Home Business & Education Economics Senate Passes Operating Budget Along Caucus Lines, Second Year of Deep Cuts

Senate Passes Operating Budget Along Caucus Lines, Second Year of Deep Cuts

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Photo by Rachael Carlson.
Photo by Rachael Carlson.

The Senate approved a Fiscal Year 2017 operating budget Monday along caucus lines that cuts agency operations by $345 million.

“We tried to preserve the functions of state government that are most important,” said Senate Finance Co-chair Pete Kelly (R-Fairbanks), “but there were a lot of cuts, and we know people are a little afraid right now.”

However, Kelly said on the Senate floor that the legislature cut $800 million last year, and “the sky didn’t fall.”

“The money was there to cut. The budget was too fat,” he said.

The Senate minority characterized this year’s budget as choosing lavish spending on projects and corporate welfare over spending for seniors and children.

“Why are you balancing this budget on the backs of those least able to afford it?” Sen. Bill Wielechowski (D-Anchorage) asked the majority.

“This budget is not about Alaskan values,” said Wielechowski. “It is so out of touch… that people don’t even believe it when you tell them what’s in it.”

Wielechowski said that the budget would pay over $400 million more in refundable oil tax credits than the State would receive in production taxes.

But Kelly noted, “We didn’t fund the tax credits. They’re not in this bill.”

“We only funded the statutory amount,” said Kelly. “That’s a piece of foundational truth that needs to be reported.”

Both the Senate and House budgets fund the minimum tax credits of $73 million while oil and gas tax credit reform legislation is pending.

The minority lost its lone member on the Senate Finance Committee when Sen. Donny Olson (D-Golovin) switched to the majority in February. It is unclear if Wielechowski’s confusion stems from lack of minority membership on the committee or whether he is following the recommendation of Legislative Finance Director David Teal to mentally pencil in the balance of tax credits.

“I like to try to speak the truth,” Senate Finance Co-chair Anna MacKinnon (R-Eagle River) said Monday. “I find it hard… when the people of Alaska get half-truths.”

MacKinnon read a portion of former Senate minority spokesperson Frank Ameduri’s resignation letter that was leaked to Alaska Dispatch News. In the letter, Ameduri accused the minority of being dishonest about the one-time savings the caucus proposed for the FY 2016 budget.

“Propose a cut. I’m happy to talk about cuts,” challenged MacKinnon, “but the public has the right to hear the whole story, not a piece of the story.”

Debate Over Constitutionality of $100 Million Unallocated Cut

One of the cuts proposed by the majority is a $100 million unallocated cut that Senate Finance added Friday. If it were to remain in the budget, Gov. Bill Walker would be tasked with choosing what to cut to reach a total of $100 million.

“We have to take money out of the operating budget to function,” said Kelly. “This is what a board of directors would do.”

However, the minority brandished an opinion from Legislative Legal Services that says courts would likely find the cut an unconstitutional delegation of power.

“The legislature is the appropriating body,” Wielechowski said in a losing effort to undo the cut. “Why would we abrogate our responsibility?”

“It doesn’t let Alaskans talk to their government about what’s a good idea or what’s a bad one,” Sen. Dennis Egan (D-Juneau) said of letting the executive branch choose what to cut.

“There is an unallocated reduction in there. I stand by it,” said Kelly. “Guess what? We’ve done unallocateds before.”

Last year, the legislature approved an unallocated cut of almost $30 million to offset cost of living adjustments (COLAs) for State workers.

Kelly and MacKinnon said the cut will only remain if sufficient savings can’t be achieved through Medicaid reform, tax credit reform, and reductions to State corporation salaries.

“It’s our goal to prove to the people of Alaska that before we ask them to give up any of the hard-earned fruits of their labor, that the government is smaller,” Kelly told the Senate. “I hope they have that confidence.”

“The only way to preserve critical services is by supporting this budget,” asserted Senate Finance Vice Chair Peter Micciche (R-Soldotna).

