Wednesday is the last day of the extended legislative session, but Alaska still doesn’t have a budget for the fiscal year starting in July. In fact, legislators haven’t passed any of the major bills that Governor Bill Walker proposed to close the state’s $3-4 billion budget deficit.
Andrew Kitchenman of APRN and KTOO in Juneau has been talking with legislators about the budget.
TOWNSEND: What is the holdup on getting the budget done that the Legislature’s been working on for months?
KITCHENMAN: The House passed its own version of the bill on Friday, but that was after the House had amended the bill to basically make it much tougher on the oil and gas industry. Much closer to what Governor Walker had originally proposed. And this is raising a lot of concern in the industry and among members of the Senate Finance Committee. So they’re looking for a bill, and they may introduce a bill tonight or tomorrow that has much smaller cuts in the oil and gas tax credits than what the House has passed.
TOWNSEND: So what happens if the two caucuses can’t reach an agreement?
KITCHENMAN: I spoke with Senate President Kevin Meyer about that earlier today and he laid out a scenario in which the Legislature draws money from the Permanent Fund’s earnings reserve account.That’s the part of the fund that usually pays for residents’ Permanent Fund Dividends, and that’s usually all it’s used for. It replenishes the main body of the Permanent Fund as well. And they’re talking about drawing more than $3 billion from that account potentially.
TOWNSEND: Wouldn’t Governor Walker have concerns about that draw?
KITCHENMAN: Yes he would. And he really spelled that out on Saturday. He sent a letter to legislators in which he listed a whole series of concerns. One is having that big of a draw could actually hurt the state’s credit rating because it would show that the state hasn’t made a commitment to get its fiscal House in order. Also, just drawing down their earnings reserve is going to make it harder to do dividend payments in the future.
Kevin Meyer had a very specific response to that which is that they’ll do this on Wednesday, but then the Governor could call them back for a special session and then the Legislature, in that special session, which could start as soon as Thursday, could make these long-term changes to the Permanent Fund which are more along the lines of what the Governor has been asking for. In fact, Meyer says he hopes the Governor will be receptive to this approach.
“I think once the governor understands that we don’t plan on just using the earnings reserve and not dealing with the long term fiscal stability and lowering that gap then I think some of his points will be moot,” Meyer said.
KITCHENMAN: Now, Meyer admits that they’re going to have to sell the governor on this.
TOWNSEND: Well, what does this mean for Permanent Fund Dividends?
KITCHENMAN: If they just start drawing money from the reserves like Meyer raised the possibility of doing, then the Dividend could completely go away or be very, very minimal, just based on how much money the Fund makes each year. And if some years, the Fund didn’t make any money, then there wouldn’t be any money really to have for the dividend.
Senate Minority Leader Berta Gardner says this scenario could be even worse if the Legislature doesn’t make the oil and gas tax changes. I spoke with her in a noisy coffee shop earlier today about this.
“If we don’t fix the oil company subsidies, we will have to use any draw from the Permanent Fund earnings to pay oil companies subsidies and that is rightly unacceptable to Alaskans,” Gardner said.
So I don’t think the majority caucuses will get much support from the minority caucuses for this proposal, unless they can agree to the oil and gas tax bill changes much closer to what the minority wants.
Andrew Kitchenman is the state government and politics reporter for Alaska Public Media and KTOO in Juneau. Reach him at akitchenman@alaskapublic.org.
