With less than three weeks remaining in the legislative session, the Senate Finance Committee introduced four anticipated bills Monday that will gradually shift more of a financial burden onto communities.
SB 208 phases out the Alaska Performance Scholarship program to reduce the local impact of the TRS increase, while the intent of SB 210 is to reduce community revenue sharing to half of its statutory maximum.
Senate Finance sponsored the bills at least in part because it is too late in the session for individual legislators to introduce bills.
All four bills were referred Monday directly to the Senate Finance Committee.
The Senate minority attempted to also have the bills referred to relevant policy committees, but all the motions failed along caucus lines.
“If a thing is worth doing, it’s worth doing right,” Senate Minority Leader Berta Gardner (D-Anchorage) said on the Senate floor. “The single referral is a violation of standards of good public process. These bills should be vetted appropriately. The argument against doing that is that we have three weeks left. We all understand that, but that’s not a reason to cut the process short. It does not generate the best bills. It doesn’t generate public confidence in the work that we’re doing.”
“Arguing that because it takes a lot of time and a lot of hearings to do things right is not a reason to not do it. It’s not,” she emphasized.
Sen. Bill Wielechowski (D-Anchorage) said that an increase in the local contribution to TRS could lead to significant local tax increases. Therefore, it should be referred to the Senate Community & Regional Affairs Committee (C&RA).
“We need to also look at impacts to local communities. We need to look at the impacts to the taxpayers of the state of Alaska,” Wielechowski said. “Just to put it in Finance, I think, is really not doing justice to the people of Alaska.”
Senate Finance Co-chair Pete Kelly (R-Fairbanks) said that additional referrals for the bills would not be wrong, but they are unnecessary. The bills will get fair hearings, including opportunity for public testimony, he told the Senate.
Sen. Gardner to Senate President Meyer: I Beg You to Do This Correctly
During debate on a motion to send SB 208 to Senate Education, Gardner said there is data that the Alaska Performance Scholarship improves educational outcomes. Before eliminating the program, she said, the legislature should understand the impact.
“We don’t want Alaskans to say, ‘They’re doing things badly,'” said Gardner. “We want them to know that whether they agree or disagree with the ultimate decision made on Senate Bill 208, it has had adequate review.”
“I’m just going to beg you, Mr. President, to do this correctly,” Gardner said to Senate President Kevin Meyer (R-Anchorage).
“This is not doing business badly,” responded Senate Majority Leader John Coghill (R-North Pole), reminding everyone that the Uniform Rules of the legislature do not require bills to be referred to more than one committee.
Coghill also said that the 90-day session places a limit on the legislature.
Wielechowski pointed to the same Uniform Rules, which lay out the jurisdiction of each policy committee.
“This is clearly, clearly something that falls within the purview of the Education Committee,” he said of SB 208.
“There’s two ways we can go about making these hard financial decisions: you can just cut; or you can spend a little bit more time evaluating what the impacts of those cuts will be,” Wielechowski said. “If we keep making decisions like this, Alaskans will have little or no confidence that their voices are being heard, that decisions are being made in a fair and adequate process.”
“If that’s an argument — that time doesn’t allow us to follow our own rules in vetting bills in each appropriate committee — why don’t we simply refer all bills to Finance and be done with all the other committees and just say, ‘We can do it in 30 days?'” Gardner asked. “We’re doing shortcuts here that are wrong.”
Sen. Dennis Egan (D-Juneau) later tried to waive his own PERS/TRS bill, SB 88, out of C&RA and on to Senate Finance. SB 88 would allow public employees to choose whether to participate in a pension-style defined benefit plan or a 401(k)-style defined contribution plan.
Egan’s move was voted down, again along caucus lines.
Coghill said it would be inappropriate to pass the motion in the absence of C&RA Chair Click Bishop (R-Fairbanks).
“We just had two bills dealing with this exact issue, PERS and TRS, that you waived and said you didn’t need CR&A [sic] referrals. This bill has been sitting in CR&A [sic] for a year,” an animated Wielechowski argued in vain. “Let’s just act consistently and send this bill to Finance.”
Senate Majority: State Can No Longer Afford Assistance to Communities
Under the bills introduced Monday, the local contribution for TRS will increase from the current 12.56 percent to 19 percent in Fiscal Year 2017. It will then increase by one percentage point per year, topping out at 22 percent in FY 2020.
