At the time of this writing, after exhausting the 121-day session limit, the Alaska State Legislature is 10 days into a special session. Lawmakers continue to try to resolve differences in a number of key pieces of legislation. Having just passed the operating and capital budgets, the key pieces remaining are Oil & Gas Tax Credit Reform and restructuring the Permanent Fund — and some taxes.
Those exact sentences were the beginning of our Legislative Wrap-up — last year. In the words of Yogi Berra, “It’s deja vu all over again.” As we experienced the past two years, the Legislature is again in a three-way tug of war to close out the session.
On May 17, Gov. Bill Walker called another post-regular-session special session to deal with the unfinished business and a few more items. There are eight items on the agenda, most of them well along in the process — but unfinished. The eight items are:
Opioid Prescriptions and Monitoring: This was close to passing at the end of the regular session. It would increase reporting requirements for opioid prescriptions by doctors and pharmacies in an attempt to reduce overdosing and illicit use of prescription opioids.
Motor Fuel Tax: This would increase the motor fuel tax from 8 cents to 24 cents a gallon over the next two years. In addition, the bill creates a transportation infrastructure fund within the general fund and directs motor fuel tax proceeds to be deposited into the fund. Of course, all funds are subject to appropriation and can only be designated for a purpose, not dedicated. AGC and others have long supported this increase for such designated purposes.
Operating Budget: There was clear distinction between the significant operating budget differences of the House and Senate. The House majority opposes most of the budget reductions proposed by the Senate, saying they’ve already cut too much. The House took the governor’s budget that proposed few reductions and added more money back in. The Senate’s budget proposal includes additional cuts, affecting university and K-12 education.
Capital Budget: Similar to record-low capital budgets from the past two years, this year’s budget is no different. It does, however, include more than $130 million in state funds that leverage over $1.3 billion in federal funds for construction projects. Of the $3.5 billion in general fund reductions, our capital budget has taken half of those cuts. The Senate capital budget did repay some of the tax credit debt and reappropriated $50 million from the Alaska Gasline Development Corp. to put toward education, public safety and road maintenance. We’ll see what they do with that.
Mental Health Budget: There was no reason this shouldn’t have passed during the regular session. It is being held hostage with the two other budget bills. This is an annual bill with no controversy, appropriating funds for the operating and capital expenses of the state’s integrated comprehensive mental health program.
Oil and Gas Tax Credit Reform: This issue has undergone extensive hearings and will require more expert testimony. Many legislators are concerned about increasing oil taxes at a time of low oil prices and production operating losses. The Senate has agreed to eliminate the “cashable credits,” and the House wants to increase taxes. Although some adjustments to the credits may be justified to help fill the fiscal gap, the question that must be answered is whether our sole focus is raising revenue for government or ensuring that Alaska has a business climate that supports and encourages private-sector activity.
Permanent Fund Protection Act: The House and the Senate are just $250 apart on this one.
Broad-based Tax: Late in the session, the Senate drew a line in the sand and voted down the House’s proposed income tax on working Alaskans. It believes that a judicious use of savings accompanied by cuts and a few revenue measures is a fiscal plan. There will be a new proposal on the table during this special session, possibly a statewide sales tax.
The Associated General Contractors of Alaska has said and continues to say that a Comprehensive Fiscal Plan needs be adopted to stabilize Alaska’s economy. The plan should be built on a restructure of the Permanent Fund (and dividend). It must also include a balance of new revenue (taxes) and further cuts to the operating budget. What constitutes a balance depends entirely on where you place the pivot point; as a former president said, it depends on what the meaning of “is” is. Any plan that imposes additional oil and gas production taxes and a state personal income tax (with at least 60 additional state employees in a mini Alaska IRS), combined with the failure to provide any cuts to the budget, is a Full Employment Act for Government. It is not a balance.
What they did accomplish:
REAL ID Act Compliance: This Legislation is necessary for state-issued identification to be used for civilians, including construction crews, to be admitted on military bases as well as facilitating Alaskans’ ability to travel by commercial aircraft. The legislation makes a compliant ID an option; if you’re willing to submit all the required personal information, you can get a compliant ID. If you don’t want to provide that information, you check the box for a basic driver’s license.
Transportation Network Companies: The Uber and Lyft bill. This bill clarifies an earlier ruling by the labor commissioner that drivers offering alternative transportation services are independent contractors and not employees, allowing services such as Uber and Lyft to operate in Alaska. Another step by Alaska into the 21st century.
Insurance for Dependents: With this legislation, the state will provide continuing health insurance for dependents of peace officers and firefighters who die in the line of duty. While mandatory at the state level, the Legislature did avoid an unfunded mandate by making it a local option. Conceptually it is a good thing to do, but it should have been done at the contract bargaining table. The Legislature gave up a valuable bargaining chip in upcoming labor negotiations with Public Safety Employee unions.
Next year, the Legislature should get around to other bills of interest to AGC. Workers Comp reform will have dueling bills — one from the administration and one from the Senate put together with assistance from a state Chamber subcommittee. We’ll be involved in a bill that will increase weekly unemployment insurance benefits, where the first-year costs are covered by a federal grant, and we know what happens when the grant goes away. There is also a bill extending the same warranty and lemon-law protection for mobile heavy equipment that is given to licensed vehicles, boats and ATVs.
Fortunately this year the Legislature didn’t pass:
Bad Bill of the Session No. 1 is one that does not solve our financial situation, and it certainly doesn’t strengthen the private sector. In fact, it hurts it. HB14 would require legislative approval for certain large-scale mines. By allowing politicians to overrule the decisions of professional technical staff working for the state and the federal government, it politicizes a process that’s been in place for decades. This legislation would add instability and uncertainty to the permitting process and make Alaska unattractive to investors.
Bad Bill of the Session No. 2 is a certain industry killer. HB 199, the Enhanced Fish Protection Act, is intended to protect any stream that is, or could be, a salmon stream. If you’re doing business around water, it affects you. A bridge over the Yukon River, a walkway near a salmon stream — no matter. You will either need an anadromous permit or an agency finding that this isn’t going to affect fish. This goes way beyond actually protecting fish; it appears to be clearly aimed at stopping development.
An important step in becoming a doctor, the Hippocratic oath is something medical students must take. One of the promises within that oath is, “First, do no harm.” It would be wise if we made legislators take a similar oath: “Do no harm.”
Meg Nordale and Regina Daniels are co-chairs of the AGC Legislative Committee. John MacKinnon is executive director of AGC.