Alaska lawmakers staring down government shutdown after session ends in disarray and defeat

JUNEAU — With a state government shutdown six weeks away, Alaska lawmakers will now have a special session for their second try at passing a budget and deficit-reduction legislation after the four-month regular session ended in disarray and defeat Wednesday night.

Gov. Bill Walker first introduced a 10-bill financial reform package Jan. 19, which included oil-tax legislation, a new personal income tax, tax increases on natural resource extraction, tobacco and alcohol, and a restructuring of the Alaska Permanent Fund to help close the state's multibillion dollar budget gap.

Lawmakers failed to pass any of those bills, or a budget, after 121 days. And the only piece of Walker's deficit-reduction plan given a floor vote by either the House or Senate was House Bill 247 — a rewritten version of the governor's oil-tax legislation that died Wednesday when the two chambers couldn't agree on  competing versions passed by each one.

On Monday morning, Walker will ask lawmakers to start all over again, though this time, the Alaska Constitution empowers him to set the agenda and limit debate to bills in his proclamation. His call for a special session lists as its subjects a budget bill, Permanent Fund legislation, and nearly all the same tax measures, minus a cruise ship passenger tax increase he's abandoned.

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The special session will also include four other bills that failed to pass during the regular session. One tries to fix the state's individual health insurance market, which has seen sharp rate increases over the past few years. Two others aim to improve the way the state handles foster care and adoptions. And a fourth would guarantee health coverage for spouses and children of police and firefighters killed in the line of duty — legislation that became a flashpoint last month in the Legislature's fight over a criminal justice reform bill.

All the bills will have to start their way through the Legislature's committee process anew in the special session, though Walker said lawmakers could also resurrect some of the legislation that died Wednesday evening with the fall of the gavels in the hands of the House speaker and Senate president.


Asked why the results of a special session should be any different from the regular session's, Walker said at a Thursday morning news conference he was relying, effectively, on a mood shift.

"I sense a lot of desire to work a little more collaboratively," he said.

That desire appears to exist in the House. In a news conference Thursday morning, the Democratic minority leader, Rep. Chris Tuck of Anchorage, praised the Republican House Speaker Mike Chenault, of Nikiski, as someone who had worked productively with Democrats.

The state Senate, however, has shown little inclination to cooperate with Walker or with the two caucuses in the House — even though all four parties will likely have to agree on a final budget and deficit-reduction plan, based on House minority Democrats' power to veto spending from an $8 billion state savings account.

The Senate rejected a negotiated House compromise on oil taxes. And while the House worked to piece that compromise together over the last month, the Senate also refused to put forward its own version of the legislation, or to vote on Walker's tax bills or his Permanent Fund legislation.

After the first day of the Legislature's extended session on April 18, after the statutory 90-day limit had passed but before the more potent constitutional limit of 121 days had arrived, senators held no finance or other standing committee meetings until May 11. It was only then that they resumed their public work on the capital budget — all while members collected $213 a day for living expenses.

Tuck, at his news conference Thursday, said the Senate should do more during the special session.

"We hope that we see more activity from the Senate leadership — they sat around and watched us this last 30 days," he said.

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Three Senate Republican leaders — Senate President Kevin Meyer of Anchorage, Majority Leader John Coghill of North Pole, and finance committee co-chair Anna MacKinnon of Eagle River — didn't respond to requests for comment Thursday. And a spokesperson for the Senate's Republican-led majority didn't respond to an email request for comment about Tuck's remarks.

One other big pressure factor for lawmakers as they get closer to July 1 — the start of the state's fiscal year — is the threat of a government shutdown if the Legislature hasn't passed a budget.

Online message boards for state employees were abuzz Thursday about that possibility, with warnings of potential layoffs set to be mailed by the state in early June.

State workers were relieved legislative leaders approved new union contracts at a committee hearing Tuesday, said Jim Duncan, the director of the Alaska State Employees Association, whose general government unit is the state's largest public employee union. But the lingering budget uncertainty and the potential for the mailing of layoff warnings leaves them with "mixed emotions," he added.

"I'm confident that there will be a budget by July 1," Duncan said in a phone interview Thursday. "But every time those are sent to employees it causes concern and unrest."

Meanwhile, just 12 hours after lawmakers gaveled out late Wednesday without a budget, they received a warning from credit ratings agency Standard and Poor's.

S&P already dropped the state's credit rating in January due to the budget crisis, and has warned it could do so again.

"The politics of reaching an agreement on some combination of fiscal reforms that would stabilize the state's budget outlook is proving every bit as difficult as we anticipated," S&P's analysts wrote Thursday. The state's credit rating will be at risk of falling farther, they added, if lawmakers can't agree on financial reforms in the special session.


The work to put those reforms in place will begin again Monday.

After their late night Wednesday, lawmakers were enjoying a warm and sunny Juneau day Thursday.

It was their first official day off from legislating since their regular session began Jan. 19 — though House minority Democrats still took the time to hold their news conference, which Tuck ended on an optimistic note after the previous night's demoralizing finish.

"Hopefully by Monday," he said, "everyone will be happy faces again and ready to get down to work."