Operating budget is largest single-year cut in Alaska history

State did no awareness campaign on new vessel registration requirements

Dear Friends and Neighbors,

Now that the first special session is in the books, I wanted to update you on some of what happened in the final week, as well as what to expect for the upcoming special session 2 on July 8.

For starters, the Legislature passed an operating budget on Monday, June 10 that, at $190 million in reductions, is the largest single-year cut in Alaska’s history. While I am pleased that a government shutdown was averted and pink slips will not be going out, I am less than pleased with what is missing from the budget discussions. I won’t waste a lot of page space beating the drums for new revenue, because the governor has flat out stated he will veto any such proposal. However, in my view, that, along with oil tax reform, needs to be part of this conversation in the future. Leaving that discussion aside, this budget contains some needed smart reductions, some not-so-smart reductions, and some plain bad cuts, while still funding a lot of essential services that Alaskans rely on.

Taking the good with the bad, the marine highway will be operating throughout the winter, but its budget was slashed to the tune of $44 million. And although we were able to fully fund school bond debt reimbursement, the battle over this year’s education appropriation will likely be continued in court.

Legislative Council has given Legislative Legal Services the authority to pursue litigation if the governor does not disburse those funds as required by law on or before July 15. I hope it does not come to that, but it is the Legislature’s job to make laws and it is the governor’s constitutional obligation to execute those laws. Both the Senate and House do not believe the governor is on good legal or moral ground and we are not backing down on this issue. We are hopeful that the administration will release the funds in accordance with law, but if a lawsuit proves necessary, we are working on contingencies to ensure that funding is provided to school districts on-time while litigation is underway.

Other notable reductions were $78 million from Medicaid and $5 million from the University of Alaska. One budget item I am proud of is the transfer of $10.5 billion from the Earnings Reserve Account to the corpus of the Permanent Fund, where it can only be spent by a vote of the people. Without new revenue or a real plan in place, locking this money away where it will be invested but not spent is a smart move for future generations.

Now, on to what is not in the budget and what the upcoming special session will address: The Permanent Fund Dividend (PFD).

In the final days of the special session, the House was expecting the Senate to pass over SB 1002, which funded this year’s PFD. However, the Senate could not find consensus on the size of the PFD. Views on this subject vary widely and do not follow party lines. Some legislators are proponents of a $960 PFD, which is where the budget balances, some are in favor of between a $1,100 and $1,600 PFD, while others argue passionately for a $3,000 dividend.

In the Senate, the bill failed to pass 10-8 on June 4, and then again failed 10-10 under reconsideration on June 10. The failure to pass under reconsideration effectively killed the bill and the House was left without a vehicle to address the PFD; however, had the bill passed the Senate, I believe there was consensus for a $1,600 PFD in the House. We always work hard to get our business done without the need for any special sessions and I’m sorry that did not happen. However, the discussion and debate we are having right now over the future of dividend, the fund itself, and how those fit into our overall fiscal picture may be the most important conversation that any Alaska Legislature has had since the fund or the dividend’s inception. The debate, although often painful and heated, is one I believe is necessary for us to move forward as a state.

I understand how critical the PFD is to all of you. Whether you use it to buy fishing gear, shop for groceries or clothes, heat your home over the winter, go on vacation, or build your children’s college fund, certainly the dividend is a uniquely Alaskan institution that is an important part of our local economies and way of life. I don’t think any legislator has lost sight of that fact. However, we must ensure that future generations continue to receive a dividend and that our communities remain a good place to live, work, and raise a family; unfortunately, the governor’s plan neglects both of those.

To address the first issue, all of our economists have warned us that paying a $3,000 dividend jeopardizes the future health of the fund and the dividend program itself. The budget balances at a $960 PFD and a $3,000 PFD puts us in massive deficit spending.

Equally as important, is the issue of what kind of a community do we want Cordova to be in 10 or 20 years? Cutting simply to get an operating budget that sustains the PFD calculation neglects many aspects of quality of life such as a functioning marine highway system, healthy fisheries management, a good education for our children, low municipal taxes, affordable healthcare, etc. 

This is the hardest decision I have been faced with down here in Juneau, but in the end, I must favor a more moderately-sized PFD that better protects the solvency of the fund and the dividend, while also preserving the core services that rural, coastal communities need to move forward.

The governor has called the special session in Wasilla and I am unable to comment further about where the work will occur. I will simply say that the location makes very little sense. Mostly, it would be exceedingly expensive to setup all of the electronics and media, support staff, equipment, office space, etc. in Wasilla. All of that is currently in place in Juneau. Finally, the logic doesn’t make any sense, which is that somehow, the underlying issues will change if we meet somewhere else.

This is simply an attempt by the governor to add pressure by convening us in what he views as a hostile environment. However, regardless of where the legislature conducts its work, we are committed to convening and passing a responsible PFD that provides the fall time boost that Alaskans have come to rely on.

It is interesting to note that the governor did not put the capital budget on the call for special session, meaning that it cannot be addressed in any form. Although the Legislature passed the capital budget last week, a portion of its projects did not get funded. To explain, $150 million for important projects used the Constitutional Budget Reserve (CBR) as a funding source, and therefore required a ¾ majority vote. Although the bill passed, the ¾ vote to access the CBR failed, leaving the projects that used that funding source unfunded. This funding is for infrastructure projects critical to moving Alaska forward, but for some reason, the Governor did think it necessary to include it in the call.

On a bright note for Cordova, the capital budget did contain a fully funded $17.7 million appropriation to the Prince William Sound Science Center for construction of new research and educational facilities. 

Please reach out to me with your thoughts on any of these very important issues. Remember, I work for you and I want your opinion, whether you agree with me or not. I will always listen, try to inform my constituents where I can, and let myself be informed.

Boaters Announcement:

I just wanted to be sure that you were all aware that due to last year’s passage of SB 92, the derelict vessel bill, there is a new requirement in law for boats over 24 feet to be registered and titled through the Department of Motor Vehicles (DMV). 

Coast Guard documented vessels only need to be registered, which is $24 for a 3-year period, whereas non-documented vessels will be required to register and title ($44). All the fees will go into a fund to help safely remove derelict vessels across the state.

This really snuck up on people as neither the Department of Administration nor the Department of Public Safety did any awareness campaigns about the new law. Many operators of commercial, sport, and pleasure boats across the state are currently out of compliance. I have reached out to the Commercial Fisheries Entry Commission (CFEC), who is working closely with DMV to craft a letter ASAP to alert permit holders of the new requirements. All CFEC permit holders should be getting something in the mail soon. In the meantime, I have reached out to the troopers to discuss the issue. I have some verbal commitments that troopers will be educating the public on the new law this season rather than ticketing, but for those who like to be in compliance, a verbal commitment is hardly comforting.  

The DMV itself seems woefully unprepared for the implementation as I have heard of reports of fishermen experiencing four-hour wait times at DMVs only to be turned away because the DMV ran out of decals. Other reports I’ve heard are that DMV workers are often unfamiliar with the law and are confused about how to adequately assist people with acquiring a boat title and/or registration.

I am currently trying to see if we can get the department to hold off on implementation of the law until DMV is better prepared for the rollout and some awareness campaigns can be conducted.

I’ll keep you in the loop on this issue, but please reach out to me with any questions. I will update you as soon as I know more regarding the special session, the new boat registration, or news on the pink salmon disaster relief funding. 

Sincerely,

Louise Stutes

State House Representative for District 32