MAY 27, 2016
Representing District 17:
Midtown, University, and East Anchorage
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State Capitol Bldg, Rm 430
Juneau, AK 99801
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My Take on the Special Session
Dear Friends and Neighbors,
A recent commentary in the Dispatch from Senate leadership omits some important facts concerning the present legislative stalemate. This omission calls for clarification.
First, while the majorities control 43 out of 60 legislative seats (72% of the entire Legislature), there had been no discussion of a settlement of the FY 2017 budget differences with the Alaska Independent Democratic Coalition (IDC) until at least Day 119 of a 121 day legislative session. Indeed, if you had asked my caucus on the morning of Day 121, on Wednesday, May 18th, how the majority intended to fund its budget, not a one of us would have known. Sure, while it was clear that the ready and available fund sources were the Permanent Fund Earnings Reserve Account (ERA), the Constitutional Budget Reserve (CBR), or some combination, there was still no telling how the majority would pay for government—or if they, in fact, would. (Recall that last year, extended and special sessions occurred because the majority did not fund its budgets).
Oil & Gas Tax Credits
Leadership’s recent opinion piece referred to a “spending compromise”. The proposed budget “compromise” included an increase in spending on tax credits from the Governor’s proposed minimum payment of about $73 million (or it could be as little as $29 million) to in excess of $425 million. This was generous, indeed. Sadly, that $425 million was designated towards unsustainable and unaffordable oil and gas tax subsidies, and is about 10 times more in subsidy pay-out than statutorily required. And, if the amount of $425 million in subsidies it not enough to create worry, the actual sum owed in cash and other subsidies tops $900 million in the current fiscal year. Under the Senate’s present proposal for “reform”, this would remain the third largest item in the entire budget.
To be clear, the greatest reason for the inability to fashion a truly bipartisan compromise in the 11th hour of the session was the failure of the Senate to accept the oil and gas tax subsidy reform reflected in the House compromise plan. No doubt, this was its prerogative.
But, the Alaska Independent Democratic Coalition simply could not be complicit in burdening our state coffers with nearly a billion dollars in future outlays to the oil and gas industry. The reforms sent to the Senate as House Bill 247 were the cornerstone upon which final settlement of the budget could have been had.
The Extended Session
Then, there is the question of the failed extension of the legislative session. The Alaska Independent Democratic Coalition’s failure to concur in a vote to extend reflected a lack of confidence in legislative leadership. Neither chamber advanced a single piece of legislation to either floor which reflected our immediate fiscal predicament—most urgently, reform of the oil and gas tax subsidies. Noteworthy, is the fact that every group, entity and organization that has spoken to our fiscal situation has indicated the need to act—and to act now. Whether the advocacy group represents the left, right or center, none have said that it would be wise to drain $4 billion from the CBR as the Senate and House majorities have seemingly proposed. Again, no one has indicated that this is a prudent path forward, least of all the credit rating agencies. As the Governor noted, spending $4 billion from the CBR would result in a future loss of $200 million per year in potential spin-off revenue. Remarkably, this lost revenue is what many in the majority have apparently espoused. Put simply, the Alaska Independent Democratic Coalition’s failure to surrender billions from Alaska’s savings account on the last day of the regular sessions makes it possible to reach agreement on a comprehensive fiscal plan in the special session that got started on Monday.
The greater fact is this: the funding of the state’s budget with savings would have neutered the special session by stripping away any semblance of leverage the Governor might have on how to fund government going forward and how to genuinely reform oil and gas tax subsidies.
While the threat of a government shutdown is cause for concern, the IDC stands committed to quickly resolving the budgetary impasse. Additionally, the Alaska Independent Democratic Caucus remains steadfast in opposition to needless cuts that would critically undermine the University of Alaska. And, we are strongly opposed to the proposed cuts to public education that crept into the discussion in the waning days of the regular session.
If the Senate truly wishes to work toward sustainability and not to kick the can down the road, the special session is now set up to be a meaningful exercise, not a shallow one.
As always, please call or email with any thoughts, ideas, or concerns.
I Answer to You!
Representative Andy Josephson
State Capitol Bldg., Room 430