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House Majority: Senate Fiscal Plan Will Leave a Deficit, Cause More Drastic Drastic Cuts Every Year

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Unsurprisingly, the House majority caucus declared its opposition Tuesday to the Senate’s proposed cuts to education. The way to avoid those cuts, they say, is to pass a comprehensive fiscal plan.

On Monday, the Senate Finance Committee sent an operating budget to the floor that cuts the K-12 Base Student Allocation (BSA) by $69.4 million and the University of Alaska (UA) by $22 million.

“Yesterday was a bit of a gut check,” House Speaker Bryce Edgmon (D-Dillingham) reacted Tuesday during a press conference.

“Our coalition totally opposes the irresponsible cuts that the Senate did in the last couple days,” said House Majority Leader Chris Tuck (D-Anchorage).

Tuck said the Senate majority is ignoring the results of their own survey, in which 63 percent of respondents said K-12 education funding was either “too low” or “about right.”

The survey has repeatedly been used as a talking point for Democrats. It is no longer a link on the Senate majority’s homepage.

House Finance Co-chair Paul Seaton (R-Homer) estimated the Senate budget would result in the loss of 200 teachers in Anchorage, 90 in the Mat-Su, 70 in Fairbanks, 50 in the Kenai Peninsula Borough, and 40 in the Lower Kuskokwim.

“Cutting more than 20 teachers out of Juneau, cutting more than 700 statewide, would have a direct impact on the quality of education that we’re able to afford to the next generation. That’s very troubling,” said Rep. Justin Parish (D-Juneau).

The Senate budget reduces agency and statewide operations by $262 million, close to the Senate majority’s FY 2018 plan of $300 million. They plan to cut another $450 million over the next two years.

“Obviously, the Senate never wants to see a capital budget,” Tuck said in response to the Senate plan. “We’re looking for ways to create a budget that leads us to prosperity, where they’re creating a budget that leads us to austerity.”

In a statement Monday, UA President Jim Johnsen said the $22 million cut to the university is “devastating” and would bring the total cuts over the last four years to $75 million.

The House version of the budget does not cut K-12 funding or the university.

House majority members would have liked to increase education funding beyond the formula, but Parish said that is not a priority in the Senate.

“We’re not the only people in the building,” he acknowledged. “We’ve got to be ready to compromise in order to get to a comprehensive fiscal plan.”

Edgmon said if the Senate plan were fulfilled, it would cut the number of teachers in his school district by half.

“It comes down to, do we want to cut our way to a sustainable future in Alaska, or do we want to try an all-of-the-above, reasonable approach?” he asked.

“It seems that the philosophy of the Senate is they want to have a poor Alaska,” Seaton concluded. “They want us to have a deficit so that we’re constantly cutting and not having adequate funds to fulfill the basic needs that Alaskans want.”

Floor debate on the Senate budget is expected Wednesday.

“It’s my fervent hope that we get more Alaskans around the state to sort of chime in and say, ‘Hey, look. This is what we envision our state to be going down the road,’” said Edgmon. “Do we want to eat into our seed corn, the ultimate sort of investment in the future, the K-12 system in Alaska? Do we want to erode that to the point where a lot of the smaller schools around the state… really don’t have the means to provide a quality education?”

“We need every Alaskan calling their senator, calling their representative, and demanding a comprehensive fiscal plan which protects our most important investments, our investments in education, in our children,” echoed Parish.

Rep. Tuck: Senate Holding Education Hostage for Permanent Fund Plan

In addition to the education cuts in the budget, Senate Finance introduced a bill (SB 103) to eliminate the Alaska Performance Scholarship (APS) and redirect that money to education innovation grants.

“It’s interesting that the promise is that, ‘Well, we’ll do some maybe innovation grants in the future, but we’re going to cut you now. Then we might appropriate money in the future for some individualized districts to do things.’ I don’t think that that’s an efficient or responsible way to proceed with our children,” Seaton responded Tuesday.

Johnsen said that of the 14,700 students that have qualified for APS since its inception in 2012, over 5,000 have attended UA.

