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Dems, GOP cutting deals early this year

Legislators from both sides look for leverage to move money in and out of budget reserve

Posted: Sunday, January 11, 2004

Majority Republicans will have to head to the bargaining table with Democrats early this session as lawmakers return to the Capitol on Monday for the second year of the 23rd Alaska Legislature.

In a controversial move last year, Republicans were allowed to tap into the state savings account, the Constitutional Budget Reserve, to balance the budget without support from minority Democrats.

It typically takes a three-quarters majority vote in both bodies of the Legislature to tap into the fund. But Democrats complained that Republicans had exploited a loophole in the state Constitution.

Last year Republicans added a provision to the state public works bill moving $260 million out of the earnings reserve of the Alaska Permanent Fund, which is used to pay annual dividend checks, and into the $27 billion principal of the fund, which cannot be spent.

Making the money unavailable for spending made it appear as if the government had spent less than in the previous year. This allowed Republicans to invoke a clause in the state Constitution that says if spending is lower than in the previous year, it takes only a majority vote to tap the budget reserve.

But now they must get a three-quarters majority vote to move the money back into the account, giving Democrats a bargaining tool.

The Legislature is mandated to balance the budget. Democrats, who hold a minority of the seats in the House and Senate, have used their votes in past sessions to negotiate with Republicans on various issues.

"It was an absolute shell game," said Democratic Rep. Beth Kerttula of Juneau. "The one thing you really shouldn't screw around with is the process."

Kerttula said she would vote to move the money back if Republicans prevent future manipulation of the law.

"We're prepared to discuss the issue with the minority," said House Speaker Pete Kott, an Eagle River Republican.

He said negotiations already have begun with House Minority Leader Ethan Berkowitz, an Anchorage Democrat, on what it will take to get Democrats to agree to return the money to the earnings reserve.

But Kott said he would not agree to overturn Gov. Frank Murkowski's veto of the state Longevity Bonus Program, which paid monthly checks of up to $250 to about 18,000 seniors. Berkowitz, along with other members of the House, has prefiled House Bill 352 to reinstate the program.

Republicans also will need Democrats' votes at the end of session to balance the fiscal year 2005 budget. Kott said Republicans could put off returning money to the earnings reserve until the end of session.

"But then you're going to be looking at two three-quarter votes at the same time and that really muddies up things tremendously," he said.

Juneau Democratic Sen. Kim Elton said his support of the proposal has nothing to do with politics.

"The size of the senior economy is huge," Elton said. "One out of every five dollars spent in Alaska is a result of the senior economy and when you take away the Longevity Bonus, which in some cases can be up to $500 a month in a family, what we're doing is we're forcing people to make a decision and that decision is do they stay in Alaska or do they move someplace cheaper ... and take their retirement income, their investment income, their health insurance dollars and spend it somewhere else."

Juneau Republican Rep. Bruce Weyhrauch said he expects Democrats on Tuesday night to demand reinstatement of the Longevity Bonus. Murkowski will give his State of the State speech to a joint session of the Legislature that night.

"They are going to stand up and they're going to want to override the governor's veto on the Longevity Bonus," Weyhrauch said. "Well, that will make great political theater, but it doesn't address where you're going to get the money."

Weyhrauch said he plans to focus this session on spurring resource development.

He said he will introduce a bill that would allow the Alaska Gas Line Authority to borrow money from the Alaska Permanent Fund to pursue construction of a natural gas line.

"It makes sense to me to have that state financial resource available to the in-state gas authority if we can use it," Weyhrauch said. "Under a plan like that it would be limited to simply allowing the pipeline authority to borrow money from the Permanent Fund Corporation if it met the corporation's fiduciary duties to have a return on the investment for the benefit of the public."

Weyhrauch also said he will introduce a proposal he calls the "Alaska Resource Kicker," which would tie dividends paid by the Alaska Permanent Fund to resource development. If resource development goes up, dividends go up. If it goes down, dividends go down.

Weyhrauch said he is working with the Permanent Fund Corp. and Department of Revenue officials to determine the key economic indicators that would show the health of the Alaska economy.

Other bills to watch for this session:

• Elton said he soon will introduce bills that would help marketing for salmon harvesters, require identification of farmed salmon on restaurant menus, and mandate labels identifying genetically modified fish.

• House Joint Resolution 26 and Senate Joint Resolution 18 would change the way dividends are calculated by using an endowment method for managing the Alaska Permanent Fund. Some lawmakers have proposed using some of the earnings, which are used to pay dividends, help pay for state government.

• Senate Bill 242 would establish the Alaska Gaming Commission to generate revenue through gambling and to regulate gaming.

• Senate Bill 246 would strengthen laws for hate crimes based on race, sex, color, creed, physical or mental disability, sexual orientation, ancestry or national origin.

• House Joint Resolution 31 would set aside $15 billion from the $27 billion Alaska Permanent Fund and divide the rest up to every eligible man, woman and child in the state.



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