The PERS contribution will increase from 22 percent to 24.5 percent in FY 2017, thereafter increasing by one percent per year until FY 2019.
SB 208 will make anyone who applies for the Alaska Performance Scholarship after July 15 ineligible to receive it. No one who graduates high school after mid-July would be eligible to receive the scholarship.
The program will be completely phased out by July of 2022.
During a Senate majority press conference Monday, Kelly lamented the elimination of the Alaska Performance Scholarship, which he worked on with former Gov. Sean Parnell.
Kelly reiterated that the scholarship money will be used to mitigate the increased local contribution to TRS, specifying that there will be no impact to the school districts this year.
“In this environment, we just have to start looking at the things that we can’t do anymore,” he said. “We can’t just keep giving money to the municipalities so they’ll be happy and they’ll vote for us.”
“All we have control over is the State budget,” Kelly said.
Kelly said that the savings from the four bills, combined with savings from a Medicaid reform bill in House Finance and a criminal justice reform bill in Senate Finance, should be enough to cover the $100 million unallocated cut in the Senate operating budget.
“The financial condition of the State of Alaska has changed,” Senate Finance member Sen. Lyman Hoffman (D-Bethel) said. “The State of Alaska is on the brink of going broke.”
Hoffman is the primary architect behind SB 210, a change in the community revenue sharing program that he said will reduce the annual payout, limited to $60 million in statute, to $30 million. The name of the program will also be changed to the Community Assistance Program.
“If we aren’t able to sustain the budgets of the State, there would be no assistance,” Hoffman said. “Trying to save the program at 50 percent is still a challenge.”
“In the long run, it will be more helpful than hurtful,” he said of changes to the program.
Still No Support for Taxes in Senate Finance
When asked Monday whether credit rating agencies will consider the bills in circulation to adequately address the State’s budget deficit, Senate Finance Vice Chair Peter Micciche (R-Soldotna) said, “It’s hard to say where they draw the line.”
Micciche said that he expects that a draw from the Permanent Fund earnings reserve will pass and that the legislature will consider a couple of tax bills and oil and gas tax credit reform.
However, he added, “That $4.1 billion gap is not going to be solved in one year.”
“Should we go all the way?” Micciche said of closing the fiscal gap. “We don’t know what all the way is. And if we passed everything the governor has laid out for us right now, we’d still have a substantial gap. I think trying to go all the way this year is irresponsible, not because we’re not willing to take necessary action; but we don’t know necessarily what that action looks like without taking a little bit more time in the interim, without carefully evaluating the remaining gap.”
Things have changed dramatically in just two years, Micciche noted.
“Who would have dreamed we were talking about re-piping the Permanent Fund? Who would have dreamed about some of the cuts we’ve had to take?” he asked.
“If we were to guess on a broad-based tax this year without fully understanding what things look like next year, I think that’d be irresponsible,” Micciche declared. “When we talk about not getting into the tax business, right now we’re asking Alaskans to help with a substantial fiscal gap. We’re talking about possibly sharing part of Grandma’s PFD.”
“This is not a discussion about whether you tax or not,” said Kelly. “Last year, we cut a pretty significant amount out of the budget, and we’re still functioning quite well. Those who say we have to start taxing now are saying, ‘Everything’s just fine. There’s no fat in there. There’s no built-in dumbness. Just tax the people of Alaska so we can keep government going at this level.'”
“We believe there’s more, and we owe it to the people of Alaska, before we start confiscating the hard-earned fruits of their labor, we need to make sure — as much as it is humanly possible to do — that we pull out the excess of spending,” Kelly said. “We still have work to do in the merit system and how government wages just go up and up and up and up, seemingly unfettered, over a fairly short period of time.”
“By the time we do push that button Yea or Nay on taxes in taking the wealth of individual Alaskans, we’ve got to be able to look ourselves in the mirror and say, ‘You know what? We did everything to make that government smaller before we went to Alaskans’ pocketbooks,'” he concluded.
When asked about Gov. Bill Walker’s declaration that he will call a special session if the legislature does not pass a broad-based tax, Kelly responded curtly, “The governor is not a member of this body.”
All four bills introduced Monday are on the Senate Finance agenda for Tuesday afternoon.