Alaska Legislature

Alaska Gov. Walker’s ‘compromise’ offer moves state lawmakers no closer to budget deal

With a state government shutdown just over three weeks away, Alaska legislative leaders say they're still working toward a financial deal even after Gov. Bill Walker's effort to forge one has fallen flat.

Though there's little public evidence that the House and Senate are closing their huge divide, House Speaker Bryce Edgmon said in a phone interview Wednesday that "there's a lot of active dialogue taking place in the Capitol."

"Maybe it doesn't appear that way," said Edgmon, who leads the largely Democratic House majority. But, he added, "There's a lot of people talking and a lot of people trying to bring this to a resolution."

Walker promised last week to introduce what he called a "compromise" fiscal plan to nudge the Legislature out of its impasse over the state budget and cover the state's $2.5 billion deficit.

But the proposal was dead even before arrival: House Majority Leader Chris Tuck, D-Anchorage, declared it lifeless in a television interview just before the governor was set to brief the Senate Democratic minority on the plan. That prompted Walker, in a news conference Tuesday, to warn that time is running out before the June end of the fiscal year.

"My message to legislators: If you can't find further compromise in what I have presented, please, please develop your own," he said.

Pressure in the Capitol is building as lawmakers draw closer to the end of their special session, set for June 16, and the July 1 start of the next fiscal year. Democrats and organized labor groups are planning "keep Alaska open for business" rallies Sunday in Anchorage, Fairbanks and Juneau.

Some state agencies with farther-flung infrastructure and workers, like the Department of Fish and Game, would likely have to start shutting down operations before the state government runs out of money to spend at the start of the fiscal year.

"We could not pull everyone in from the field in one day," said Carol Petraborg, the department's administrative services director. Breaking down fish weirs and observation towers and bringing back staff, she said, could take one to two weeks — during which state fisheries could be affected.

Three weeks into the special session convened by Walker — which followed a one-month extension to the 90-day regular session — lawmakers have made almost zero progress in public on the state budget and a broader fiscal plan.

An official House-Senate conference committee is tasked with resolving the differences between the separate budget bills passed by each chamber. But it's met just once since the start of the special session May 18, and has addressed the spending plans for just two noncontroversial state agencies — the administration and commerce departments.

Leaders in the Republican-led Senate majority say they want the state operating budget at the top of the Legislature's agenda.

"The clock is ticking and there are families and employees that are in very stressful situations," Eagle River Republican Sen. Anna MacKinnon said in a phone interview. "All hands need to be on deck on the budget now."

But House majority members are reticent about approving a budget unless deficit-reduction measures come along with it.

Both chambers agree on the need to use some of the Permanent Fund's investment earnings to help pay for government services, even if they differ on the exact split between state spending and dividends. But both proposals to tap the fund would close the majority of the state deficit, though not all of it.

In the face of opposition from the Senate, the House also wants progressive, broad-based tax legislation that would completely erase the deficit, and likely leave some extra cash as a buffer against another crash in the price of oil — revenues from which have long paid for the vast majority of state services.

"The House majority coalition is focused on its original objective of a comprehensive fiscal plan, and a budget is part of that process," Edgmon said.

Part of the proposal Walker offered this week tried to bring the two chambers together on a tax proposal different from the one the House originally approved, which would have taxed increasing percentages of income as earnings rose, to yield a total of $700 million.

Instead, Walker wanted to generate $100 million, using a kind of head tax — modeled on Senate Bill 12 from Fairbanks Republican Sen. Click Bishop — that increases with a person's earnings but asks a fixed amount from each income bracket. People earning less than $20,000 a year would pay $50 under Bishop's proposal; those earning between $50,000 and $100,000 would pay $200; and people earning more than $500,000 would pay $500.

Neither chamber's leadership has given an endorsement, though one Democratic senator, Berta Gardner of Anchorage, wrote in an open letter that Walker's tax proposal asked too much of poor Alaskans and that his full proposal was "weak," "inadequate" and "inexplicable."

MacKinnon said senators have different opinions about whether Bishop's proposal qualifies as an "income tax," which majority leaders have vowed to defeat. She declined to offer her own opinion.

"Sen. Bishop would say no — it is collected by an employer and paid to the state from an employer, versus a person," she said. Others, she added, see the proposal — with its escalating contributions from different brackets — as similar to a federal income tax, and unpalatable.

Asked about Edgmon's assessment of the Legislature's progress, MacKinnon said "positive steps" have been taken since Walker introduced his plan Monday.

"I see a path forward, but it will require compromise," she said.

Differences also remain between the two chambers over oil-tax legislation and whether to pay cash subsidies claimed by oil companies. And lawmakers haven't decided whether to stick with the cuts to schools and the state university system that the Senate proposed in its version of the operating budget.

Public employees — who would not get back pay for time missed during a government shutdown — are growing increasingly uneasy, said Jim Duncan, head of the largest state workers union, the Alaska State Employees Association.

"Anxiety level, I would say, is rising because it's their livelihood on the line," Duncan said in a phone interview. "Our members aren't inside the legislative process and they can't understand exactly why a whole lot's not taking place publicly."

Duncan, a former legislator himself, said he's confident the two sides will be able to reach a deal, even if he doesn't know whether it will happen before the end of the special session.

"Can they do it before June 16 or do they need pressure to build more? I don't know," he said. "These are really major issues; it makes it more difficult for them to reach a compromise. But I'm confident there is one there."