Legislators hurry back to Juneau, hopeful for a budget deal

Alaska State CapitolThe Alaska State Capitol as photographed in March 2017. (Photo by gillfoto/Creative Commons)

Legislators from the House and Senate are being told to be back in Juneau by Thursday as a budget deal appears to be materializing. It’s not just talk, either, as the operating budget conference committee closed out some big items on Wednesday.

Republican and Democratic legislators attending a bill signing in Fairbanks on Wednesday confirmed their marching orders to return to the capital by Thursday. They said a budget deal could come together as early as Friday.

Senate President Pete Kelly was even more bullish with the Juneau Empire, telling reporter James Brooks, “I think we, the Senate, should be done tomorrow. If it hits the floor, we’ll be done tomorrow.”

This coincides with the work done by the conference committee on the operating budget, which closed out some big items at its Wednesday meeting. So far the committee has limited its meetings to smaller, less controversial items. They saved big items like the University of Alaska funding, K-12 education and unallocated cuts as leverage.

Many of the big-ticket items closed out at Wednesday’s meeting were also in the all-or-nothing budget rushed through by the House Majority last week. House Majority members said their budget included the latest from negotiations and that appears to be the case.

Here’s a rundown of the highlights:

• The committee cut the University of Alaska budget by $8 million. The House budget included this number. UA President Jim Johnsen said it would “severely impact” UA services. The Senate has put forward $5 million for UA deferred maintenance, but some legislators are quick to point out that it’s not the same as operating budget funding.

• The committee also cut $15 million from Medicaid. This is part of the anticipated savings under the Medicaid reform bill, Senate Bill 74, authored by Senate President Pete Kelly in 2016. That cut was also included in the House budget.

No decisions on education funding, but it could be close. The committee initially included the education budget on the agenda, but bumped it at the meeting. The House budget avoided any direct cuts on K-12 education.

• The across-the-board cuts to personal services the Senate introduced as leverage appeared to be just that. The committee sided with the House and rejected some $16 million of cuts the Senate spread across various services. This was where the Senate included the infamous cut to the Pioneer Homes, though Senate Republicans swore up and down that’s not what they intended.

• The one unresolved item of the Health and Social Services budget is $153,000 the Senate wanted to cut from abortion services. The committee moved to restore the money, but House Minority member Rep. Lance Pruitt objected and the item was left open.

The budget included nearly $2 million for per diem during the first 121 days of the session. The conference committee didn’t open funding for special session, which the Legislative Affairs Agency ballparks at $30,000 per day. At 35 days in special session, the Legislature has racked up more than an additional $1 million in costs.

Funding the budget

A budget would avert a government shutdown on July 1, but it leaves the state without a fiscal plan moving forward. Gov. Bill Walker and legislators had hoped to get something into place that would bolster state revenues. That included the restructuring of the permanent fund at the very least.

But now, the Legislature is likely poised to cover the budget gap with an unstructured draw from the permanent fund earnings reserve. It could tap the Constitutional Budget Reserve with the help of House Republicans.

It’s a topic covered today in reporting by KTOO’S Andrew Kitchenman, who caught up with Alaska Permanent Fund Corporation CEO Angela Rodell. Rodell and others have expressed concern about how varying year-to-year draws could hurt the corporation’s ability to manage the funds effectively.

“Part of my concern will be, if (the permanent fund restructure) doesn’t pass, … the unknown quality of how much money they’re going to use,” she told Kitchenman. “Because under the current construct, they’re allowed to take and to appropriate as much as they need out of the earnings reserve account.”

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