The House continued working Tuesday through operating budget amendments that are said to number in the hundreds. Majority and minority members each tried to hold the moral high ground during debate.
The budget (HB 57) that passed out of House Finance last week increases unrestricted general fund (UGF) spending by $70 million over FY 2017, but cuts agency operations by $114 million.
Rep. Andy Josephson (D-Anchorage) moved to strike intent language encouraging the Department of Motor Vehicles (DMV) to outsource administrative and licensing services. That language was added in House Finance via an amendment from Rep. Cathy Tilton (R-Wasilla).
Josephson’s amendment initially failed, 20-20, but Rep. Dan Ortiz (I-Ketchikan) asked that the House rescind its action. Ortiz, who initially voted “no,” changed his vote, and the DMV intent language was removed on a vote of 21-19. Rep. Jason Grenn (I-Anchorage) joined minority caucus members in opposition.
An amendment from Rep. Tammie Wilson (R-North Pole) to delete $10.4 million from the Alaska Gasline Development Corporation (AGDC) only received the support of 12 minority members.
Wilson offered most of the 330 amendments in House Finance, including the cut to AGDC. House Finance did not accept any of Wilson’s proposed budget cuts.
Many of the amendments would have set FY 2018 spending to reported FY 2016 actuals. House Finance voted 93 of those amendments down at one time.
Wilson’s streak continued Tuesday on the House floor as she offered more amendments based on departments’ FY 2016 spending.
“This isn’t complicated,” asserted Rep. Chris Birch (R-Anchorage). “This basically rolls the budget to what was actually expended last year.”
“This is another of these unspecified cuts,” House Finance Co-chair Paul Seaton (R-Homer) countered after Wilson suggested a $400,000 cut to professional licensing in the Department of Commerce, Community, & Economic Development (DEC). “We dealt with over 100 of these structural amendments in House Finance.”
Seaton called using FY 2016 actuals a “highly questionable method” of budgeting because departments have the flexibility to redistribute money between allocations as needed after the money has been appropriated by the legislature.
“This presumes that those adjustments were unnecessary,” Seaton said of Wilson’s amendments.
If that’s the case, how can the legislature know what the departments actually spent, Wilson asked.
“Someone’s supposed to build a budget, and there aren’t any numbers we can use that are accurate,” she said.
Seaton said that budgeting to actuals creates a “perverse incentive” for departments to spend every penny in every line item, knowing that if it is not spent, the legislature will cut it the following year.
“If we make the cut, it won’t be there for them to spend,” responded David Eastman (R-Wasilla).
“This budget represents the actual number it costs the department to function,” Rep. David Guttenberg (D-Fairbanks) insisted, calling Wilson’s effort an “anti-economic development amendment.”
“We are charging our businesses for licensing more than it costs to do it,” Wilson replied. “Voting ‘yes’ on this amendment tells the businesses, ‘We are not going to overcharge you.’”
Wilson’s DEC amendment and another cutting Department of Education & Early Development travel to FY 2016 levels failed along caucus lines.
Minority Introduces Permanent Fund Amendments “For the Kids”
Minority members offered a pair of amendments Tuesday highlighting the majority’s plan to draw $4.2 billion from the Permanent Fund Earnings Reserve Account (ERA). The structured draw closes the deficit and allows for a $1,150 Permanent Fund dividend (PFD).
“All I’ve heard for the last couple years is we need to protect the Permanent Fund,” Wilson said on the floor. “In this budget here, over $4 billion is going to be taken out.”
$1.7 million of that $4.2 million draw funds education, while $120 million goes toward inflation-proofing. While inflation is not technically part of the House budget calculation, the legislature has not deposited anything in the Permanent Fund corpus in the last two years.
Rep. Steve Thompson (R-Fairbanks) moved to inflation-proof the corpus with an additional $550 million. The transfer from the ERA would not grow the budget, he noted.
To date, Thompson said the legislature has added $16 billion to the Permanent Fund beyond the oil royalties that are constitutionally required.
“Almost 40 percent of the contributions to the Permanent Fund have been from inflation-proofing,” said Thompson
“We must preserve our buying power with that Fund,” he declared. “Does this body want a Permanent Fund or a semi-Permanent Fund?”
“The Permanent Fund should not be managed for the next year or the next election,” said Thompson, concluding it must be managed for the next generation.
“This is for the kids,” agreed Rep. Lance Pruitt (R-Anchorage).
