The Senate version of the operating budget is headed to the floor, complete with a fresh $70 million cut to education. In addition, Senate leaders announced, for the second year in a row, they are seeking to eliminate the Alaska Performance Scholarship (APS).
“We are facing a monumental deficit. We have reduced government, but we need to continue to march down that road until we have a complete fiscal plan,” Senate Finance Co-chair Lyman Hoffman (D-Bethel) said before the CS moved from committee.
Senate Finance had adopted cuts of at least five-percent to the Department of Health & Social Services, the Department of Transportation, and the University of Alaska prior to Monday’s brisk hearing, but had yet to officially accept a five-percent cut to the Department of Education & Early Development (DEED).
Last week, Senate Majority Leader Peter Micciche (R-Soldotna) told reporters “the whole world knows there’s going to be a five-percent cut” to education.
That cut — a $69.4 million reduction to the Base Student Allocation (BSA) — was adopted Monday by Senate Finance without objection.
Micciche said in a press conference that while other departments have been cut to FY 2007 levels, “We have not cut the BSA yet, to date.”
Senate Finance Co-chair Anna MacKinnon (R-Eagle River) said the BSA is the fairest way to distribute either an increase or a decrease in education funding.
“I know the reduction — that’s a hard pill to swallow. I get that,” said Senate Education Chair Shelley Hughes (R-Palmer).
But Hughes said that reading scores have been stagnant in Alaska for over a decade.
Hughes is shepherding a bill (SB 96) through Senate Education that will increase virtual education options for school districts. She and MacKinnon tried to out-duel each other Monday in the use of buzzwords like “innovation,” “efficiency,” and “streamlined delivery.”
“Transforming education is going to help our students,” Hughes insisted. “Overall spending on education does not correlate with academic achievement. However, spending in the classroom does.”
The BSA cut is a cut to classroom funding.
Senate Finance Bills Try to Redirect Scholarship Money
Senate Finance introduced a bill (SB 103) Monday that seeks to eliminate Alaska Performance Scholarships and redirect that money toward education innovation grants with an emphasis on technology.
“Overall, when our students test, they don’t fare well nationally or internationally,” MacKinnon alleged. “We need to improve outcomes for Alaska students.”
But, she said, “It comes with a price.”
“The seniors of 2017’s graduation class would be the last group that qualifies for the Alaska Performance Scholarship,” MacKinnon announced.
“We’re spending, on a very small group of people, about $17 million a year,” she later added, referring to APS.
There is no available funding for SB 102 or the proposed innovation grants other than the APS money, MacKinnon suggested.
Hughes moved to waive the five-day notice requirement on the three bills so Senate Education could hear them Tuesday.
“We know from broad experience that two of the things that bring the greatest interest from the public are people’s kids — things that impact their kids directly — and their wallets,” Senate Minority Leader Berta Gardner (D-Anchorage) objected on the Senate floor. “I think there’s a great deal of public interest, and I think the process under our rules — as they are without waiving them — allows the minimum amount of time for people to decide how they’re going to participate.”
Gardner later withdrew her objection when she learned representatives of the school districts were in Juneau Monday.
The bills are scheduled for a hearing at 3:30 pm on Tuesday.
Hughes said that the legislature has been waiting on school districts to innovate, but they haven’t done so.
“We can’t afford to wait,” MacKinnon declared.
One year ago, Senate Finance introduced a series of bills that would have eliminated APS to offset teacher retirement costs the Senate proposed to shift to municipalities.
Former Gov. Sean Parnell, who helped establish the APS program, called its elimination “a head scratcher.”
Education officials criticized the fact that the bills did not codify use of scholarship funds for Teachers’ Retirement System (TRS) payments. Instead, there was intent language that Alaska Council of School Administrators (ACSA) Executive Director Lisa Parady called nothing more than a “suggestion of additional funding in future years.”
The Senate Finance bills died in committee last year.
Like those bills, broadband improvements in SB 102 are dependent on passage of SB 103. If both bills were to pass, future legislatures would still not be required to appropriate the scholarship money for broadband.
Monday afternoon, Sen. Donny Olson (D-Golovin) tried to restore $2.8 million for pre-Kindergarten grants and programs that are cut from the Senate budget. The programs have been proven to save money in the long term by avoiding remediation.
Olson pointed out that many of the beneficiaries of pre-K are in Hoffman’s Southwest Alaska district.
But Hoffman said the new trio of bills are a more appropriate place to look for improved education outcomes.
Olson’s amendment failed along caucus lines. Pre-K will be an item subject to negotiation between the House and Senate.
Senate Leaders Argue Against Income Tax as They Prepare for Fallout
Micciche said he expects pushback from educators this year.
“Today, we know there will be active participation from educators from around the state that are arriving today to come to each of our offices and to kindly let us know how they feel about education cuts,” he said with a wry smile.
