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Gov. Walker says full deficit-reduction plan might not happen until next year

JUNEAU — Alaska Gov. Bill Walker on Tuesday suggested he'd be willing to accept a partial deficit-reduction plan from the Legislature and not the full package of financial reforms that he asked for at the start of the year.

"I think some will have to come back next year," Walker said in an interview. He added: "Getting it all done this year may not be realistic given where we are."

Walker's comments came a day after lawmakers made substantial progress on the two biggest pieces of his financial plan.

Both the House and Senate have approved an oil-tax bill that phases out cash subsidies for companies in Cook Inlet, though the legislation didn't ask for as much of a contribution by industry as Walker and some lawmakers wanted.

And shortly after the House voted on oil taxes Monday, the Senate approved a long-awaited proposal to restructure the $54 billion Permanent Fund to help reduce the state's $4 billion budget deficit — though that bill, Senate Bill 128, still awaits action from wary House lawmakers.

If the House ultimately passes the bill, that deficit would shrink by more than half, according to projections by legislative analysts — leaving the state with more than $14 billion in savings at the end of the next financial year.

That appears to come close to satisfying Walker, who said putting his full plan in place might need a "two-step process."

"The goal is to make the hole as small as possible," Walker said. The Permanent Fund bill, he added, is "the most significant piece of fixing the hole."

Walker's comments came as Republican Senate leaders said they were unlikely to take up additional proposals from the governor to create a small personal income tax and to increase taxes on fuel, tobacco, alcohol, commercial fishing and mining.

Walker said he proposed those taxes to balance the impact of his deficit reduction plan, since the dividend cuts contained in SB 128 disproportionately hit lower-income Alaskans.

But Republican lawmakers have criticized the tax plans — which were projected to raise a combined $350 million — as unsupported by data and financially insignificant.

"If you have a dollar problem, it's a nickel," Sen. Mia Costello, R-Anchorage, said in an interview Tuesday. "What we passed last night, in my estimation, addresses the problem."

Up until this week, Walker had been insistent the Legislature present him with a plan to completely close the deficit — and he said lawmakers must pass some type of broad-based tax.

His political shift Tuesday came on the 16th day of a special session he convened in Juneau after lawmakers failed to pass a budget or any of his deficit-reduction measures in a regular session that dragged on for its constitutional limit of 121 days.

Many lawmakers and staff have moved into temporary housing, with a Native cultural festival starting Wednesday in Juneau forcing some legislators out of their hotel rooms. Some are flying out of town, though Rep. Lynn Gattis, R-Wasilla, plans on sleeping in her Juneau office in a cot for the rest of the week.

Walker will still have to fight to get the Permanent Fund legislation through the House when lawmakers return to work next week.

One reliable tally relayed to Rep. Andy Josephson, D-Anchorage, found just 15 members in support, Josephson said. It takes 21 votes to pass a bill in the House.

"There's not any real solid support that I've seen," House Speaker Mike Chenault, R-Nikiski, said in an interview Tuesday. "There's little pockets of support. But I don't know what it's going to take to pass it."

The Permanent Fund bill faces skepticism or outright opposition from House minority Democrats and some members of a moderate faction of the Republican-led majority, who say the oil-tax bill that passed Monday was too sympathetic to the industry to justify cutting constituents' dividends.

"Why should working Alaskans be asked to pay for these oil-industry subsidies?" Rep. Ivy Spohnholz, D-Anchorage, wrote in a Facebook post Tuesday.

Several Republican House members are also unwilling to vote for the Permanent Fund legislation without deeper cuts to state government.

"I have repeatedly said that unless or until we reduce spending to sustainable levels, I will not support new taxes, tax increases or any use of the Permanent Fund," wrote Rep. Cathy Tilton, R-Wasilla, in her own Facebook post Tuesday. "My position has not changed. I will be a no vote on SB 128 when it comes to the House for concurrence."

If the House does pass the Permanent Fund bill, the state's budget deficit would drop to about $1.5 billion, according to calculations by legislative analysts — leaving a total of $14.4 billion in savings at the end of the year.

That $1.5 billion figure, however, includes a legal minimum payment of $30 million in cash subsidies for oil companies, rather than the hundreds of millions of dollars the state is projected to owe. (Payments above the minimum can be postponed if they're not funded by the Legislature, or if Walker vetoes them, as he did for $200 million in subsidies last year.)

Sen. Johnny Ellis, D-Anchorage, said his chamber has made "some progress" by passing the oil tax and Permanent Fund legislation. But the restructuring of the fund, and the associated reductions to dividend checks, produces a "disproportionate impact on low-income Alaskans" unless the other tax measures are approved, he added.

Walker should force lawmakers to keep working until they pass a more balanced plan, Ellis said in an interview.

"It's not even close to being what the state of Alaska at this moment requires to save our credit rating, to save our economy, to save the families in Alaska that are depending on us to make the right decisions," he said.

Walker, he added, "is the one with the bully pulpit and the public and the ability to make us do the work. This is the moment for him to give it his best shot."

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