Legislative session may wrap up soon

JUNEAU —The end may be in sight for the 2019 legislative session. Although legislators were still grappling Saturday on a key issue – providing a mechanism for a “structured” draw on Permanent Fund earnings – meetings were at least scheduled that afternoon in hopes of a compromise.

The bill being considered is Senate Bill 26, which passed both the Senate and House last year but in different forms. SB 26 is now in a House-Senate conference committee to iron out differences, but disagreements over how to structure the draw and also provide for Permanent Fund Dividends have delayed resolution.

Legislators have already provided for a one-year draw on Fund earnings in the state budget, which is in a separate conference committee, but putting rules in place for future draws in state law, through SB 26, is considered important.

Aside from SB 26, many of the major issues of the session including much of the operating budget and the 2018 PFD – it has been set at $1,600 – have been agreed.

One other important issue agreed on is a bill providing for earlier disbursement of state funds for school districts, to allow education administrators to better plan their budgets.

If agreement comes on the structured Permanent Fund draw in SB 26 or even if it does not, things could begin to move very quickly this week on a long list of important bills.

For example, lawmakers must still finalize a state capital, or construction, budget, which is in a separate bill. The FY 2019 capital budget is bare bones because of the state revenue shortfall, but a question remains over the fate of Gov. Bill Walker’s proposed list of projects that he proposed to be funded by a state wage, or employment, tax that he suggested earlier this year.

The Legislature has taken no action on the wage tax, so legislators must find another source of funds for the projects, which includes tackling deferred maintenance on school, university and state-owned buildings, along with port and harbor improvements and phase one of Port of Anchorage reconstruction.

Another bill pending that is important to the state’s tourism industry a bill now in House Finance Committee, with a similar Senate bill in the Senate Finance Committee.

The legislation would establish a mechanism for Alaska businesses in tourism to self-fund a marketing and promotion program. For years the state has funded tourism promotion to supplement what the large cruise companies spend on advertising Alaska on their own, but the revenue shortfall has sharply curtailed the state-funded effort.

The Alaska Travel Industry Association, the trade association for Alaska-based tourism companies, has proposed a structured program of fees assessed on tour operators that would be administered by the state, something similar to how the Alaska Seafood Marketing Institute functions to as a state entity to promote seafood with fees paid by seafood processors.

However, the bill has gotten bogged down in the Legislature. Some in the visitor industry, Alyeska Resort as an example, oppose the bill because of a fear that assessments will be made unfairly. The future of the proposal is unclear as this is written.

Another priority bill that faces uncertainty is legislation that would set up a bonding mechanism to pay off about $900 million in accumulated oil exploration incentive tax credits.

Oil companies, typically small independents, invested in exploration have even made discoveries under a state program where part of the costs would be paid for by state, the theory being new oil discovered would create new oil royalties and taxes.

Several discoveries were made under the program but the state had to curtail paying on the credits because of the collapse in revenues in 2016. Unable to be paid, companies had to delay work in further exploring or development discoveries they had made.

The state has recognized this as a liability and a program is in place to pay off the credits, with this to be accomplished by 2024. The idea of the state issuing bonds is that the payoff would come faster, allowing the small companies to get back to work (the large producing companies are not eligible for the exploration incentives).

To get their money faster, the explorers would agree to a small discount on what they are owed, which would essentially pay for the state’s costs of issuing the bonds, state revenue commissioner Sheldon Fisher is arguing. The bill is a priority for Gov. Bill Walker, who argues the state’s reputation has been damaged by its inability to pay on the promises of the tax credit incentives.

Despite this, some legislators have doubts about the bonding, including some would want to see guarantees that the immediate payments will result in exploration and development work being resumed.

While that seems a logical outcome, the companies involved have not made commitments. Also, about half of the $900 million liability is held by banks who loaned money to the explorers and took the tax credits as collateral.

Banks themselves cannot resume the work on stalled projects although, in theory, they could loan more money to the explorers so that they can do the work.

The House Finance Committee was meeting on the bonding bill on Saturday.

There are a number of other bills pending that could be passed by the time the Legislature adjourns including several that deal with medical cost pricing transparency, guarantees that state telecommunications companies will not unfairly take advantage of new federal rules allowing pricing differences for internet services, a bill creating incentives for school districts to improve curriculums, a bill that would help independent pharmacies deal with large companies on pricing of drugs, and legislation allowing property owners to finance energy improvements with payments on utility bills.