Politics

What's actually happening in Juneau? Here's a walkthrough.

JUNEAU — The Alaska Legislature was supposed to be done in April when lawmakers hit the 90-day regular session limit set by voters in a 2006 initiative. But without compromises on a budget or deficit-reduction legislation, the House and Senate blew 30 days past that deadline — which is allowed under a separate constitutional limit — and are now nearing the end of a 30-day special session.

Lawmakers are likely to spend more time in Juneau in another special session Gov. Bill Walker has threatened to call. Here's a look at what the Legislature has accomplished so far, and what it hasn't.

Why isn't the Legislature done? Why haven't lawmakers all gone home? In short, because they haven't done everything Walker wants them to do to cut the state's budget deficit, estimated at $4 billion for the current financial year.

In January, at the start of this year's legislative session, Walker presented lawmakers with a dozen different bills designed to eliminate the state's deficit by 2018. The bills included a combination of budget cuts, taxes and a restructuring of the Permanent Fund. But the legislation ran into a wall, in the form of the Republican-led majorities in the House and Senate, whose members balked at the tax increases and smaller dividends that would result if Walker's full package passed.

The Legislature didn't approve a single one of Walker's bills — not even a budget — during the 90-day regular session, which dragged on an extra 31 days before hitting the 121-day constitutional deadline last month. Walker then ordered lawmakers into a special session that began May 23.

A week later, the Legislature passed a reduced budget, with needed votes from the House Democratic minority to access a key $8 billion savings account. Lawmakers also recently passed oil tax legislation that scales back cash subsidies to oil companies — the second-largest piece of Walker's deficit reduction plan.

But Walker says lawmakers are not done.

Why not? Because next year's budget still has a $3.2 billion deficit, which would use about half the remaining cash in the state's primary savings account, the Constitutional Budget Reserve. And, lawmakers haven't passed the cornerstone of Walker's deficit-reduction plan — his legislation to restructure the Permanent Fund to help pay for state government.

That Permanent Fund plan sounds complicated — how does it work? The current version of the bill is an adaptation of Walker's proposal, rewritten by Republican legislative leaders. The bill, Senate Bill 128, would convert the fund into a sort of endowment to sustainably generate an estimated $2 billion a year or more to pay for dividends and government services.

That could cover around half the remaining deficit. But the Senate's version of the Permanent Fund bill would produce dividend checks of $1,000 — a sharp drop from last year's $2,078, though still in line with the historic average.

Well, I don't want my dividend cut in half, and I don't want my legislator to approve a plan that would do that. Why shouldn't the Legislature just reject the Permanent Fund bill and keep spending from savings? Because unless there's a rise in the price of oil — taxes and royalties from which have paid for Alaska's government for years — the state's primary savings account, the Constitutional Budget Reserve, will be gone in about two years. That leaves the fund's earnings account — the source of Alaskans' dividend checks — which lawmakers would drain within two more years to cover continuing deficits, according to the Walker administration. Walker also says that for every year lawmakers simply draw money from savings instead of taking it out of a restructured Permanent Fund, the state loses the ability to generate more money from investments — increasing the likelihood of further budget cuts or taxes in the future.

That sounds pretty bad. So how do lawmakers justify their opposition to Walker's plan? It's complicated. And not everyone is opposed — the Senate voted 14-5 to pass its version of the fund legislation.

But the bill has faced stronger opposition in the House, where all 40 members — compared with only half of the Senate's 20 members — are up for re-election in November. Criticism of the plan comes from two different groups of minority Democrats and majority Republicans.

What are the Democrats' objections? Their chief complaint is the Senate's Permanent Fund bill would set aside $700 million less for this year's dividends, while the Legislature's budget would still pay about $460 million in cash subsidies for oil companies. Those subsidies are about $300 million less than the companies are expected to claim, and the payments will be reduced in the future because of the oil tax legislation that lawmakers approved during the special session.

But over Democrats' opposition, that oil tax legislation also preserved a specific tax credit tied to losses that can only apply to the state's largest oil companies — BP, ConocoPhillips, ExxonMobil, and Hilcorp. And because the tax credit wasn't eliminated, some Democrats say the oil tax legislation didn't go far enough to justify dividend reductions. They also say that a deficit-reduction plan that relies solely on the Permanent Fund — and not taxes on industry or personal income — would disproportionately hit poor Alaskans, since dividends would be reduced the same amount for each resident regardless of their income.

What about Republicans? Many of them are unwilling to approve dividend reductions because they say the state budget hasn't been cut deeply enough, even though their own GOP-led majorities in both the House and Senate lead the Legislature's budget-writing process.

The operating budget for the fiscal financial year starts July 1 and provides $3.9 billion for state agencies, or about 5 percent less than last year's $4.1 billion budget and 11 percent less than the $4.4 billion spent two years ago. Some Republicans opposed to the Permanent Fund legislation say those budget cuts aren't enough, citing, in particular, lawmakers' refusal to approve a bill this year to stop annual and biennial raises for state workers unless the price of oil rebounded.

So, where does that leave things now? The House Finance Committee on Friday rejected the Permanent Fund bill in a 6-5 vote. It's possible one of the opposing members could flip, but that's unlikely to happen before the end of the special session set to conclude Tuesday.

Does that mean the Legislature will finally be done for the year? Hardly.

At a news conference Wednesday, Walker made it all but certain he'd call the Legislature into yet another special session if the Permanent Fund bill failed.

After five months in Juneau, lawmakers are ready to go home. They're living in temporary housing and working in temporary offices, with the Capitol under renovations. Many face primary elections Aug. 16. And House Speaker Mike Chenault, R-Nikiski, says it's unlikely his chamber will make much more progress on the deficit-reduction legislation in another special session. If they want, lawmakers can simply adjourn a new special session as soon as it starts, if Walker decides to call one.

Then why would Walker bother to call another special session? Because he has leverage — a lot of leverage — to force lawmakers to keep working.

Most of Walker's leverage flows from his power to veto legislation. Among his options: he could announce a veto of the whole budget, forcing lawmakers to reconvene to pass a new one that will satisfy him if they want to avert a government shutdown July 1, the start of Alaska's fiscal year.

Walker could also use a line-item veto to trim the $1.4 billion lawmakers budgeted for this year's dividends. He could veto the full amount, which could push the Legislature to pass some type of Permanent Fund legislation with smaller dividend checks. Or he could make a partial veto, reducing dividend checks to an amount he thinks is sustainable.

Those powers, however, are not absolute. Lawmakers can vote to override a veto, though such action takes a three-fourths vote of the entire Legislature.

So, it doesn't sound like anything is going to be resolved any time soon. Is anyone still happy to be in Juneau? No. And that might be the only thing that lawmakers can agree upon.

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