Dear Friends and Neighbors,
As we approach the finish line, I want to keep you informed with our progress. Here is an update of where we stand after our constitutional session has reached its deadline:
Legislature Headed into Overtime
As I write this, today, May 18, is the first day of special session. May 17 was day 121, which is the constitutionally authorized amount of time for the Legislature to conduct its business. Unfortunately, with key pieces of legislation yet to pass and ongoing conference committee negotiations between the House and the Senate on the budget and the Permanent Fund restructuring, it was necessary to go into extra innings.
The House and Senate both adjourned last night and were called back into special session by Governor Walker. During special session, the Legislature is limited to working on items that the Governor has placed on the call. Those items are:
- Operating budget
- Mental health budget
- Capital budget
- Oil and gas tax credit reform
- Permanent Fund Protection Act
- Motor fuel tax
- Broad-based tax
- Opioids prescription and monitoring
The special session has a limit of 30 days, but I am optimistic that we will not require that full time period to reach a consensus. The House Majority and the Senate were supportive of a 10-day extension rather than a 30-day special session; however, with the 18-member House Minority vowing to oppose such a measure, we did not have the support to meet the two-thirds vote requirement.
I regret that we were not able to finish on time, but leaving these items on the table for another year – burning through our savings at a rate of $8 million per day and kicking the can down the road – is not an option we are willing to accept.
How We Got Here
The bottom line is that the House supports a complete, fair, and comprehensive plan that solves our deficit this year. Meanwhile, the Senate is supportive of a plan that only utilizes the most regressive option, restructuring the Permanent Fund. This plan leaves over a $500 million budget hole. In order to fill that hole, the Senate plans on an additional $500 million in cuts to, as yet, unidentified state services. The problem with that approach is that both the House and the Senate are having difficulties finding large additional cuts from a budget that has been cut 44 percent since FY2013. In rural Alaska, we need a functioning marine highway system, a good education for our children, plowed roads, maintained ports and harbors, and robust fisheries management; furthermore, expert testimony has clearly shown that cuts result in more job loss and detriment to the economy than a broad-based tax.
The House passed its comprehensive 4-pillar plan to the Senate over a month ago. The Senate voted down the income tax and gutted our oil and gas tax credit reform bill, HB 111, dismantling two pillars of our plan. At the same time, the Senate included an additional $288 million appropriation to oil companies for tax credits. Given that the Senate did not pass any form of a broad-based tax or a strong version of an oil and gas tax credit reform bill, we will not support this large payment to oil companies.
The House does not feel that a “Permanent Fund restructuring only” plan, coupled with irresponsible cuts to essential services, is fair to Alaskans, and specifically to those living in the rural areas of our state.
Conference Committee Appointed on Operating Budget:
Last week, the Senate did not rescind its changes to HB 57, the operating budget, and both bodies appointed members to a conference committee to negotiate and reach a compromise.
The House appointed Representatives Seaton (Chair), Foster, and Pruitt, while the Senate appointed Senators Hoffman (Chair), MacKinnon, and Olson to the committee.
The appointment of this committee marks the beginning of intense negotiations on the differences between the House and Senate budget numbers, as well as the initiation of what is known as the 24-Hour Rule. Once the conference committee has been appointed, this rule comes into effect and allows bills to be heard more quickly. Normally, a 5-day notice period is required prior to a bill hearing, but the 24-Hour Rule allows for a hearing with a 1-day notice instead. This allows concessions to be made quickly and expedites the negotiation process.
Senate Votes Down Income Tax:
After several hearings in the Senate Labor and Commerce Committee, HB 115 was pulled without any consideration of amendments, and was never heard in Senate Finance.
Instead, it was placed straight on the Floor on May 12 to be voted down 4 yeas to 15 nays. Unfortunately, by failing to pass this measure, the Senate’s budget is left with more than a $500 million hole this year. This bill is part of the House’s four-pillar plan and a responsible move towards getting Alaska on a path of fiscal sustainability.
We are disappointed with this action to say the least as it results in a massive loss to our savings and furthers Alaska’s recession by creating more uncertainty.
The proposed tax would be the 4th lowest in the nation and, currently, Alaska is the only state in the country without a broad-based tax.
Capital Budget in the Hands of the House:
As far as budgets go, there isn’t a lot left in this one. What used to be a very large budget has been whittled down in recent years to about $123 million of state participation. That amount will leverage about $1.2 billion in federal funds for infrastructure projects. While a bare-bones capital budget is necessary currently, part of the reason we need a broad-based tax is so we can one day have a robust construction budget again. A healthy capital budget is a massive stimulus to jobs and the economy.
I was very pleased to see that the $22 million for the replacement of the Tustumena remains in the Senate’s version of the budget. This amount will leverage another $222 million in federal funds, bringing the total funding for the new vessel to $244 million.
The capital budget is currently being considered in the House Finance Committee.
The delay of the Tustumena’ s return to service until July 18th and the corresponding cancellations in service from Homer to Seldovia, Port Lions, Ouzinkie, Kodiak, and Old Harbor perfectly illustrate the need for a replacement vessel.
There are currently only two AMHS vessels that are certified for cross-gulf operation and the Tustumena is one of those; unfortunately, it is also 53 years old, which increases the cost and frequency of repairs. We need a vessel that can provide dependable access in and out of our communities.
The Alaska Marine Highway System (AMHS) announced on May 9th that Coastal Transportation, Inc. will assist AMHS customers impacted by the delay of the M/V Tustumena. Coastal Transportation, based in Seattle, will carry cargo on an “as able basis” from Homer and Kodiak, to Aleutian Islands destinations, at the same cost AMHS charges. Unfortunately, Coastal Transportation is prohibited from carrying passengers.
AMHS customers attempting to rebook their cargo with Coastal Transportation should let Coastal Transportation agents know they are displaced AMHS customers to ensure they receive the AMHS rate. Coastal Transportation can be reached at 1-800-544-2580 or 206-282-9979.
You can view the press release from the Department of Transportation and Public Facilities here:
Please stay patient, informed, and engaged. We are in active negotiations with the Senate and I am hopeful that we can reach a compromise soon that is responsible to you, my constituents. I will be in touch with more information as things change.
Also, feel free to reach out to me with any suggestions or concerns you have. Whether your thoughts are on the budget, new revenue, fisheries or transportation issues, or something that is important to you and your family, I’m here for you and will always endeavor to work on your behalf.
State House Representative for District 32
Serving Kodiak, Cordova, and Yakutat