“With this amendment, we’re not taking anything off the table for this year’s discussion at all,” Pruitt said, referring to the debate over restructuring the Permanent Fund. He said the amendment merely removes $550 million from available spending.
“It was not done for the last two years, and it shouldn’t be done this year,” Seaton said of inflation-proofing.
“The argument that I just heard was, ‘In times like this, we shouldn’t do it,’” Eastman responded.
Eastman contrasted the current fiscal crisis with the Great Depression and noted that the legislature did not restructure the Permanent Fund when oil was at nine dollars per barrel.
“Are we in times like that today? I don’t think so,” he said.
Eastman asked how the legislature can expect Alaskans to follow the law when the legislature does not follow statutes requiring inflation-proofing.
Thompson’s amendment failed along caucus lines.
The Senate is scheduled to debate its Permanent Fund restructuring plan, SB 26, Wednesday.
Like the Senate plan, the House budget reduces the amount of royalties deposited in the Permanent Fund corpus to the constitutionally-mandated 25 percent. That is a $55 million reduction in income for the corpus.
“I think we are telling the future that we want to spend money today because that is more important than the future,” Thompson argued.
Thompson moved to maintain the current royalty allocation, which is set in statute.
“It’s not just the $55 million; it’s also the 55 million dollars’ ability to earn interest,” Pruitt said.
“Taking funds away from the Permanent Fund and putting them into government does not fit the definition of diversifying our revenue,” Wilson added.
That amendment also failed along caucus lines.
House Finance Addresses Inflation-Proofing in Separate Bill
House Finance Vice-chair Les Gara (D-Anchorage) said he believes the legislature will come up with a solution for inflation-proofing before the end of session.
Gara, Seaton, and House Finance Co-chair Neal Foster (D-Nome) co-sponsored amendments to the House majority’s deficit reduction plan that would deposit .25 percent of the annual Permanent Fund draw in the corpus. The amendments match the inflation-proofing mechanism in the budget.
House Finance passed the amendments along caucus lines between House floor sessions Tuesday afternoon.
Other items in the amendments to HB 115 include increasing the percent-of-market-value (POMV) draw from 4.75 percent to 5.25 percent to match the Senate. The House version then drops to five percent in FY 2020, rather than FY 2021, as the Senate has proposed.
In addition to the .25 percent of the POMV draw, any amount in the ERA in excess of four times the POMV draw would spill into the corpus, unless actual inflation-proofing would be a smaller amount. With an amendment Tuesday, the legislature would put the lesser amount in the corpus.
While HB 115 includes an income tax, it dedicates more to PFDs than the Senate’s SB 26.
An amendment Tuesday, adopted without objection, increased the PFD in HB 115 to at least $1,250 in 2018 and 2019.
Rep. Saddler Tries to Cut Village Public Safety Officer Funds
A handful of budget amendments from Rep. Dan Saddler (R-Eagle River) would have cut funding for vacant Village Public Safety Officer (VPSO) positions.
Saddler said that while there are 78 budgeted positions for VPSOs, only 52 of those positions are filled. He variously tried to fund-down to 52 positions, 58 positions, and 68 positions, with additional cuts to travel and commodities.
“This speaks really to the values of our state,” Rep. Zach Fansler (D-Bethel) said in opposition.
“Unfortunately, we’re not like District 13 [Eagle River]. We’re not a bedroom community to anybody,” added another rural legislator, Rep. Dean Westlake (D-Kotzebue).
Opponents of the cuts said that $1.8 million in unspent VPSO money from last year was returned to the General Fund, while $2.7 million was used for VPSO-related expenses, like housing.
“The pay is low. Housing options are limited,” said Foster.
Supporters of the amendments said the money was appropriated specifically for hiring and training.
“Should we keep paying for things that we’re not getting?” Wilson asked.
“I call it a slush fund,” Eastman said of the VPSO program. “It’s time to return those funds.”
A Saddler amendment that would have issued VPSO grant money every two months, instead of annually, failed along caucus lines.
House Majority Leader Chris Tuck (D-Anchorage) said he was able to read what the amendment does, after Saddler introduced it without explanation.
“Is there a savings here? Is there a cost here?” Tuck asked. “I think there’s a little bit of a disservice to the debate if we don’t know the intent.”
Saddler replied the goal was to reduce the ability for grantees to spend VPSO money on something other than intended.
Rep. Scott Kawasaki (D-Fairbanks) noted that the crime rate in Ambler is more than five times higher than Anchorage.
