Capital Budget Held Hostage and No PFD...Yet - P.O.W. Report

Thursday, June 13, 2019

Capital Budget Held Hostage and No PFD...Yet

A lot has been happening in the legislature recently and if you haven't been paying attention let's get you caught up:

Midnight Sun:
With just days left in the special session, the House finally passed the capital budget on Wednesday afternoon. They weren’t, however, able to muster the votes to pay for most of it.

The minority Republicans refused to vote for the draw from the Constitutional Budget Reserve because they hadn’t gotten their way on an earlier vote to insert a $3,000 permanent fund dividend into the capital budget.

The Constitutional Budget Reserve requires a supermajority of 30 members in the House to tap into. With all minority Republicans withholding their votes over the failure to add the PFD into the bill, the CBR portions of the bill failed on a 23Y-13N vote.

The amendment to insert the $3,000 PFD failed on 21N-15Y vote.

The budget itself passed with broad support on a 31-5 vote. [...]

The biggest impact will be felt in the Department of Transportation where $915 million of federal highway funding could be in jeopardy because the state’s matching funds would have come out of the Constitutional Budget Reserve. An amendment by minority Republicans get out of the bind by changing the funding to state general fund dollars was soundly defeated.

The $10 million in grants that would go to constructing more drug addiction treatment facilities is also tied to the Constitutional Budget Reserve.

The failure to reach a three-quarter vote also introduces a new headache for legislators: The dreaded “sweep” that automatically transfers many different funds into the Constitutional Budget Reserve according to rules in the Alaska Constitution.

So, the nut's and bolts of what's happening in the legislature is this, there are two main budgets that Alaska makes;

     1. Operating Budget (which is the basic budget needed to run the government) and this was passed [Monday]:

The budget contains around $190 million in reductions from last year’s budget, said to be the largest drop in year-on-year spending in Alaska’s history. A tough-on-crime bill that passed through the Legislature in late May is estimated to cost over $40 million, eating up much of the budget’s savings.

Sen. Bert Stedman, R-Sitka, the co-chair of the Senate Finance Committee, urged passage of the compromise budget, saying work would continue next year to reduce spending.

The Legislature’s version of the budget rejected most of the proposals made by the governor in February.

Some big reductions were made to some major spending areas. The Legislature approved a roughly $45 million cut to the Alaska Marine Highway System, a $78 million cut was made to Medicaid while $5 million was taken from the University of Alaska.

Lawmakers voted to fully fund school bond debt, costing the state over $100 million in the next fiscal year.

A $10.5 billion transfer was also approved from the Earnings Reserve Account (ERA) to the Permanent Fund corpus, the constitutionally protected account of the Permanent Fund that can only be spent by a vote of the people.

2. The Capital Budget (which is the pork-barrel budget that is used to fund many legislative pet projects primarily related to infrastructure and in POW's interest the IFA supplemental budget to help run it).

Now this is where the fun blame game begins as Bryce Edgmon the House Speaker writes on Facebook:

Bryce Edgmon
The House Minority is holding several hundred million in capital dollars hostage by refusing to fund a capital budget unless the State of Alaska pays the largest Permanent Fund Dividend in the history of our state. If we followed the minority’s proposed course of action, we would risk taking dividends away from our children and grandchildren, and this political gamesmanship has the immediate effect of hamstringing the private sector at the height of summer construction season.

And there are a few things that must be understood because the Alaska legislature operates differently than most state governments. The power structure (who controls the house or the senate) isn't dependent on how many Republicans vs Democrats are elected, how Alaska operates is based on who can create the largest "Caucus." Now for the last several years the Democrats (despite having the minority in the house) have been able to get Republicans to betray their party and switch allegiances and side with the Democrats. Of course a gripe that I have is that it's mostly the "Conservatives" who are the ones that seem to always betray the party and side with Democrats.

A great example is Tammie Wilson out of Fairbanks/North Pole who always runs as a 'Conservative" and yet flip-flops to whom ever can giver her the most legislative power--and it works as she is co-chair of the finance committee. 

So, when Edgmon and his caucus plays rhetorical games and blames the "Republican minority" it's a bit disingenuous because his caucus is made up of the minority Democrats who pulled together "independents" and turn-coat Republicans.

Does this make sense so far? 

This is how the House Minority Responds:

Lance Pruitt House Minority Leader
House Majority Chooses to Play Games Over Alaskan Jobs

June 12, 2019 (JUNEAU) – With just two days left in the first special session, the House Majority today rejected a proposal to protect matching federal road construction funds and bypassed another opportunity the pay the Permanent Fund Dividend as is required by law.

Representative Lance Pruitt (R-Anchorage), House Minority Leader, issued the following statement:

“We gave the House Majority every opportunity to use the right funding source on the capital budget today and they did not want to do it. They should have taken this up in March when we asked them to, but instead they decided to play games with the capital budget and pull what they needed from a savings account. We offered amendments today that would have addressed every single obstacle that stands in the way of us finishing out this special session, and those were all turned down as well.”

What's Next? 

As mentioned earlier the Capital Budget will need to be passed, so the Governor will order a "special session" (most likely in Anchorage) to figure out the Capital Budget as well as the PFD question. 

Now here is my prediction and it's an optimistic one, I believe that there will be a compromise on the PFD and it will look something like this; 

We will get a full PFD this year however, there will most likely be a clause that says next year we will only get 1/2 off the PFD to make up for the continued Budget Deficit. 

This is all speculation on my part, however, the tea leaves are pointing to Dunleavey drawing a hard line on a Full PFD (thus full filling a campaign pledge) and the Democrats will be able to get their Capital Budget and also lay claim to a full PFD and pass the puck till next year. 

This is of course complete speculation on my part and time will tell. 

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