Senate pushing back on crime bill, SB54

The prevailing assumption is that the special legislative session will go on for 11 more days until the Tuesday, Nov. 21 limit for the session (special sessions can last 30 days) because of ongoing wrangling over the crime bill, SB 54.

Of note, Thursday, Nov. 23, is Thanksgiving, so one way or another, legislators will be out of the capitol by then. On the fiscal issues, there seems little likelihood that the Legislature will deal with it despite this being the main reason Gov. Bill Walker called the special session. Hearings have been held in both the House and Senate on the governor’s proposed “wage tax,” but the Senate still has little appetite for a new tax.

What lawmakers are focused on now is the crime bill, SB 54. The bill has passed the House (it passed the Senate last year) and senators are now reviewing changes substantial changes that were made in the House last week, including some made on the floor of the House. There’s serious pushback from the Senate, in particular, Sen. John Coghill, R-Fairbanks, who chairs Senate Judiciary Committee, and Sen. Lyman Hoffman, D-Bethel, cochair of Senate Finance.

Coghill, Hoffman, have deep reservations on House-passed SB 54

In a review by Senate Finance of the House-passed SB 54 Friday morning, Coghill major changes made by the House, some by floor amendment, that were without benefit of work by standing committees or fiscal analysis. His concern is that significant increases in “jail time” for minor crimes made in the House, on top of more jail time added by the Senate version (to existing law, SB 91), could add costs to a state budget that is already under strain. Hoffman’s concern is that significant jail time added for low-level “C-class” felonies disproportionately affect Alaska Natives in rural areas, who comprise 17 percent of the state’s population, but who constitute 60 percent of Alaskans in the criminal justice system. Also, Class C felonies are 40 percent of all felonies, Hoffman pointed out. The implication is that the cost impact would be substantial. The outlook is for SB 54 to go to a Senate-House conference committee which will likely happen next week.

Fiscal issue: Senate inclination seems to be “wait it out”

On the fiscal issue, the Senate position, according to discussions with key senators and staff, is to wait things out a bit and watch the revenue situation. Oil production has ticked up a bit, as have oil prices, and that could shrink the projected $2.4 billion defecit for next year and following years. More significantly, the performance of the Alaska Permanent Fund may continue to exceed the Trustee’s target return of 6.5 percent and almost certainly exceed the allowable draw on earnings of 5.5 and 5.0 percent in SB 26, which is still pending.

The Senate’s assumption, we’re told, is that some compromise version of SB 26 will be passed in the 2018 session. Both the Senate and House have passed different versions of the bill but final compromises have to be made. If the Fund performance exceeds targets, as it has in recent years, market value will grow and with it the amount of money a 5.5 percent percent-of-market-value payout would bring to the treasury.

Estimates by the Office of Management and Budget are that this wouldn’t do a lot to shrink the deficit near-term. Longer-term, however, Senate leaders wager that SB 26 revenues to the treasury could erase the deficit within a few years. However, this depends on keeping spending roughly static, and this where there is a rub. Estimates are that the FY 2019 general fund operating budget will require about $350 million in new revenues due to dif cult-to-control or uncontrollable factors, such as rising health care costs. There will be similar annual increases over the next three years, the administration says. The Senate will likely oppose the overall increase in the FY 2018 budget, we’re told, but cutting an increase in health care costs, which are spread through the budget, will be tough. If it can’t be done the Senate will try to cut other programs. That’s where the fight will be. We’re heard this before, of course. Last January, Senate leaders said they would cut $200 million from the FY 2018 budget but when the budget finally passed in late spring the Senate votes weren’t there to do it.