The House majority pushed back Tuesday on the Senate majority’s plan to delay closing the deficit for another year.
Senate leaders have said their goals for the session are limited to restructuring the Permanent Fund, making $300 million in unspecified cuts to the budget, and revising a spending limit in the Alaska Constitution.
“With a restructuring and some reductions, we know that we have a very manageable gap, and we have savings that moves 15 years out versus one [year],” Senate Majority Leader Peter Micciche (R-Soldotna) said Monday during a press conference.
The Senate majority’s plan would leave a deficit of around $800 million, which would again have to be filled from the Constitutional Budget Reserve (CBR) savings account. The CBR balance would drop to less than $4 billion, and the State would probably face a downgrade in its credit rating.
But the Senate majority believes trying to do more this year will cause the legislature to grossly exceed the 90-day session limit for the third year in a row.
“If we do the necessary things we need to do and we walk out of here with an $800 million gap, then we have something to come back and talk about next year. If we complicate the solutions of a restructuring and a reasonable budget this year with all of those other philosophical, rhetorical things, that’s when it gets really complicated, and that’s what drags on through the year,” Micciche said. “If we complicate it and drag on through the Summer, I think we all lose.”
The “other philosophical, rhetorical things” the Senate majority worries about are new taxes and revisiting the oil tax regime and associated tax credits.
House majority members said during a press conference Tuesday that all have to be part of a fiscal solution this year.
“This is the year it has to be done,” said Rep. David Guttenberg (D-Fairbanks). “Our savings are down. They’re dwindling to nothing. We don’t have an option. We have to get something done.”
“People are going to be critical of whatever you do, but if you kick it down the road another year, that’s failure,” agreed Rep. Matt Claman (D-Anchorage).
Last week, the House Resources Committee received an update on oil taxes and the State’s tax credit liability. The cash liability is estimated to be $900 million in Fiscal Year 2018, in part due to Walker’s vetoes last year.
House Resources scheduled a Wednesday afternoon hearing on a new oil tax and tax credit bill, as long as that bill is introduced in the House Wednesday morning.
House Speaker Bryce Edgmon (D-Dillingham) said a separate fiscal plan will be formally introduced later this week. The House Finance Committee received advice Monday from Legislative Finance Director David Teal on how to successfully construct that bill.
“I want to be really frank. We can’t be in a situation where we’re looking at cuts only and a Permanent Fund restructuring,” Rep. Ivy Spohnholz (D-Anchorage) said. “That’s a solution that is hardest on working Alaskans and has a lot of consequences that I think people are not thinking through all the way.”
Spohnholz referred to Institute of Social and Economic Research (ISER) statistics showing that for every $100 million cut from the State budget, there are over 1,200 jobs lost. 750 of those are in the private sector because of reduced spending by unemployed State workers.
“All of those Troopers and teachers and nurses also spend money. They pay rent. They buy groceries. They buy gas,” said Spohnholz. “A cuts-only solution is just not going to work.”
Guttenberg said that the legislature had the ability to deal with the fiscal crisis last year.
Aiming for a fiscal solution, Walker introduced a variety of taxes and a bill to restructure the Permanent Fund.
When none of the taxes advanced in the legislature, the administration reintroduced them in a single bill during the special session, much to the consternation of legislators. The taxes again died in committee.
“I think last year, you saw too much gamesmanship and not enough statesmanship,” Guttenberg said Tuesday. “When you know something is going to be an issue at the end, you deal with it.”
The Permanent Fund bill made it through the Senate last year, ending up in House Finance after the legislature approved a modest oil tax bill that focused on Cook Inlet and left the North Slope largely untouched.
Before voting against the Permanent Fund bill, Guttenberg said that the legislature had failed to “stop the hemorrhaging” of oil tax credits or adequately spread the burden of a fiscal solution.
“The governor came to the table and said, ‘We need a broad fiscal plan, and not one component of it is good enough to make it work.’ We’re at the point now where we only have one component, and it’s the most expensive one for Alaskans,” Guttenberg said last year of the Permanent Fund bill.
“I think we have a situation where, before we ask the public to step in and participate in the reduction of their Permanent Fund dividend check — every man, woman, and child — that there are tax credits on the table that are a huge hole in the bucket that represents the State’s budget process,” he continued.
The Permanent Fund bill failed in a 5-6 vote.
“That was probably the toughest vote I have ever taken,” Guttenberg said Tuesday. “I don’t regret that I did that. I still think that I did the right thing.”
Rather than passing one or two items individually, Guttenberg said this year, the House majority will negotiate an entire fiscal package at the end of the session.
“The fact that the Senate is espousing that they’re narrowing sort of the menu of choices… that’s encouraging,” Edgmon said optimistically. “I think whatever plan that we come forward [with] will be possibly in concert with what the Senate is doing, but, as well, may have some different pieces that we will come to an agreement on.”
“I’m very confident that, in the end, we are going to reach some kind of consensus that gets us a substantial way towards a sustainable future for the state,” Edgmon concluded.
Tuesday was Day 22 of the 90-day session.