| March 25, 2016
Southeast Spotlight: Spring News
I hope you have been enjoying some spring sunshine. We’re coming into the final weeks of session and I wanted to give you a quick update on what’s been happening in the halls of the Capitol.
Our State operating budget has been considered by both the House and Senate, and now is poised for the appointment of a conference committee to consider the differences between the two versions. I am still concerned that both the House and Senate versions of the bill cut about $200 million more out of state spending than the Governor proposed in his budget, and do not include critical items such as early childhood education, senior and disabled benefits, or education programs such as Online with Libraries (OWL), the Alaska Learning Network, and Teacher Mentoring. These cuts will have negative effects on Alaska’s economy. According to a study being produced by Gunnar Knapp from the University of Alaska Anchorage’s Institute of Social and Economic Research (ISER), this could result in the loss of up to 3,400 more jobs than the $100 million proposed to be cut from the budget by the Governor.
A bill moves forward (HB 280)
Earlier this session, I introduced HB 280. This week it was heard and passed out of its first committee of referral, House State Affairs. HB 280 allows for teachers, Troopers, firefighters and other public employees to choose either a defined contribution retirement program or a defined benefit program. The bill is written so that it saves the state money while still allowing for employees to choose the type of retirement that works best for them. A defined benefit pension takes time to earn, but rewards public service by paying a guaranteed monthly benefit and, for long-term employees, health insurance. An individual defined contribution account is portable from one employer to another, and flexible in how it can be used, but provides no guarantee of portfolio earnings. A few years ago, Alaska beefed up oversight of the pension system to head off any new surprises. HB 280 keeps these smart reforms, making Alaska pensions stronger than ever.
Anchorage Legislative Information Office
This past Thursday, March 24, 2016, Judge McKay declared the lease at the Anchorage Legislative Information Office invalid and illegal (ADN story here). I have long been in favor of pursuing alternative accommodations for the Anchorage offices, and I welcome Judge McKay’s findings. It is time for the legislature to find more suitable space.
Upcoming bill hearings
This week will be a busy one for our office. Now that the budget is through most of its process, other bills are being heard. I have two bills up for hearings.
• HB 292 allows municipalities to make an optional contribution to the Alaska Marine Highway System fund. The Alaska Marine Highway System (AMHS) is the lifeblood of coastal communities. It facilitates commercial, social, and cultural development and exchange among these communities, with an influence that extends far inland. Recent years have seen a decline in funding for AMHS, the effects of which have been acutely felt in communities around Alaska. HB 292 provides a mechanism by which municipalities may make voluntary contributions to the AMHS fund in order to support services that so directly impact their existence.
• HB 24 extends the use of Qualifications-Based Selection (QBS) of design professionals to municipal and non-profit organizations receiving state funds. The QBS process allows for the selection of design professionals based on the qualifications provided by the hiring company or individual. Using QBS to choose design professionals is similar to the way in which we, as individuals, consider the qualifications of a medical professional when selecting a doctor, or legal experience when selecting a lawyer. Use of the QBS process will result in public projects that are better and more efficiently designed. Both state and federal projects have used QBS, with great success.
We have only completed half of the budgeting process
Now that both the House and Senate have each passed a version of the operating budget, it is time to complete the process by identifying how we pay for that budget. Discussions between the House Majority and Minority are in the early stages, but it is important that we have as many tools on the table as possible to work with.
The Governor has proposed a multi-faceted plan that includes reducing the budget by $100 million (discussed in more detail above), restructuring the permanent fund, adding a broad based income tax, addressing out-of-control oil and gas tax credits, and increasing other taxes such as tobacco, alcohol, mining, fisheries, motor fuel, and tourism. Many of the bills have had hearings (except the income tax proposal), but so far, the only bill that has been moving is one of the permanent fund restructuring options (SB114 by Senator Lesil McGuire). Representative Seaton has also introduced an income tax and credit bill, HB 365. HB 365 establishes an income tax based on 15% of an individual’s federal tax, but allows the permanent fund dividend to be used as a refundable tax credit to pay for an individual’s state tax liability.
Some combination of the pieces above will be needed for us to make substantial progress in addressing our fiscal gap. A successful outcome of this legislative session will be establishing a solid trajectory toward a sustainable future for all Alaskans.
If you haven’t done so yet, please don’t forget to apply for your 2016 Permanent Fund Dividend. The deadline to apply is March 31. You can apply online at http://pfd.alaska.gov/, or call the Permanent Fund Dividend office at 269-0370 to find your nearest location and fill the application out by hand.
Please contact my office for additional information about any of the issues discussed in this newsletter (or anything at all).