“It’s not acceptable to have two classes of law enforcement in this state,” said Gara.
“This is not a rural issue. This is not an urban issue. This is an Alaska issue,” Saddler responded.
Gara said claims that VPSO money was spent on water and sewer work could only be tied to VPSO housing, which is important for retention.
But Birch responded that if housing needs to be built, it should be vetted in the capital budget.
“This is really about truth in budgeting. It’s about public accountability,” he said.
Majority members noted that public safety is a constitutional obligation.
“It’s been a tough time for public safety officers across the country,” said Rep. Geran Tarr (D-Anchorage).
“My concern with these proposed cuts is it’s a step backwards. It’s a retreat,” added Rep. Andy Josephson (D-Anchorage), a prosecutor.
Saddler lost some minority votes on his proposed cuts to VPSO positions, but he picked up Grenn on an amendment that would have cut $100,000 from the VPSO travel and commodities budget alone. That amendment failed, 19-21.
Fansler said a cut to the travel budget would be “absolutely devastating” when VPSOs have to fly into remote villages. They must travel for training, to escort people, and to testify on cases, Fansler said.
U-Med Road Again Under Debate, But With a Different Outcome
As was the case with the Permanent Fund amendments, children were at the heart of the discussion of the U-Med Road in Anchorage, also called the Bragaw Extension.
“This has become an annual exercise here,” said Pruitt.
Tarr tried again Tuesday.
“If you want to save some money, this is your opportunity,” she told minority members disappointed by a lack of budget cuts. “Here’s an opportunity for $17 million.”
“I might be able to support this, surprisingly, if that $17 million was going into the principal of the Permanent Fund, but it’s not,” Thompson half-joked.
Tarr’s amendment moves the money into the Public Education Fund.
Tarr said the Alaska Airlines Center sports arena that borders the existing road may end up closing, reducing need for the extension. In addition, there are four schools whose students cross the road, but there is not enough money to finish the project, let alone account for the increased traffic.
“This is not about safety,” Tarr said. “There’s no money for any mitigation.”
Tarr noted people who live north of Northern Lights Boulevard can go to Alaska Regional Hospital in an emergency.
“At this time, this is not a good use of State dollars,” she concluded.
Tarr added that stoplights in Anchorage turn green for emergency vehicles, so travel time to Providence Medical Center is already reduced.
“Not everyone who goes to the emergency room uses an ambulance to get there,” responded Pruitt.
Pruitt alluded to a time when he had to race his son to the hospital and was delayed.
“This is personal,” he said. “This is a real thing. There are lives at stake here.”
Eastman had a similar story of when his daughter was suffering a seizure.
“I can tell you, having been in that situation as a father… that every second does matter,” Eastman said.
“We have a growing city, a growing population,” said House Minority Leader Charisse Millett (R-Anchorage). “We’re attracting young families with children. Children sometimes get hurt.”
Millett noted there was similar opposition to the Elmore Road extension, which gives people in South Anchorage access to the U-Med area.
Birch, who also referenced Elmore Road, said, “This is a job-killing amendment.”
“This is not a job-killing amendment; it’s a neighborhood-preserving amendment,” responded Rep. Ivy Spohnholz (D-Anchorage).
“This is an issue of access,” reacted Saddler. “Your neighborhood, your ability to walk your dog, is more important than my ability to get my son to the hospital?!”
Saddler later apologized for the outburst.
Josephson told House members it’s hard to find a supporter of the U-Med Road in the surrounding districts.
“The vocal opposition is strong. It’s very strong,” he said.
House Rules Chair Gabrielle LeDoux (R-Anchorage), whose district abuts Saddler’s, said road supporters in the legislature are, in an unusual move, “trying to stuff a capital project down the throat” of people who don’t want it.
“I’m beginning to realize why I don’t live in Anchorage now,” House Speaker Bryce Edgmon (D-Dillingham) joked after listening to the heated debate from Anchorage representatives.
Tarr’s amendment passed, 23-17, with Rep. DeLena Johnson (R-Palmer) joining majority members in support.
The Senate is unlikely to be supportive, as they rejected a similar amendment last year.
The House was scheduled to consider more budget amendments at 6:30 pm Tuesday.
It took them five hours to go through ten amendments, not including lunch. At that rate, if there are indeed hundreds of amendments, the House will not pass the budget until late next week.
Minority budget amendments were still coming in Tuesday while the House was in session.