Senate Preserves Funding for UMed Road, Rejects Increase to AMHS

On Thursday, the House rejected 30 budget amendments before passing the operating budget around 3 a.m. Friday.

In contrast, the Senate minority employed a strategy they used last year on the Senate floor, bundling budget restorations with offsetting cuts. Kelly applauded the effort, though he didn’t support any of the amendments.

The most exciting moment on the floor occurred during debate of Amendment 4, an amendment that would have restored $6 million each for the Alaska Marine Highway System (AMHS) and community revenue sharing using $18.9 million clawed back from the proposed UMed road in Anchorage.

At seven-tenths of a mile, Egan called the UMed road the “most expensive stretch of road I think I’ve ever heard of.”

Senate Minority Leader Berta Gardner (D-Anchorage) said the number of community councils that oppose the UMed Road is up to 13. She added that she is “irked” that those councils were told the new Alaska Airlines Center sports arena would not require the road extension, yet now the Center is being used as a justification for the extension.

“Roads are the most controversial things I have seen in my time in the legislature,” responded MacKinnon, “but they are necessary.”

MacKinnon said the road has the support of Providence Alaska Medical Center, Alaska Native Tribal Health Consortium, and Alaska Native Medical Center’s Southcentral Foundation, all of which have property adjacent to the road. That road is important for emergency response time, said MacKinnon.

“Lives matter, kids matter, and minutes matter,” she told the Senate.

Neither the House nor the Senate budget funds community revenue sharing. This is part of a process of stepping down the program over three years, said MacKinnon.

But Egan argued that while revenue sharing keeps property taxes low in cities, it keeps the lights on in villages and allows for police patrol instead of State Troopers.

“We can’t afford for those villages to close up shop,” Egan said.

Egan said that while he has been supportive of the proposed Juneau Access Road, there will be no similar roads in Sitka or Dutch Harbor, communities that rely on AMHS.

“Many of our military service members transfer in and out of Alaska using the marine highway system,” Wielechowski noted.

In an interesting move, Sen. Gary Stevens (R-Kodiak), with the support of Sen. Bert Stedman (R-Sitka), made a motion to split the amendment. The coastal legislators tried to build a coalition to support funding for AMHS, but Stevens quickly withdrew the motion.

Despite support from Stevens and Stedman, Amendment 4 failed 6-13. Olson was absent.

Bundled Amendments Fail Along Caucus Lines

All other amendments failed along caucus lines. Olson voted with his new caucus.

Amendment 1 would have restored pre-Kindergarten grants, the Statewide Mentoring Program, Online With Libraries (OWL), and $10 million of the Senate’s proposed $26 million cut to the University of Alaska, for a total of $14.3 million

Gardner said that eliminating OWL will mean libraries won’t be able to sustain a minimum bandwidth, and it will cost the State $2 million in federal e-rate funds.

To offset those restorations, similar to an effort by the House minority, Amendment 1 would claw back $21.5 million from the Knik Arm Crossing, Ambler Road, and the Susitna-Watana dam, megaprojects Sen. Johnny Ellis (D-Anchorage) said “have no hope of completion going forward.”

“It should be an easy call, I think- we think- to stand up for Alaska’s kids and put their needs before the needs of ambitious but impractical megaprojects,” Gardner said on the floor. “I’m making the easy choice. I’m choosing Alaska’s kids over megaprojects.”

“I, too, am choosing Alaska’s kids first,” responded MacKinnon. “I support pre-K. It is in our budget, and it will be conferenceable.”

Best Beginnings and the Parents as Teachers program were added back via a Senate Finance amendment, but pre-K grants are not funded in either the Senate or House budgets. It is highly unlikely that the budget conference committee, tasked with reconciling differences in the budget, would restore pre-K grants when the House and Senate have already agreed not to fund them.

