Home Culture Economics Senate Passes Budget, Shoots Down Minority Amendments, Loses Caucus Member

Senate Passes Budget, Shoots Down Minority Amendments, Loses Caucus Member


The Alaska Senate passed a Fiscal Year 2018 operating budget Thursday, finally setting up formal negotiations with the House. The process cost the Senate majority caucus one of their most conservative members.

The Senate budget cuts unrestricted general fund (UGF) spending by $262 million.

It initially cut the the University of Alaska (UA), the Department of Transportation and the Department of Health & Social Services (DHSS) by at least five percent apiece.

On Monday, Senate Finance cut the K-12 public education Base Student Allocation (BSA) by $69.4 million. It also added a $5 million cut to DHSS and a $5.7 million cut to UA, bringing the total UA reduction to $22 million.

“These are trying times financially for the State of Alaska,” Senate Finance Co-chair Lyman Hoffman (D-Bethel) explained Thursday on the Senate floor. “When we’re looking at a deficit of $2.8 billion, the Senate felt that we should be able to look at reducing our own budgets… by a nickel on the dollar.”

Sen. Tom Begich (D-Anchorage) tried to restore the BSA, saying the $69 million cut doubles what the formula has lost to inflation.

“You’re actually undermining our ability to educate kids,” he said on the Senate floor. “This cut is not only unnecessary; it’s not responsible.”

Per Sen. Bill Wielechowski (D-Anchorage), the Anchorage School District (ASD) will see an effective reduction of $21 million with between 250 and 300 positions lost. Not all of those are teachers, Wielechowski acknowledged, yet ASD expects the cuts to increase class sizes by four students per class.

To offset the cut, Anchorage would have to raise property taxes by $50 for every $100,000 of home value. That would likely bump up against the tax cap, said Wielechowski.

Hoffman said that the Department of Education and Early Development (DEED) accounts for one-third of general fund spending. He recognized that the BSA cut would impact the Lower Kuskokwim School District, which he represents.

“This is a tough decision,” said an emotional Hoffman, “but I’m going to be voting ‘no.’”

The amendment failed along caucus lines.

Senate Minority Leader Berta Gardner (D-Anchorage) tried to restore the $22 million cut from UA.

“These are really devastating for our university,” she said of the cuts.

Gardner noted that UA supports 15,000 jobs and $1 billion of economic activity every year.

“All of that is desperately needed right now,” she said. “I ask the body — I beg the body — to support this amendment.”

“The university is an economic engine for our state,” agreed Wielechowski.

He said UA keeps kids from leaving Alaska.

“This is about what kind of a state we want to have,” said Wielechowski. “When we pass cuts like this, I just don’t know that we’re thinking about the future.”

Sen. Natasha von Imhof (R-Anchorage) said she will be watching to see how UA responds to the cuts, but noted the university has flexibility in how the cuts are applied.

“They are free to spread the cuts wherever they see fit,” she said.

That amendment failed along caucus lines.

A $2.8 million cut to pre-Kindergarten grants and programs also survived a challenge from Begich. Hoffman said he would consider funding over the Summer.

“For the kids that miss a year… it’s too late for all of those children,” responded Gardner.

She noted that pre-K is particularly important in rural Alaska, where English may not be spoken in the home.

“Those children will be the next leaders, the next legislators,” Sen. Donny Olson (D-Golovin) said in support.

The amendment failed along caucus lines.

Gardner was able to increase funding by $50,000 for the interstate medical school partnership known as WWAMI. She said that for the 20 students Alaska sends to the program every year, it gets 17 physicians back.

“Now that’s an amendment,” Senate Majority Leader Peter Micciche (R-Soldotna) said in approval. “I remove my objection.”

The Senate also adopted without objection an amendment restoring $250,000 of Alaska’s Education Challenge money designed to modernize public education.

Senate Majority Avoids Votes on PFD Amendments But Loses Dunleavy

All but two Senate minority amendments failed Thursday, while two amendments on the Permanent Fund dividend (PFD) never even reached a vote.

Wielechowski moved to restore the 2016 PFD. He argued, as he has unsuccessfully done in court, that Gov. Bill Walker’s veto of the PFD was unconstitutional.

The amendment was likely going to garner enough Senate majority support to threaten passage.

“I plan to vote for the amendment to restore the PFD today as part of the budget process on the Senate floor,” Sen. Shelley Hughes (R-Palmer) announced on Twitter.