“Cutting the scholarship program could impact UA’s bottom line by as much as $10 million annually, on top of other cuts under consideration,” he said.

Seaton credited APS with a 6.5-percent statewide increase in graduation rates. He called the Senate’s proposal for elimination “mystifying.”

“I think it is not a responsible thing to do to take the one innovation that we have made in this state that has actually had great success in changing high school and college attendance rates and doing away with it for some supposed new innovation grants that might be funded in the future,” said Seaton.

“The Senate is holding public education hostage just to get a Permanent Fund-only plan, which I think is very irresponsible,” Tuck declared.

Tuck is referring to SB 26, the Senate’s plan to restructure the Permanent Fund and cut the Permanent Fund dividend (PFD) to $1,000.

“That’s not a bill that our caucus is supporting,” Seaton said.

The House majority has a similar Permanent Fund plan (HB 115) with a $1,250 PFD, but it closes the deficit with an income tax.

“One of the problems with the Senate’s approach is they’re leaving an $800 million deficit this year, and by 2023, they’re still having a $500 million deficit. When you have a $500 million deficit every single year, what it means is your cuts are going to be like they are this year,” Seaton explained.

“We have a problem with the economy. We need a vibrant economy going forward, and we’re not going to get there by passing something that has a $500 million deficit every year for the foreseeable future and is just spending our savings. We don’t think that works, so why would we pass that?” he asked.

Seaton pointed out that a bill like SB 26 that only restructured the Permanent Fund failed to garner enough support last year to reach the House floor.

“SB 26 hits the poorest Alaskans 50 times harder than it hits the richest earners in Alaska,” said Parish.

A progressive income tax balances the impact a PFD reduction has on lower-income Alaskans, Seaton has said.

“We need to focus on a balanced plan that can solve our problem, instead of just working on one element of the problem,” he told reporters.

Seaton noted that no one has introduced a state sales tax, which would have to apply to all products and services to raise an amount equivalent to an income tax. Yet a lack of exemptions is unpopular with businesses, he said.

Speaker Edgmon on HB 115 Whip Count: “We’re Working on It.”

During a hearing Monday, House Finance rejected along caucus lines an amendment from Rep. Lance Pruitt (R-Anchorage) that would have stripped out the income tax.

Pruitt chose not to offer a separate amendment that would have replaced HB 115 with his HB 192, a Permanent Fund restructuring with larger PFDs and no income tax.

But Monday’s hearing suggests the House majority may not be unified in its support for HB 115.

First, Rep. Dan Ortiz (I-Ketchikan) offered an amendment that would have allowed an income tax deduction for 50 percent of municipal property taxes.

When Pruitt tacked on a deduction for military retirement pay, it passed House Finance overwhelmingly.

Pruitt had another deduction queued up for Social Security benefits and pension income, while Rep. Jason Grenn (I-Anchorage) was going to try to exempt ten percent of rent in boroughs that levy property taxes.

House Finance took a break before considering those amendments to Ortiz’s amendment. When they returned, Ortiz withdrew his original amendment, preventing all those deductions.

Though House Finance seemed poised to move HB 115 to the floor, the committee canceled a Tuesday hearing on the bill.

Tuesday was Day 78 of the 90-day session.

When asked whether HB 115 is balanced enough to pass the House, Edgmon said tellingly, “We’re working on it… Conceptually, I think our caucus is very much in support of the components of House Bill 115.”

House Finance is also working on a rewrite of oil tax credits that raises the minimum production tax. That bill (HB 111) could move to the floor over the weekend.

“We cannot ask Alaskans to reach in their pockets just to watch it go into these unsustainable cash subsidies to the oil industry. I can’t stomach that,” said Tuck.

Edgmon’s answer to the question of whether the House majority would be willing to walk away if they don’t get what they want in negotiations with the Senate was simply, “No.”

“We want to make the tough decisions this year,” Tuck clarified.

He noted that many Senate majority members will be on the ballot in 2018, making it harder to get things done next session. All House seats will be on the ballot, as well.

“I think that rational minds and reasonable people will come together around a solution,” Seaton offered.

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