee.
"They can have all the bullets in the gun when they figure out which ones can be fired," Chenault said.
A final budget plan, with all the accompanying revenue sources, won't be agreed until the final days of the legislative session, Chenault said, because House Democrats won't vote for a package until they see how it will be paid for.
McGuire said she expected some tax legislation to be part of the mix because the public is looking to lawmakers for "diversification."
"Which ones will survive? I don't know that yet," she said.
Correction: An earlier version of this story said that Gov. Bill Walker's statement was sent by his spokeswoman, Katie Marquette. It actually was sent by his communications director, Grace Jang.