But Senate Rules Chair Kevin Meyer (R-Anchorage) moved to table the amendment, ending debate and setting up a procedural vote that members of the binding Senate majority caucus would be forced to support.

Micciche placed a call on the Senate so that senators wouldn’t leave the chamber to avoid voting on the motion to table.

It initially passed, 14-6. Sen. Mike Dunleavy (R-Wasilla) broke with his caucus to join the five Senate minority members.

Dunleavy has two bills (SB 1 and SB 2) in Senate Finance to restore the 2016 PFD, bills Meyer used as justification for his motion to table.

Dunleavy later moved to rescind action on the amendment so he could change his vote to “yes” without breaking caucus rules.

The Senate also tabled, at Meyer’s request, a Wielechowski amendment to fund the 2017 PFD at the statutory amount, estimated to be $2,300, rather than the $1,000 proposed in the Senate budget. That motion passed along caucus lines.

Multiple motions to move the two PFD amendments off the table and bring them back for debate likewise failed along caucus lines.

“You weren’t elected to represent your caucus,” Wielechowski directed to Senate majority members. “You were elected to represent your constituents.”

It became evident how torn some Senate majority members were when Dunleavy announced it had become difficult to operate within the confines of the caucus.

“This operating budget is the enemy of Alaska,” he said. “In order for me to vote the way I want to vote on this budget, I need to respectfully withdraw from this caucus.”

The decision will almost certainly cost Dunleavy his chairmanship of the Senate State Affairs Committee.

Dunleavy later voted for the budget under reconsideration. KTVA’s Liz Raines tweeted after the vote that “Sen. Dunleavy says he accidentally pushed ‘yes’ button on the budget under reconsideration[.]”

Senate Minority: Budget Jeopardizes Permanent Fund, Deepens Recession

The Senate debated the budget for five hours Thursday.

“We’re certainly in a pickle,” said Dunleavy. “But we kind of knew this day would come.”

“You run out of money unless you contain the size of this government,” he said.

Dunleavy was not the only member who considered leaving the Senate majority to vote against the budget.

“For me, it would be easier to vote ‘no,’” said Hughes, but she asked herself, “From what vantage point should I influence future reductions?”

Hughes said she determined it would be better for her district if she remains in the Senate majority and works as a conservative from within.

“We have a government that the private sector can’t afford anymore,” she said.

“Some of the reductions didn’t reduce the size and scope of government,” Hughes said of the budget, noting that fund source changes will have to be re-addressed next year.

In contrast, Senate minority members said the budget is the result of not considering new taxes while drawing $2.5 billion from the Permanent Fund earnings reserve.

“This is a vote on cutting Permanent Fund dividends,” Wielechowski said. “It is the absolute most regressive tax you could imagine to fund our government.”

He said the Senate budget cuts the PFD in half, yet doesn’t tax income from Outside workers or purchases by tourists in what is expected to be a record tourist season. It also pushes a $69 million cut to education on to local communities.

“This budget does put the Permanent Fund more at risk in the long run,” agreed Begich. “We have other choices. We don’t need to go down this path.”

Begich listed an income tax and oil taxes as options.

But Dunleavy warned that in the face of taxes, Alaskans “can vote with their feet.”

“We’re not going to get out of this by taking money from other people,” he said.

Senate Declines Savings From Knik Arm Bridge, Oil Tax Credits

In 2015 and 2016, the Senate minority consolidated their amendments, attempting to claw back money from megaprojects and use it to offset spending priorities.

Most of those megaprojects are now dead. Walker’s proposed budget eliminated funding for the Juneau Access Road, and the Senate Finance Committee matched the House’s move to redirect U-Med Road funds to public education.

Citing the U-Med Road decision, Begich tried Thursday to claw back $5 million from the dormant Knik Arm Crossing. The money would have been deposited in the general fund.

“It’s time we finally put an end to KABATA and the Knik Arm Bridge Project,” Begich declared.

Hoffman committed to considering the move next year, and the amendment failed along caucus lines.

The Senate also rejected Wielechowski’s move to cut $74 million in oil and gas tax credit payments. Wielechowski said that while there is a funding formula in statute for the tax credits, it is discretionary.

Facing a $2.8 billion deficit, Wielechowski said, “We simply cannot afford to pay this at this time.”

“This is a minimum amount to pay,” said Hoffman, calling it a show of good faith to the oil companies.

“Yes, this is a minimum amount to pay,” Gardner responded, “but it is balanced by what we’re not doing for our children.”

The amendment failed along caucus lines.

