Alaska’s budget talks have failed.
Shortly before midnight Thursday morning, the Alaska Legislature adjourned without fixing the state’s $4 billion annual deficit and without providing a budget that keeps the state operating after July 1.
Without a budget, all nonessential government services will end July 1. Alaska’s government will shut down.
To avert that disaster, Gov. Bill Walker has ordered lawmakers into a special session starting 11 a.m. Monday. Topping the special session’s agenda will be the state’s operating and capital construction budgets. Also on the agenda will be bills to reduce or entirely erase the deficit: tax increases and spending cuts.
“It’s not a real bright day for Alaska right now,” Speaker of the House Mike Chenault, R-Nikiski, said at the close of a press conference early Thursday morning.
“I think we were very close to be able to put together a budget. Unfortunately, we just ran out of time,” said Rep. Craig Johnson, R-Anchorage and the House Rules Committee chairman.
The Alaska Constitution limits lawmakers to 121 days of regular session. Lawmakers can extend that limit for up to 10 days with a two-thirds vote of the House and a two-thirds vote of the Senate.
The Senate voted 16-3 in favor of an extension, but the House vote was 26-12, one vote shy. The vote was exactly along the divisions in the House: Every member of the Republican-led majority voted to extend the session and continue budget negotiations; every member of the Democratic-led minority voted to end it and break off negotiations.
Rep. Matt Claman, D-Anchorage, and Rep. Mike Hawker, R-Anchorage, were each absent from the vote.
“We just weren’t able to come to an agreement, and the Senate (adjourned) underneath us,” said House Minority Leader Chris Tuck, D-Anchorage.
Sen. Anna MacKinnon, R-Anchorage and co-chairwoman of the Senate Finance Committee, disagreed with that assessment. She said the Senate was ready to compromise up until the final gavel fell at 10 minutes to midnight.
Impasse in the House
The cause of the budget logjam is a disagreement in the House between the majority and the minority over the state’s $8.2 billion Constitutional Budget Reserve.
With Alaska running a $4 billion annual deficit due to low oil prices, spending some of the reserve will be necessary to balance the budget, even under the most optimistic plans to cut spending and increase tax revenue. Using the reserve requires a three-quarters vote of the House and a three-quarters vote of the Senate.
That vote is relatively straightforward in the Senate, where the Republican-led majority has a 16-4 advantage.
In the House, it’s far less straightforward. The majority there has only 26 members, the minority 13 members, and there is one Representative who is a member of neither caucus. Getting a three-quarters majority requires the support of both Democrats and Republicans.
“The budget is very easy; we’re close,” said Rep. Les Gara, D-Anchorage, on Thursday morning.
The sticking point was House Bill 247, a measure reducing state subsidies for oil and gas drilling and production.
The House passed an ambitious compromise on HB 247 last week that garnered both Republican and Democratic support. When the bill went to the Senate, however, lawmakers threw out that compromise and rewrote the bill.
“The problem really came up when House Bill 247 came back (from the Senate),” Tuck said Thursday morning. “You cannot have a budget fix without a fix to that (subsidy) system.”
The Senate and House versions were so different that coming up with a compromise would have taken time ─ something that was in short supply as the clock neared midnight.
Extension or special session
The House minority had been pushing for a one-day extension of the session, but the Senate rejected that notion. With the clock nearing midnight and the constitutional end of the session, the Senate voted to adjourn, leaving no alternative for the House but to adjourn as well.
Walker had previously vowed to call lawmakers into special session, and Rep. Sam Kito, D-Juneau, said the choice to enter a special session rather than extend the regular session is a strategic one for minority Democrats.
The end of the regular session means every bill not on the governor’s special-session agenda will die.
“They would still be there in an extended session,” Kito said.
Among the bills that concerned Democrats was House Bill 379, which would have eliminated merit raises for state employees when oil prices are low.
He called that bill “a distraction from trying to get a funded and sustainable budget” and said lawmakers “need to focus on trying to make sure the budget is funded and that we have the ability to pay for that budget.”
Tuck added that if the Legislature extended for 10 days and was still unable to reach agreement on a budget, a 30-day special session would have put the end of the session very close to July 1 if negotiations continued to the very end.
House Majority Leader Charisse Millett, R-Anchorage, said the end of the regular session means “a lot of lost work” because every bill on the special session agenda must now be reintroduced, considered by committee, and advance to a floor vote in a deliberate process.
