AKLEG Day 38: The Dunleavy administration is failing to convince legislators its budget is good for Alaska

The 38^th day of the Legislature felt like one of the first “normal” days of the session thanks in large part to the House finally getting underway with its first House Finance Committee meeting. The Legislature also heard from Sen. Dan Sullivan, who had plenty of praise for Trump, and the budget work continued.

Today is day 39.

‘I would like to think there’s a goal’

The House Finance Committee had its first official hearing on Thursday, the 38^th day of the legislative session, chaired by Reps. Tammie Wilson and Neal Foster (which is still a pretty unbelievable sentence to be writing). The committee had a budget overview from OMB Director Donna Arduin and was met with the same kind of frustrating dead-end answers that senators have been hearing for the last week when asking “Do you know how this budget will affect X service/Y community/Alaska?”

The House Finance Committee, for its part, didn’t seem to need much of a warm up (likely thanks to weeks of informal budget overviews hosted by Wilson and others). There’s plenty of interesting moments from the hearing and Arduin finally gave a bit more justification for the cuts, even if it was the same eye-roll-y answers about efficiencies we can at least see where they’re coming from.

But perhaps the most surprising day came from Rep. Ben “I think I am the Chair and you are done” Carpenter, R-Kenai, who got to the heart of the problem everyone’s having with Gov. Michael J. Dunleavy’s budget regardless of political affiliation: The lack of vision and lack of justification.

Carpenter, who made the case for a Republican majority in an email thread with legislators last year because a “focused and humble team will help enable the success of our new governor and his administration,” said he was particularly concerned about Dunleavy’s proposal to bar municipalities from taxing oil and gas properties in order to seize the revenue for state coffers.

“Do you have some analysis whether this is a net positive gain for the state to eliminate this sharing agreement portion of this? Because the tax is obviously going to have to be made up by the boroughs. So, what does right look like for the state and is this a good thing for the state as a whole? I understand this benefits the state, but it doesn’t benefit the local jurisdictions,” he said. “Where’ s the analysis that shows this is a net gain to the state as a whole?”

OMB Policy Director Mike Barnhill stayed focused on the numbers, pointing out that the net benefit for the state to sweep up about $440 million in property tax revenue would only lead to a net benefit to the state of about $398 million. That’s because of how it’ll impact the municipalities’ ability to fund schools.

“The state’s contribution to these municipalities for schools, under the foundation formula, would go up because their contribution would go down,” he said.

Carpenter didn’t let up, keeping the focus on the big picture.

“As we’re looking at our options here, from the Kenai’s perspective we’ve got $15 million that we’re going to have to come up with. I don’t have any rocks, and I don’t think there are any rocks there that have $15 million hiding underneath them,” he said. “The question is if each one of the boroughs that are affected by this are going to have to raise taxes how is this a net positive gain to the state? I want to see the analysis that says this is a positive way for the state to go as a whole.”

It was a question that other legislators have been asking for the last few weeks and were asking during that meeting—Rep. Andy Josephson later asked about the budget’s impact on the state’s culture only to get a “we’re just focused on the numbers” kind of answer from the administration—but Carpenter put it into the plainest language we’ve heard yet.

Carpenter’s skepticism should be particularly worrisome for the Dunleavy administration, especially with this comment—which he said was sparked by Josephson’s comment about culture—that drives to the heart of the problem:

“This is a policy question and it’s a budget question, we can’t separate the two at this point. The question in my mind is where are we going? And I don’t see a big picture of that, I can’t yet determine whether policy is driving the budget discussion or whether the budget discussion is driving the policy,” Carpenter said. “I would like to think there’s a goal that we’re trying to reach that we can articulate to the public and to ourselves as we look going down the road.”

The lack of justification for the cuts—combined with the insistence that what communities and school districts do in response to the cuts aren’t the state’s problem—are making it incredibly tough for even pro-Dunleavy legislators like Carpenter, who’d presumably want to get on board, to get on board.

Perhaps it’s the sticker shock at seeing Dunleavy’s budget policies—which Barnhill described simply as a full PFD while also “matching expenditures to revenues” without adding any new revenues—in action. While that may be cause for many a liberal and moderate to mock Dunleavy voters in the same way we see people gleefully go after Trump voters disappointed with their tax returns, but Carpenter’s response runs to a more core problem: That there’s simply no evidence that this budget will make a better Alaska.

Would legislators like Carpenter and even bipartisan-minded Republicans like Wilson want to cut the budget? Yes, of course. Would they like to cut it as deep as Dunleavy is proposing? Yes, of course, but only as long as they can have the cover and evidence that it’ll work.

Arduin and the Dunleavy administration’s justification of the budget boils down to a flimsy promise that the economic gains from a more stable budget (that’s still incredibly reliant on volatile oil prices) and a lack of taxes (even though the state’s Revenue commissioner acknowledges they’ll be needed eventually) will more than make up for the devastating losses to state and local government.

Will that evidence materialize with OMB Economist Ed King’s much-awaited report? Perhaps, but it will have to go up against a veritable mountain of schools, local governments, constituents, credit rating agencies and economists who say otherwise.

It’ll ultimately be up to legislators to decide who to trust.

Sullivan praises Trump

Speaking of Trump supporters, U.S. Sen. Dan Sullivan made his annual address to the Alaska Legislature on Thursday. His address capped off a week of annual addresses that included U.S. Sen. Lisa Murkowski and Alaska Supreme Court Justice Joel Bolger.

Sullivan had plenty of shining things to say about the president’s tax plan, his economic policies and his attitudes toward the military and resource development. He said it’s all ignited an economic boom for the Lower 48.

He acknowledged, however, that Alaska has yet to see any benefits of that economic boom.

Senate piles on

Arduin and her budget team didn’t get a much warmer reception earlier in the morning in the Senate Finance Committee, where legislators bashed proposed changes to the Department of Fish and Game, the Department of Natural Resources and the Department of Environmental Conservation. Here’s a quick rundown:

• Click Bishop, a Fairbanks Republican and part-time miner, said he’s concerned about the budget’s plan to shutter a bunch of DNR Recorder’s offices in the name of efficiencies and computer access: “Not all small miners have the ability to have a computer. … You’re going to get some push back for me on this.”
• Both Sens. Lyman Hoffman and Donny Olson raised concerns about cuts to positions that handle wildlife management and subsistence. Hoffman ripped into them for failing to justify the cuts or explain how it’ll impact services: “I think the cart is before the horse. I think those questions need to be answered and adequately addressed. … In the haste of reductions, a critical error in the management of this proposal has been made.” Olson: “What do I tell my constituents?”
• Does eliminating the Ocean Ranger program help with the deficit? No? Then, Sen. Bert Stedman suggests it won’t be a priority for the Senate Finance Committee.

(The Senate Finance Committee is already underway on Friday with its hearing on the Department of Health and Social Services budget, which is where increased fees for Pioneer Homes, the elimination of the Senior Benefits Program and cuts to Medicaid are housed. It’s already going about as well as you’d imagine with Bethel Sen. Lyman Hoffman stating, “You are playing with people’s lives with this budget.”)

Tweet of the Day

Credit where it’s due:

there’s still a lot of houses getting robbed but it does seem that the burglar is getting a little better at cleaning up afterwards #akleg https://t.co/fo5GAOiIsF

— slim riggins (@notarealchris) February 22, 2019