Senate Keeps Cuts to Public Health Nursing, Medicaid-Funded Abortions

Without offsetting cuts, Wielechowski tried Thursday to add $1.5 million to the Criminal Division of the Department of Law based on Attorney General Jahna Lindemuth’s testimony that 7,000 criminals were not prosecuted due to budget constraints.

There was no debate on that amendment. It failed along caucus lines.

The Senate budget cuts public health nursing by five percent, which Olson said will close public health centers in Kenai and Kodiak. Saying he fears that a consequent reduction in vaccinations will lead to weakened herd immunity and spikes of meningitis and tuberculosis, Olson offered an amendment to undo the cut.

“Cutting public health nursing is a difficult decision,” Micciche acknowledged, but he said he expects there are efficiencies available that will ultimately lead to better service.

Olson responded that expecting better service while cutting public health nursing is a “stretch of the imagination.”

The amendment failed along caucus lines.

Gardner tried to restore $153,000 for Medicaid-funded abortions and remove intent language saying the funds cannot be used for abortion. She cited a 2015 Alaska Supreme Court ruling that mandates the State must pay for medically-necessary abortions.

“It sounds good to those who are opposed to abortion,” she said of the language, “but the fact is it’s unconstitutional.”

Gardner said that the Supreme Court decision means DHSS will simply have to find the $153,000 elsewhere, so it is an unallocated cut.

“It’s a shell game,” she said.

While Wielechowski argued the amendment could avoid another $1 million lawsuit, Micciche said the language has been in previous budgets without incident.

The amendment failed 4-16. Olson joined Senate majority members in opposition.

Sen. Dennis Egan (D-Juneau) tried to increase Alaska Marine Highway (AMHS) funding by $2 million.

“The Marine Highway… is not a convenience,” he said. “It’s vital to commerce and transportation.”

Gardner pointed out that cutting AMHS hurts one of the healthy sectors of the economy: tourism.

The amendment failed along caucus lines.

Next Up: Conference Committee Appointments

The House will next vote against concurrence in the changes the Senate made to the House budget, which increases UGF spending by $69 million because it includes a larger PFD than the Senate. The House version also does not cut education funding.

The House will then ask the Senate to recede from its amendments, which the Senate will decline to do.

Those votes tend to be unanimous.

Senate President Pete Kelly (R-Fairbanks) and House Speaker Bryce Edgmon (D-Dillingham) will appoint members to a conference committee to reconcile the two versions of the operating budget.

Senate members will be Hoffman, MacKinnon, and Olson. House majority members will be House Finance Co-chairs Paul Seaton (R-Homer) and Neal Foster (D-Nome). The House minority member will probably be Rep. Lance Pruitt (R-Anchorage).

“I’m willing to work with them to do the best thing for Alaska,” Pruitt said during a press conference Thursday, but he expressed concern that the House majority would “move the goalposts” during negotiations.

Olson supports an income tax, like the one advocated by the House majority in HB 115.

House Minority Leader Charisse Millett (R-Anchorage) and Rep. David Eastman (R-Wasilla) announced Thursday they will not vote for an income tax. Pruitt took that position the day the bill was released.

Eastman said he was disappointed by the amount of cuts in the Senate budget.

“Without cuts now in the short term, we will find that it is harder and harder to ever reach a sustainable budget for our state,” he said. “Without reaching a sustainable budget, you can expect deficits to continue. It’s as simple as that. It’s a math problem. So we do need to continue to maintain cuts because the math doesn’t work any other way.”

“All the work we are doing here today, we are still going to have a deficit next year,” Hoffman echoed during debate on the budget.

Legislative Finance Division analysts have shown that HB 115 eliminates structural deficits within three years without further cuts. The House budget also closes the deficit this year.

An ideologically-balanced conference committee will likely extend negotiations.

Thursday was Day 80 of what statute limits to a 90-day session, though the Alaska Constitution allows 121 days.

“Not planning on going home on Day 90,” said Millett. “A little unfortunate that we’re ten days out, and there seems to be no rush to meet our statutory requirement of 90 days.”

Pruitt, also blaming the pace of the House majority, said one of the three things constituents told him during the 2016 election was that they wanted the legislature to finish within 90 days.

“Someone’s not listening,” he said.

When the conference committee is appointed, the rule requiring five-day notice for committee hearings will give way to the 24-hour rule. In the past, the legislature has interpreted the 24-hour rule to mean hearing notice can be posted any time on the calendar day before that hearing.