Amendment 2 would defund the Workers’ Compensation Appeals Commission and claw back $11 million from the Port MacKenzie rail extension, the Kodiak Launch Complex, and the Anchorage Legislation Information Office (LIO).

In constituent meetings, Ellis said, “Nothing came close to the criticism of the Anchorage Legislative Information Office,” the lease for which costs $4 million per year.

With those savings, the amendment would restore $2.7 million for public radio and $500,000 for the Council on Domestic Violence and Sexual Assault.

The House already restored $2.7 million for public broadcasting in its budget.

“Those are pretty significant policy calls,” Kelly said of the cuts in the amendment. “I think it’s a little bit apples to oranges here to start mixing capital projects with the operating budget.”

“Even good programs aren’t going to survive the next few years,” he added.

“You do not take one-time money and invest it in reoccurring costs,” reiterated MacKinnon. “It’s an overstatement to say it’s disingenuous, but it’s just not the right way to do business.”

Another amendment that would have restored $5.1 million to the Senior Benefits Program and $9.2 million to the Affordable Heating Program, the elimination of which Ellis said will force seniors to “decide whether to heat or to eat,” also failed.

The amendment would have restructured the per-barrel tax credit for North Slope oil, something Senate Resources Chair Cathy Giessel (R-Anchorage) said “doesn’t belong in a budget bill.”

“It’s a piece of legislation that sat in this body for two sessions without a hearing,” said Wielechowski. “This amendment asks a fundamental question. Who do we work for? Do we work for the rich, the powerful… or do we work for the people of Alaska?”

Again, No Vote on Medicaid Lawsuit

Simpler minority amendments also gained no traction.

Wielechowski attempted to restore money for inflation-proofing the Permanent Fund, which he said has almost doubled the size of the Fund. Statute requires the Alaska Permanent Fund Corporation to inflation-proof the corpus using the earnings reserve, but Senate Finance stripped out the approximately $950 million for FY 2016 and 2017.

“We’re asking the Permanent Fund [Corporation] to break the law,” said Wielechowski, somewhat inconsistently adding, “Let’s not slip it in a must-vote budget bill.”

“People have complained for years that we double inflation-proof the Permanent Fund,” responded Kelly. “We can’t do this any longer because it just doesn’t make sense.”

Multiple majority members said that the economy is in a borderline deflationary period, so the money that was stripped from the budget, based on inflation, is likely not necessary. Further, the bills that would tap the Permanent Fund earnings reserve end inflation-proofing.

“Those bills have not passed. I don’t know if they will or not,” said Wielechowski.

Gardner moved to restore $200,000 cut from the Alaska Public Offices Commission (APOC), the organization that monitors lobbying and campaign contributions.

“The public wants us to do our business in the open,” she said. “It’s about maintaining the public’s trust at a basic level.”

Even with the cut, Kelly said simply, “They will continue to function in the manner that we expect.”

The Senate tabled an amendment that would have clawed back $150,000 for the Medicaid expansion lawsuit. There was no debate.

House Speaker Mike Chenault (R-Nikiski) also did not allow debate on a matching amendment in the House, ruling it out of order.

Even though a superior court judge recently dismissed the legislature’s lawsuit against Walker for his unilateral expansion of Medicaid, the Legislative Council is authorized to pursue an appeal to the Alaska Supreme Court. House and Senate minority members argue that the full legislature must vote to continue the suit.

During special orders, after the budget passed, Senate Majority Leader John Coghill (R-North Pole) acknowledged that most senators probably support Medicaid expansion, but not done unilaterally. The budget is the wrong place to address the question, he said.

The budget now heads back to the House. Most likely on Wednesday, the House will vote not to concur with the changes made by the Senate, sending the two versions to a conference committee for reconciliation.

That process could take the remainder of the session, a little less than five weeks.

Craig Tuten moved from Florida to Alaska with his wife Rachael in 2006. He studied history at Florida State University while everybody else was having a good time. It is hard to list a low-wage job he hasn't briefly held.

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