State lawmakers are now more than halfway through their four-month legislative session, and time is ticking away.
The Alaska House and Senate are both controlled by bipartisan caucuses made up mostly of Democrats. Coming into the session, the two caucuses looked like they were aligned on many key issues. They each said they wanted to boost education funding, improve the state’s retirement system, and, of course, pass a balanced budget.
But the devil is always in the details, and fractures are starting to show as legislators work toward a final budget. Alaska News Nightly Host Casey Grove spoke with Capitol reporter Eric Stone to learn more.
The following transcript has been lightly edited for length and clarity.
Casey Grove: Eric, where do things stand in Juneau?
Eric Stone: We’re coming up on the end of March, which means the complicated, time-consuming budget-writing process is well underway.
But, looming over all of it: lower oil prices that mean lawmakers are facing deficits. And unlike the U.S. Congress, the state Constitution requires the Legislature to balance the budget every year.
Current estimates for a status quo budget put it hundreds of millions of dollars underwater. So that’s for basically the same education funding as last year, and a roughly $1,400 Permanent Fund dividend.
Thing is, there’s a lot that the majorities want to add. The biggest part of that is the boost to state education funding that the House passed earlier this month. And how to pay for that isn’t exactly clear.
CG: So how could lawmakers pay for that funding boost and balance the budget?
ES: There are a few different levers lawmakers could pull to balance the budget. There are three main ones: they could raise taxes or find some other revenue, they could draw from a state savings account, or they could cut the Permanent Fund dividend. And actually, there’s a fourth. They could significantly cut state services.
But every single one of those is facing opposition from somewhere.
I’ll go in reverse order: Budget cuts are on the table. But some of the key budgeters say that after years of relative austerity, there isn’t a whole lot left to cut back. House members are talking about cutting spending somewhere, but it’s unclear where that will land as I talk to you now [Wednesday afternoon].
OK, next — cutting the PFD. That is never popular. In the last couple years, it’s become something of a tradition to use a quarter of the Legislature’s annual draw from the Permanent Fund for dividends. That’s the $1,400 figure I referenced earlier.
Senators have been hesitant to go much lower than that.
Though, this week, we saw some softening on that — at a news conference, key senators expressed some flexibility on maybe reducing the PFD to about $1,000. They’ve also floated repeatedly cutting back the education funding the House passed by about a third. That gets you a lot of the way there, but not quite.
CG: Not quite — so how about the other two options? Raising revenue or taking the deficit from savings?
ES: This is another one where they’re kind of at loggerheads. Senate President Gary Stevens, a Kodiak Republican, said at the beginning of the session that drawing from savings was off the table. He even chastised the Juneau Empire’s editor for asking him about it repeatedly.
Well, this week Stevens apologized to the Empire and said that the Senate was, after all, looking at drawing from savings to cover the portion of the deficit that covers the current year.
“Times change, things change, and sometimes you have to eat crow up here,” Stevens said.
But Bethel Democratic Sen. Lyman Hoffman, the Finance Committee co-chair, says he doesn’t think senators are interested in drawing from savings for the next year, and that’s the real meat of the budget.
Hoffman and the rest of the Senate majority have been emphasizing revenue bills. There are three major ones in the Senate right now — basically changes to oil taxes and corporate income taxes.
But again, there’s a catch. The House has a one-vote majority. And just recently, House Majority Leader Chuck Kopp, an Anchorage Republican, signed on to an Anchorage Daily News op-ed opposing oil taxes that included most of the minority Republicans in the House. So that means that even if every member of the majority voted for all these taxes — and there’s no guarantee they would — they could not pass it without Republican help.
Kopp says he’d like to balance the budget using some of the other mechanisms we just talked about, like using savings in the Constitutional Budget Reserve, or CBR.
“Yes, we have to do a CBR draw. Yes, we have to pay the dividend we can afford,” Kopp said. “No, we don't have to do it by raising taxes on entities and persons, not this year.”
And that’s basically where things stand.
CG: How are they going to resolve this?
ES: That is anybody’s guess. There is some special session chatter going around But Hoffman says it’s unlikely any extra time would actually result in some breakthrough.
“I've been trying to impress upon my colleagues that the numbers don't change, but if we don't come up with a solution, it can ruin your summers,” Hoffman said.
House leaders say nobody’s too dug in, and they’re optimistic, too. But we’ll have to see.