“Cutting had to be a solution,” Micciche said.
About an hour after the Senate majority called Alaska student performance into question, the Kenai Peninsula Borough School District tweeted a graph of elementary school reading fluency, saying, “76% of our students scored average to well above average compared to national peers.”
Micciche said his message to teachers is to tell the House to pass the Senate’s Permanent Fund restructuring plan, SB 26.
SB 26 leaves a FY 2018 deficit of about $900 million, with $500 million deficits every year into the future.
The House has instead been focused on its own deficit reduction plan (HB 115) that restructures the Permanent Fund and closes the deficit with an income tax. Consequently, while the House budget includes $115 million in cuts to agency operations, it does not cut education funding.
“Our Coalition has made public education a priority and we will not sacrifice the future of our children for some short-term savings. We are committed to fully-funding the Base Student Allocation in the final budget,” House Majority Leader Chris Tuck (D-Anchorage) said in a statement. “The Senate is proposing a cute maneuver that holds public education hostage while they continue to advocate for half-measures that will cost jobs and push Alaska deeper into recession.”
House Finance considered amendments to HB 115 Monday.
“What is a better plan? I would say let’s take these one step at a time,” said Hoffman, encouraging separate consideration of an income tax.
Micciche said SB 26 could also close the deficit if oil prices rise.
“It’s as complete as a plan including an income tax,” he said. “It just depends on where oil goes from here.”
Rather than trying to close the deficit, Micciche said he would tell teachers it’s better to pass SB 26 this year and come back next year to consider the remaining fiscal gap.
House Finance has not moved HB 115 or HB 111, a bill increasing oil taxes and dramatically altering oil tax credits. HB 111 is scheduled for committee amendments on Friday and Saturday.
“The House has done nothing to pass over to the Senate a piece of legislation that will do anything to solve our budget,” criticized MacKinnon. “There is not an income tax over here. There is not an oil tax change. There is not use of our [Permanent Fund] earnings. So when the House is able to advance a piece of legislation, I think we can take up the question again. But until they act, all they’ve done is talk about it.”
“There’s 13 days left, and we haven’t seen a thing,” agreed Micciche.
Monday was Day 77 of the 90-day session.
Senate leaders said education simply can’t be held harmless anymore.
“We’ve drawn over $10 billion from Alaska’s savings accounts,” MacKinnon said.
“We, as a state, are continuing to struggle with the fact that we are living beyond our means today,” Hoffman added.
Public Broadcasting Restored, University Cut Deeper
The Senate budget CS makes a $16.8 million cut to personal services, which includes State worker pay. Hoffman’s aide James Armstrong said that is a cut of between one percent and 2.75 percent in the various departments.
Intent language allows heads of the State agencies to distribute the personal services cut as they see fit, making it essentially an unallocated reduction.
The cut will likely have the biggest impact on the University of Alaska (UA). The personal services reduction cuts $5.7 million more than the $16 million reduction UA was already facing.
MacKinnon noted that UA is responding by raising tuition, which would replace unrestricted general funds (UGF) with designated general funds (DGF).
Though it does not reduce overall spending, increasing DGF while decreasing UGF shrinks the budget deficit on paper.
“That, from my perspective, is a responsible way to move forward,” MacKinnon said.
The CS restores $2.8 million for public broadcasting, matching the House.
“This is an attempt to get us as close as possible to that reduction,” Dunleavy told Senate Finance.
Hoffman responded that public broadcasting received more support during public testimony than any other item.
Dunleavy’s amendments failed, 1-6.
A frustrated Dunleavy pointed out that the $337 million UGF reduction in the CS is inflated by $75 million in FY 2017 supplementals and $70 million for a motor fuel tax that will be replaced with unrestricted general funds (UGF) if it does not pass the legislature this year.
In another amendment, Dunleavy tried to add a $103 million unallocated reduction to the executive branch.
“The Senate majority, particularly, believes that there’s still room to come down in time, but we have to leave the agencies time to respond,” said Micciche.
“There’s still work to be done” on budget reductions, Hoffman agreed. However, he continued, “Unallocated reductions are very difficult to manage.”
That amendment also failed, 1-6.
The committee rejected Dunleavy amendments that would have restored the 2016 Permanent Fund dividend (PFD) and inflation-proofed the Permanent Fund.
Dunleavy said a constituent told him, “I hope you cut the government’s budget before you cut our budget.”
The Permanent Fund amendments would have added $1.2 billion to the budget.
That $17 million offset some of the $86 million cut to public education funding, making the BSA cut $69.4 million.
Senate Finance added $6 million to Gov. Bill Walker’s proposed budget, fully-funding pupil transportation.
Senate floor amendments to the budget are likely on Wednesday. The Senate could pass the budget that same day, depending on how long the amendment process lasts.