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House passes Senate version of tax bill after Rep. Hawker returns from cancer treatment

JUNEAU — The Alaska Legislature passed a long-awaited oil tax reform bill Monday, with Rep. Mike Hawker, R-Anchorage, ill with cancer, casting a pivotal vote in the House after returning to Juneau for the first time in two months.

The vote on House Bill 247 was 13-6 in the Republican-led Senate, whose finance committee last month wrote the final version of the bill that was slightly adjusted in a committee hearing Monday morning.

But the House vote was a razor-thin 21-19, with four committee amendments helping to flip a few votes and allowing the legislation to pass with the bare minimum it needed — over the objections of minority Democrats and some moderate Republicans who said the legislation went too easy on the state's largest oil companies.

The bill could still net the state as much as an estimated $140 million by 2020, but that's only half of what was projected in a version of the bill produced in a bipartisan House compromise. The legislation passed Monday also preserves a tax credit for the state's four largest oil companies that the House compromise had proposed to repeal — credits that by 2020 would amount to $585 million, which the companies could claim as tax deductions, according to the state's projections.

With the bill's passage, lawmakers now are poised to tackle the biggest piece of Gov. Bill Walker's deficit-reduction plan — his proposal to restructure the Alaska Permanent Fund to help close the state's $4 billion budget gap.

But the oil tax bill approved Monday — if it escapes Walker's veto pen — may make passage of the Permanent Fund proposal more difficult in the House.

That chamber's version of the Permanent Fund legislation has been stuck in the finance committee, where it's faced opposition from conservative Republicans as well as Democrats who say they won't touch residents' dividend checks without steeper oil taxes.

"I think passage of the Permanent Fund restructuring is dead at this point," Rep. Paul Seaton, R-Homer, said in an interview after Monday's vote.

Walker hasn't indicated if he'll sign the oil tax bill. His communications director, Grace Jang, said late Monday that Walker opposed the version that passed because he "felt the bill didn't go far enough," but she added that it was too soon to say if he'd veto it.

The House last month, in a 14-24 vote, had rejected almost the exact same Senate oil tax proposal that members approved Monday. The difference was four narrowly tailored amendments adopted Monday morning, as well as Hawker's return.

The Anchorage Republican, who's being treated for prostate cancer, flew into Juneau on Monday for his first floor session since early April. He declined to answer a reporter's questions before posing with his allies in the House's Republican-led majority and leading members in the daily pledge of allegiance.

The presence of Hawker, an oil industry supporter whose wife earns more than $200,000 annually as a ConocoPhillips financial analyst, added one reliable vote for the Senate's version of the oil tax bill.

Several other members flipped, with some citing concessions made in the four amendments adopted Monday. Rep. Jim Colver, R-Palmer, switched his vote after one amendment extended the lifetime of a tax credit for "Middle Earth" — the area between Cook Inlet and the North Slope that happens to be in Colver's district.

Colver said in a phone interview that the amendment was a key incentive for natural gas development in the region, which includes the Copper River Valley.

"It's very important for the Copper Valley to get gas," he said.

Rep. Tammie Wilson, R-North Pole, was one of the architects of the previous House version of the oil tax bill that passed with bipartisan support. But she voted for the Senate version Monday after an amendment that preserves a credit for oil refineries that she said was critical for a $100 million Petro Star project in her district.

And Rep. Cathy Munoz, R-Juneau, said one thing that helped convince her to switch her position was another amendment that gives priority for cash subsidies to oil companies with higher proportions of Alaska resident workers.

She said in an interview after the vote that Walker's administration had lobbied her Monday morning to support the legislation before the governor decided by the end of the day to oppose the bill — an account that Jang confirmed.

The legislation approved Monday by the House, Munoz added, was the best that her chamber would get, with the Senate staunchly opposed to scaling back the tax deductions for the North Slope companies.

"The Senate was not going to concede anything further at this point in the process," she said.

The bill adopted Monday still makes substantial changes to the state's oil tax regime.

It would phase out the cash subsidy programs in place for companies developing projects in Cook Inlet, the source of the natural gas for much of Southcentral Alaska's heating and electricity.

It shortens the duration of tax breaks for new North Slope developments. And, in one other amendment made Monday, it loosens confidentiality requirements that barred the state from disclosing which companies received state subsidies, and how much.

"We compromised significantly. We're ending credits and minimizing our outlay," Rep. Dave Talerico, R-Healy and co-chair of the House Resources Committee, said in a prepared statement. "We're also protecting our stability and, eventually, our economy."

But without the limits on tax deductions for major North Slope oil companies, the legislation that passed Monday appears to risk support for the Permanent Fund proposal in the House — the lynchpin of Walker's deficit reduction plan and one that's expected to produce billions in revenue to help pay for state government.

Rewritten versions of Walker's Permanent Fund plans have languished for weeks in the House and Senate finance committees. The Senate on Monday finally advanced a new version of the legislation to the floor, where members passed it 14 to 5, with Anchorage Democrats Bill Wielechowski, Berta Gardner and Johnny Ellis opposing along with Mat-Su Republicans Mike Dunleavy and Bill Stoltze. Charlie Huggins, a Republican from Wasilla, was absent.

But the House's identical version of the bill is expected to stay in the 11-member finance committee through next week, when members will have the chance to offer amendments after they return from a five-day break. So far, the legislation, House Bill 245, doesn't appear to have support from the six committee members it needs to advance to the floor for a vote.

"The oil tax bill as it stands now — the state is hemorrhaging," Fairbanks Rep. David Guttenberg, one of three minority Democrats on the finance committee, said in an interview Monday. "I need to stop the state from hemorrhaging before I can ask voters to come to the table and give a personal sacrifice."

Three Republicans on the committee, meanwhile, wouldn't offer their support for the Permanent Fund legislation either.

Rep. Lance Pruitt, R-Anchorage, said he hadn't made up his mind on the bill.

But he said there hasn't been enough discussion about provisions that could be attached to the legislation to help limit government spending. He also said that lawmakers should consider asking for a public vote before making any changes to the dividend program, noting that groups advocating for structural changes to the Permanent Fund have cited support for the idea in public polls.

"Maybe the ultimate poll is to ask the public if they agree with what we're being told," Pruitt said in an interview. "And I think there's validity to that, and that may be something that I look at joining some of my colleagues in trying to call for."

Reps. Wilson and Lynn Gattis, R-Wasilla, both said in interviews that they were staunchly opposed to the Permanent Fund legislation — a message that Gattis bluntly relayed to Walker personally in a meeting last week.

"I said, 'The Mat-Su did not vote for you,' " Gattis said in an interview, referring to the region she represents.

Her objections, she added, stem from the fact that the Walker administration hasn't proposed deep enough cuts to the state budget — even though lawmakers have the ability to further reduce the spending plans submitted to them by the state's chief executive.

Gattis also alluded to the state's merit-based pay system for its employees — which House Republican leaders are trying to scale back through legislation, but have so far failed.

"I'm not going back home and looking in my constituents' eyes and stating that while you're losing your jobs, we're going to give raises to government workers," Gattis said. "Not going to happen."

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