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House bipartisan budget deal appears to be dead on arrival in the Senate

  • Author: Nathaniel Herz
  • Updated: September 28, 2016
  • Published May 30, 2015

A budget deal painstakingly negotiated in the Alaska House dropped dead on arrival in the Senate on Saturday, raising doubts about the Legislature's ability to finish its business before layoff notices are mailed to 10,000 state workers Monday.

On Saturday morning, two Republican Senate leaders said in interviews that their chamber was unlikely to accept all the elements of the House's $5 billion bipartisan budget package passed the previous night. The package was part of a deal designed to head off a possible government shutdown July 1.

By the end of the day, the Senate leaders had canceled a hearing on the compromise budget bill and said they were baffled by a decision by the House to only authorize spending $15 million from a state savings account when $3 billion was needed to pay for the full package.

"We've got a $15 million answer to a $3 billion problem," Sen. Pete Kelly, R-Fairbanks, co-chair of the Senate Finance Committee, said in a brief hearing earlier Saturday afternoon.

House members characterized that provision as a simple insurance policy that gives them an opportunity to accept or reject any changes to the budget bill made by the Senate.

"It's nowhere near rocket science -- it's a two-piece puzzle," said Rep. David Guttenberg, D-Fairbanks. "It's confusing because people are intentionally making it confusing, because they want to obscure the issue."

House Democrats and Republicans both said they were prepared to approve the deal if the Senate's Republican-led majority sent it back to them unchanged beyond authorizing the spending of billions of dollars from the state savings account.

"We sent them what we thought was a reasonable compromise," said Anchorage Rep. Charisse Millett, the Republicans' majority leader. "If it comes back to us exactly as it is, we know we'll pass it. We have no doubt."

Rep. Les Gara, D-Anchorage, said the only thing the Senate has to do is "put in the funding language and the House says yes tomorrow at 5 o'clock."

But the Senate Republicans said they couldn't trust that the House would, in fact, give its approval. They noted that more than half of Democrats actually voted against the budget package itself -- though all the Democrats subsequently voted to approve spending the initial $15 million from the state savings account.

"This is happening because they haven't found out what it is that they can agree on," Kelly said in an interview, referring to his House counterparts. "They have to come to an agreement before they can then come to us."

In a prepared statement issued later Saturday, Kelly and his colleagues in the Senate's Republican-led majority blasted the House deal for adding spending and not including the full funding required. And they said they'd replace it with their own package.

"Alaskans deserve better, and the committee substitute we propose will be fully funded and responsible," Sen. Anna MacKinnon, R-Eagle River, the other finance committee co-chair, was quoted as saying in a prepared statement. "Now more than ever, we must be cautious when adding to our significant deficit, and the recurring costs that were added by the House are simply irresponsible."

Lawmakers are proposing to slice hundreds of millions of dollars from Alaska's annual budget this year, with the state facing a multibillion-dollar deficit stemming from a crash in the price of oil. Taxes and royalties from oil make up the majority of state revenue.

But lawmakers differ over how deep the cuts should go and where they should be made, with the Republican-led Senate majority generally favoring the sharpest reductions in many areas like funding for education and the state's ferry system.

House Democrats' support for a budget deal is needed for a three-fourths supermajority vote to tap a state savings account holding billions of dollars in savings, the Constitutional Budget Reserve.

The Democrats' negotiations with the Republican-led majority have kept the Legislature from adjourning for more than a month after the scheduled conclusion of its regular 90-day session.

After rejecting a House majority offer earlier this week, the Democratic caucus accepted a second proposal early Saturday after getting about $30 million in concessions -- and a promise to fund scheduled raises for state workers, which were previously proposed to be canceled.

The changes amount to a difference of less than 1 percent of total spending from an earlier package agreed to by the House and Senate Republican-led majorities.

The new money in the House compromise included about $17 million to partially restore some cuts proposed for the state's education system, plus another $2 million for Alaska's ferries, $5 million for the university system, $3 million for a program that makes cash payments to low- and moderate-income senior citizens, $2.5 million for social workers, and $2 million in grants for pre-kindergarten.

The deal did not, however, include other Democratic demands like restoring additional cuts to education funding, and it also left out language providing for expansion of the public Medicaid health care program to make about 40,000 low-income Alaskans newly eligible.

House members hailed Saturday morning's deal as a milestone and said they were relieved. Gov. Bill Walker's spokeswoman also praised it in an email as an agreement "worthy of congratulations," and in his own prepared statement, Walker urged the Senate "to concur with work the House has begun."

The House's schism with the Senate, however, quickly became apparent as Saturday wore on.

Kelly and Senate President Kevin Meyer, R-Anchorage, said they hadn't been engaged in discussions with Anchorage Rep. Chris Tuck, the House Democratic leader, as the House deal was being hammered out.

Kelly said his caucus first had to determine how it would react to the House's action before he started talking with Democrats.

"It ain't about whether I talk to Chris Tuck or not," Kelly said. "I've got this job to do -- we have to nail this down. Then we can talk."

Tuck, meanwhile, was taking Saturday off, he said in an interview while giving a tour of the Legislature's Anchorage offices to his mother and son. And House Speaker Mike Chenault, R-Nikiski, returned home to the Kenai Peninsula early Saturday morning, though he planned to be back in Anchorage on Sunday.

It was unclear exactly how the Senate would approach its rewrite of the House budget deal.

The Senate majority, Meyer said in an interview, was "not real pleased with what we received."

"It looks like the House majority gave up quite a bit to the minority," he said. "We're going to adjust it the way we want."

Meyer said his caucus could probably stomach the roughly $30 million in additional spending on education and other Democratic priorities in the House budget bill.

But the idea of restoring state employees' canceled raises, he added, gives Senate Republicans "heartburn," in part because preserving the raises means a higher baseline when the state's next round of union contracts is negotiated.

"What we're trying to do is limit the growth of government," Meyer said.

House members watched the Senate on Saturday with a mix of apprehension and frustration.

Rep. Cathy Munoz, R-Juneau, said she was nervous about how the Senate would treat the House compromise.

"I'm holding my breath and I really want this to settle out today," she said after sitting through the brief Senate Finance Committee hearing with two of her House colleagues. "If there are changes to what was sent over, we won't get the three-quarters vote. It's a very delicate balance."

The Senate Finance Committee originally planned to introduce a substitute version of the House budget in a hearing Saturday afternoon, though it was ultimately postponed until noon on Sunday.

Kelly said the Senate majority would first work toward a new version of a compromise that could get the Democratic support required to tap the billions of dollars in the Constitutional Budget Reserve account.

If that support can't be found, Kelly said, it's possible the Senate would pursue another budget plan that could provide for funding of state government without Democratic approval.

The plan, however, involves a fiscal maneuver to transfer billions of dollars between two Alaska Permanent Fund accounts, and it's not clear whether it could pass the House.

Some Democratic and Republican members of that chamber have said they're not comfortable with the potential for the plan to impact Alaskans' annual dividends in the event of a severe economic downturn.

The Legislature's schedule for adjournment also appeared to be a moving target.

House members said their deal early Saturday was spurred in part by the planned mailing Monday of warnings to 10,000 state workers that they would be laid off July 1 unless a budget deal was reached.

But Kelly said he saw the Monday mailing as "somewhat of an artificial deadline."