“To not be able to extend for 10 days, which I think was a reasonable ask … is incredibly unfortunate,” she said.
Kito disagreed.
“I don’t know that they really slow down that much because we’ve done a lot of the work to this point,” he said.
“There’s no reason why we can’t get all of the stuff done in a week,” Tuck said.
Shutdown’s effects loom
The Alaska Constitution implies that lawmakers must pass a budget each year, but it does not specifically state when that budget must be approved.
“I think as long as we have a budget passed by … June (30), we have met our constitutional obligations,” Johnson said.
“I don’t know if there’s a time limit on it,” Chenault said.
While lawmakers may not be required to approve a budget until the final day of June, Alaskans will begin seeing the effects much sooner.
Last year, thousands of state employees began receiving layoff warnings as early as June 1. Union contracts require 30 days’ notice before a layoff, and Chenault said state employees should expect to receive those notices again this year.
Even if the special session moves quickly when it begins on May 23, he said he expects the state will need several days of advance planning to prepare, then mail those ‘pink slip’ layoff notices.
If the Legislature doesn’t finish its work by the middle of next week ─ something that may not even be technically possible ─ the pink slips will be in the mail.
If the Legislature can’t finish its work in the 30-day special session, many of those pink slips will become more than just warnings.
Walker speaks out
“The pink slip issue goes beyond state employees,” Walker said in a press conference at noon Thursday at the Community Building in downtown Juneau.
A government shutdown would have ripple effects throughout the private sector, as government contracts are canceled, stores lose potential shoppers, and workers cancel purchases of their own.
“It’s painful to be where we are today, but I guess the point is to make sure we are not here again,” he said.
The governor said the state will begin implementing the plans it made last year, when lawmakers deadlocked over the issue of how to pay for the state budget. On June 1, if there is still no deal, state employees will get notices warning of a layoff in 30 days.
“We have to resurrect that process, hopefully for the last time, to give the proper contractual notice,” Walker said. “It’s a little bit of a disappointment to all.”
This weekend, Walker and a team of experts from Alaska’s executive branch will meet in Juneau to determine the language of the 10 or so bills that will come before lawmakers on Monday as the special session begins.
“If that’s the case, we will have a logjam on Monday,” said the Senate’s MacKinnon, cautioning that the Legislature’s legal and financial divisions will still have to vet all the new language.
There’s only so much staff to go around, and those divisions may be stretched by too much legislation.
“My guess is that if we have anything new, it will take time,” she said.
Walker said he had considered having the special session begin at 8 a.m. Thursday, but after talks with Chenault, decided against that approach.
“We’re going to look at each item on the (special session) call and how we will deal with it,” he said of this weekend’s activity. “We’ve learned an awful lot since we drafted that original legislation. We’re going to take it and look at it based on the facts we know today.”
Walker said it remains critically important for the Legislature to approve a comprehensive financial plan that fixes the deficit. A plan that simply stretches the state’s savings (without action, savings are projected to run out in two years, ending the Permanent Fund Dividend in the process) is unacceptable, he said. Savings are supposed to be used to improve Alaska, not simply for subsistence.
“We need to build a gasline. We need to build a future to this state, and we need to build infrastructure that brings our economy back up,” he said. “It’s a matter of building our future and not just how long we can draw from our savings.”
Contact Empire reporter James Brooks at james.k.brooks@juneauempire.com or 523-2258.
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On the agenda
Here’s a brief list of what’s on the special session agenda ordered by the governor. The initial versions of the bills have yet to be selected, and each will be renumbered for the special session.
- House Bill 256 – operating budget
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HB 257 – mental health operating budget
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Senate Bill 138 – capital construction budget
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HB 245 or SB 128 – diverting a portion of the Alaska Permanent Fund’s earnings reserve to pay for state services
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HB 247 – cuts state subsidies for oil and gas drilling and production
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Establishing an income tax
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Raising the gasoline/motor fuel tax
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Raising the alcohol tax
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Raising mining taxes
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Reducing state subsidies for mining
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Raising fisheries taxes
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Marijuana taxes
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Raising tobacco taxes
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HB 200 – modifying adoption rules
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HB 27 – foster care reform
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HB 374 – reinsurance and health insurance waivers
- Medical coverage for spouses of police and firefighters killed in the line of duty.
