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Alaska Legislature

Yes, the Alaska Legislature will likely quit for the summer without a fiscal plan, or even a capital budget

  • Author: Nathaniel Herz
  • Updated: June 27, 2017
  • Published June 27, 2017

The Alaska State Capitol in Juneau (Marc Lester / Alaska Dispatch News)

The Alaska Legislature, with members weary and demoralized after two months of extra work with little to show for it, is increasingly likely to take the summer off before taking up its unfinished work of righting the state's unstable finances, according to legislative leaders.

Lawmakers approved an operating budget last week and averted a government shutdown that was looming July 1, and they're still technically convened in a second special session called by Gov. Bill Walker, who's asking them to move next to a stalled oil-tax bill.

But legislative leaders say members don't have much appetite to keep working, even with the potential for delayed projects around the state because of the Legislature's failure to pass a separate capital budget.

Alaska House Speaker Bryce Edgmon, D-Dillingham, appears at a news conference at the Capitol earlier this month. (Nathaniel Herz / Alaska Dispatch News)

"People have to get on with their lives," said House Speaker Bryce Edgmon, D-Dillingham, in a phone interview from Juneau, where he's still camped. "It's just a really hard time of the year having people be in the Legislature, especially how long we've been down here."

With the exception of the budget, the Legislature's to-do list is still essentially unchanged from January, when members arrived in Juneau for what was supposed to be a 90-day regular session. The session stretched on for an extra month, followed by the two consecutive special sessions called by Walker.

After dozens of hearings on oil taxes, income taxes and legislation to restructure the $60 billion Permanent Fund, the Republican-led Senate majority and the largely Democratic House majority couldn't agree on any measure to substantially reduce Alaska's multibillion-dollar deficit. Instead, they decided to fill the gap with savings for a third straight year.

Lawmakers did the bare minimum of passing an annual operating budget to keep state government running — but that came just 10 days before a shutdown would have started.

And the yearly spending bill is still missing its sidekick: the capital budget, which would spend a little more than $100 million in unrestricted general funds to bring in more than $1 billion in federal cash, largely for transportation projects.

It's been decades since the Legislature arrived at the July 1 start of the fiscal year without a capital budget. But that outcome now appears almost certain.

Legislative leaders said earlier this month that they were close to a deal on the capital budget. But that was before negotiations about a broader deficit-reduction plan broke down and the House proposed to nearly double the capital budget's size by adding an extra $800 million for larger Permanent Fund dividend checks for Alaskans.

"It's not going to be a simple vote anymore," said Fairbanks Democratic Rep. Adam Wool, a member of the majority caucus but not one of its leaders.

Senate Majority Leader Peter Micciche, R-Soldotna, said in a phone interview that his majority wants to pass a "depoliticized, traditional capital budget." But that may not happen soon, he acknowledged.

Soldotna Republican Sen. Peter Micciche speaks at a committee hearing in March. (Nathaniel Herz / Alaska Dispatch News)

"Now that we don't have the criticality of a shutdown looming, I think folks should take a little bit of time off, cool back down," Micciche said.

Months of additional legislative inaction would likely be a continued drag on the state's economy, which, experts say, has been harmed by uncertainty about which policies lawmakers will ultimately use to balance the budget.

"Without a credible fiscal plan, we're flying blind," economist Gunnar Knapp wrote earlier this month. "Most importantly, we leave Alaska residents and businesses uncertain about whether Alaska is a place they want to live and invest in."

A delay would also be a setback for Walker, who's been pushing for deficit-reduction measures for the past two years.

A spokeswoman for Walker, Grace Jang, referred questions to Revenue Commissioner Randy Hoffbeck, who said in a phone interview that it appears increasingly likely the administration will have to wait until the fall for the capital budget, and for more work on deficit-reduction bills, based on what he's hearing from legislators.

"They're talking about September, waiting until the summer's over," Hoffbeck said. "If it were up to the governor, they would be here until they were done. If they choose not to engage, then we'll have to figure out what is possible."

Hoffbeck said that a delayed capital budget shouldn't have a "major impact" on construction projects. But the Department of Transportation is warning that lawmakers' failure to approve a capital budget will have an "immediate impact" on its summer construction program, according to a memo sent to legislative budget analysts.

The M/V Tustumena, a 296-foot ferry of the Alaska Marine Highway System, is 53 years old and undergoing repairs for a deteriorating steel structure. (Marc Lester / Alaska Dispatch News)

The department has used nearly all of the state money that it budgets to bring in federal matching cash, and it's identified more than 20 projects across Alaska that would be slowed by a late capital budget. They range from road work in Fairbanks, Haines and Juneau, and on the Parks and Seward highways north and south of Anchorage, to construction of the replacement for the 53-year-old Tustumena — the state ferry that's canceled summer trips to the Aleutians so that its deteriorating steel structure can be repaired.

"It's going to push out projects for us. Things we were going to be able to do this summer would not get done," Meadow Bailey, a transportation department spokeswoman, said of the potential delay. A slowdown would also hurt private industry, she pointed out — like the construction workers who would be hired to work on each project.

The construction industry isn't alarmed about having to wait for a capital budget, but lawmakers also "don't need to wait," said John MacKinnon, head of the Associated General Contractors of Alaska and the husband of the co-chair of the Senate Finance Committee, Anna MacKinnon, R-Eagle River.

"They're in agreement on at least 95, 98 percent of it," MacKinnon said. "I would see no reason why reasonable minds, reasonable people could not get a capital budget out."

The displeasure over the Legislature's gridlock extends to legislators themselves, who have been expressing themselves in recent constituent newsletters and interviews.

Wool, the Fairbanks Democrat, wrote Monday that the Legislature's work isn't done, that it "once again kicked the can," and that "this is not acceptable."

Micciche, the Senate majority leader, said he's "not very satisfied" with the results of this year's legislative sessions, adding that he expects that Alaskans are similarly frustrated.

"These are big issues and legislators move at different speeds. But at some point we certainly have to have a performance expectation that the work is going to get done in a timely manner," he said. "And I don't think that we can make that claim for this session. I don't think using any metric that anyone could claim that we worked efficiently."

Lawmakers are still technically convened in the second special session in Juneau, making them eligible for daily payments of $295 to cover housing and meals — in addition to their $50,000 annual salary. An accounting of the costs of their extra time in Juneau wasn't immediately available from the Legislature's finance manager. Nothing requires legislators to claim the daily payments.

Walker's administration is still pushing legislators to reach a deal on the oil tax legislation, House Bill 111, which is hung up despite agreement between the House and Senate majorities on the need to eliminate a program that promotes new development by paying cash tax credits to companies.

House majority members have been unwilling to accept the elimination of that program alone and are holding out for a broader tax increase that the Senate majority opposes.

Edgmon, the House speaker, said discussions between the two sides are ongoing. But, he added, the chances of an oil tax deal emerging before the end of the special session next month are "very remote."

"There are active efforts going on. Whether it formally ends up with us coming back — it's hard to see that happening," Edgmon said.

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