|Protecting Your Rights: Serving Sand Lake, Spenard, and Turnagain|
|June 8, 2016
Dear Friends and Neighbors,
On Monday, the House approved a conference committee version of HB 247, an oil and gas tax reform bill that impacts how much progress we can make in trying to close Alaska’s deficit gap. Shortly after the House voted on oil taxes, the Senate approved a Permanent Fund restructuring bill.
Oil and Gas Tax Reform Bill
HB 247, originally proposed by the Walker-Mallott administration, would create total combined savings and revenue of approximately $500 million for next year (FY17). However, throughout the session, HB 247 was altered in the committee process. A few weeks ago, a bipartisan group in the House agreed to amend HB 247, but the Senate did not agree with those changes. On Monday morning, a conference committee met to reconcile the House and Senate versions of the bill. The conference committee adopted the Senate version with four amendments. According to analysis at $40 per barrel distributed by Representative Paul Seaton, who led the efforts for the bipartisan bill that passed the House, the House version saves the State over $2.5 billion in credits and subsidies by 2022, while the conference committee version loses $37 million by 2022. As the price of oil increases, the State allows fewer subsidies; but those subsidies may increase if the price of oil declines. On Monday evening, the House passed HB 247 by a razor-thin margin, 21-19.
In its current form, HB 247 will have a fiscal impact almost $500 million less than the compromise bill negotiated by members of the House. The Senate version also eliminates subsidies for companies operating in Cook Inlet, but does not eliminate subsidies given to North Slope companies that are losing money. North Slope oil producers will become eligible for the subsidies when oil prices dip below $46 per barrel.
I did not support the conference committee version of HB 247. With removal of the net operating loss provisions that were in the House version, North Slope producers are not helping solve the state’s financial challenges. Under HB 247, Alaska will continue to spend hundreds of millions of dollars in savings to fund oil and gas tax credits and subsidies. The passage of HB 247, if approved by Governor Walker, may hinder passage of a Permanent Fund restructuring proposal because of the continued financial pressure on the State from credits and subsidies.
Permanent Fund Restructuring Bill Moves Forward
On Monday evening, the Senate passed a Permanent Fund restructuring bill by a vote of 14-5.
SB 128 establishes a $1,000 Permanent Fund Dividend for the next three years. After 2019, dividend checks would be based on how much the state collects in revenue from natural resource royalties. Under the bill, part of the dividend payouts will come from oil production rather than from the Permanent Fund principal. SB 128 now awaits action from the House.
The Walker-Mallott administration set the goal for this legislative session: Closing Alaska’s multibillion dollar deficit as much as possible. As Governor Walker said repeatedly, Permanent Fund restructuring is “the most significant piece of fixing the hole.” The state’s multibillion dollar deficit is currently funded from savings. In the budget compromise approved by the House and Senate last week, 75% of funding for the budget—approximately $3.2 billion—came from the Constitutional Budget Reserve. If our savings run out, the state will be unable to pay any dividends.
Throughout this session, I have emphasized the importance of a responsible action plan for Alaska. Restructuring the Permanent Fund is part of the Governor’s multi-part fiscal plan. To date, however, the only parts of the plan that have passed the legislature is a budget with substantial cuts and a multibillion dollar withdrawal from the Constitutional Budget Reserve saving account. Next week, the House will consider tax increases on mining, commercial fishing, and motor fuels. How the House votes on the proposed Permanent Fund restructure may depend on how we vote on these other revenue proposals. As your representative, I will keep in mind your emails, telephone calls, and constituent survey responses as I continue my work to put Alaska first.
Medicaid Expansion Lawsuit
Last month, the House Majority filed an appeal in the Alaska Supreme Court to try and reverse Judge Pfiffner’s decision that Governor Walker has the authority to accept Medicaid expansion. After the Senate refused to participate in an appeal, the House Rules Chair took this action without a vote of the House. In fact, there has never been a vote on the floor about whether to file suit over the Governor’s action. Now, the Walker-Mallot administration has asked the Supreme Court to find that the House Rules Chair cannot authorize the appeal without a decision by the full House because the 14-member Alaska Legislative Council, which originally voted to sue Governor Walker over Medicaid expansion, does not support the lawsuit in light of the Senate’s refusal to participate.
Whether to appeal the decision deserves a vote of the full House. The inaction by the entire body is discouraging because it avoids important public process. I have never supported this costly, losing lawsuit, and believe the State must stop incurring legal fees. A responsible action plan for Alaska does not include an expensive lawsuit against our Governor.
Constituent Meeting this Saturday
Please join me this Saturday, June 11th from 4-5pm at Tastee Freez to discuss the legislative session or other issues affecting our community.
As always, please let us know if you have any questions or concerns.
Rep. Matt Claman
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