Valley legislators downplay expectations for second special session

WASILLA — Some local state legislators say that Permanent Fund reform, taxes and other measures likely won’t pass the legislature this July.

On June 19, Alaska Gov. Bill Walker said he was calling the Legislature back for a second special session July 11. Walker’s move came the day after legislation designed to restructure the Permanent Fund Dividend earnings reserve failed to come out of the House Finance Committee by a 5-6 vote.

The measure would have capped Permanent Fund Dividend checks at $1,000 and used the remainder to bridge an estimated government funding shortfall brought on by slumping global oil prices.

The proclamation for the session sets the Permanent Fund measure, a bevy of tax measures and measures relating to oil and gas production tax for the agenda.

Most legislators interviewed said they likely wouldn’t vote to restructure the Permanent Fund if it came to the floor.

The two legislators on the House Finance Committee, Rep. Lynn Gattis (R-Wasilla) and Rep. Mark Neuman (R-Big Lake), even found themselves on opposite sides of the vote that kept the Permanent Fund bill in committee, though their positions on it weren’t that far apart.

Neuman, one of five committee members who voted in favor a floor vote, said he would have voted against it on the house floor given the chance.

“I do not support using the PFD at this time,” he said. “We don’t need it. We don’t need to use it now.”

At the same time, Neuman said he felt a floor vote could potentially have prevented the third special session underway.

“The thing of it is, Gov. Walker’s going to call us back,” he said. “He told us he was going to call us back until we bring it (the permanent fund legislation) bring it to the full body for a vote.”

At the same time, a floor vote would have given representatives the chance to put their objections to the bill on record, Neuman said.

“Every legislator should vote on this, first off,” he said. “I think that every legislator should want to vote on it to show where they stand.”

Neuman opposes limiting the PFD because he says the government has enough savings to survive the upcoming budget year. Combining the Constitutional Budget Reserve, worth about $6 billion, with the balances for the state’s general fund, capital budget and other funds puts the total balance at $10.4 billion in revenue reserves this year, according to a budget talking points memo provided by Neuman’s office.

“We’ve got about $14 billion,” he said. “After we pull out the draw for this year’s budget, we’ll have over $10 billion in reserves.”

The reserves are big enough to resolve the shortfall without needing to use the reserves, Neuman said. He also said recent moves by rating agencies to downgrade the state’s credit rating likely would not have a significant impact on the budget going forward.

Gattis voted against moving the bill out of committee.

“I think it’s not ready for what I would consider prime time,” she said. “I think folks in the Mat-Su, who I represent, do not think we have made enough cuts in government so that they can donate to the largesse of the government.”

Committee rules allowed the committee to take action against the bill without a floor vote, Gattis said.

“A part of me is challenged with knowing that I did not allow my colleagues to vote on that on the floor, but held it up in committee,” she said. “That’s what we do with any bill that we don’t think is ready or right.”

Legislators repeatedly raised the specter of further cuts before any action on limiting the PFD could be taken. Rep. Wes Keller cited figures from the Kaiser Family Foundation showing Alaskans had the highest per capita expenditure ($15,470) by any state government in the United States for fiscal year 2015. Even though Alaskans don’t pay any state income tax or sales tax, that equates to the highest taxes in the nation, Keller said.

“That’s not free money,” he said. “That’s money that comes from the development of the state’s natural resources.”

More cuts are necessary before taxes or PFD changes are considered, Keller said.

“We need to cut, cut, cut, cut,” he said.

Legislators also pointed to communications with constituents, which showed that voters in their districts oppose changes to the PFD checks. Rep. Jim Colver (R-Palmer) said communications against any PFD change started from the moment the bill was introduced.

“I listen to my constituents, I care what their opinion is, and they said don’t mess with my dividend pretty overwhelmingly,” he said.

Hughes said she opposed PFD restructuring on slightly different grounds. An alteration to the amount of the PFD would constitute a second shock to the economy on top of the oil slump, which could do more harm than good, citing an analysis by state economist Gunnar Knapp.

“The two worst things the legislature can do are: one, do nothing, or two, do everything at once,” she said.

Instead, legislators should adjust gradually, Hughes said.

“It’s a couple-year process,” she said.

Alaska senators Charlie Huggins, Bill Stoltze and Mike Dunleavy did not return calls seeking comments for this article, nor did Rep. Cathy Tilton.

Contact reporter Brian O’Connor at 352-2270, brian.oconnor@frontiersman.com, or on Twitter @reporterbriano.

This story has been updated to reflect the correct spelling of Rep. Tilton's name.