With 10 days left, the Legislature still has a lot left to do

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It’s Day 112 of the session and there’s just 10 days left before the end of the 121-day legislative session. Things are kinda starting to come together but there’s still a long way and it’s looking more and more likely that some combination of extra hours or a special session will be needed.

Here’s a rundown of some of the big to-dos left on the Legislature’s agenda:

The budget

Eight days after the process ran off the rails, the House is underway with another go at passing the operating budget today and they’ll still need to get through the several dozen Republican-sponsored amendments. Suffice it to say, this has certainly thrown a wrench into the Legislature’s hopes of being done by Day 121. The Legislature can extend an additional 10 days on a two-third vote in each chamber (two-thirds of the full Legislature is needed to call a special session) or leave it to Gov. Mike Dunleavy to call a special session. The budget is the one must-pass piece of legislation and failing to pass one by July 1 would lead to partial shutdown of state government, which legislators have flirted with in recent years.

Aside from the process, the big unresolved questions that remain are the use of federal funds (which may already be complicated with the arrival of the federal guidance), the potential overdraw from the Alaska Permanent Fund and, of course, the dividend.

The House operating budget doesn’t include a dividend and neither does the one that the Senate has begun working through. The House budget seems to be an attempt at at least setting aside some money for a dividend by swapping in federal funding, which is part of the problem as it looks like they’ll be getting the funding in two chunks as opposed to one lump sum. The Senate budget, meanwhile, is more of a straight-forward attempt at putting together in what seems like service of making the point that the state’s budget actually balances without a dividend (a particularly good pitch to wealthier districts opposed to an income tax).

Part of the debate when it comes to dividends is just what stomach the Legislature has for overspending from the Alaska Permanent Fund. While some have pointed out that blaming the dividend for the overdraw from the Alaska Permanent Fund is a matter of framing the dividend as the last thing out the door, it doesn’t blunt the fact that overspending is overspending. In very rough numbers, every billion dollars the Legislature spends out of the fund will result in $50 million less every year forever in returns, which means larger deficits and less money to go around. The Senate’s version of the operating budget proposes moving $2 billion out of reach of legislators while the House budget doesn’t currently contain such a transfer.

That’s all to say that the House and Senate still have quite a bit of distance between them when it comes to the budget. Typically, the budget would already be in the conference committee by now, not only opening up debate on the budget but also moving the Legislature into the more speedy endgame where meetings can be held with shorter notice. It’ll take a significant amount of negotiating to get things to land near the 121-day mark and with little room for error, anything could send it off the rails.

The PFD formula

One of the biggest unknowns for the budget at this point is the size of the dividend. There’s new battle lines that are forming that may shift direction on it this year, but it doesn’t seem like significant progress will be made without a change to the formula.

So far, the prevailing course of action has been to ignore the formula and appropriate whatever is politically feasible (about $1,000 in recent years) despite the “shall” language in the bill. The Alaska Supreme Court has agreed with the approach, finding that basically all spending laws are subject to appropriation under the constitution’s prohibition on dedicating funds (a finding that continues to have impacts on how things are run, see also: tax credits and school bond debt reimbursement). After an initial run at changing the formula when Gov. Bill Walker and company tripped over themselves to offer real, actual policy budget solutions to a group of legislators who still had savings to burn through (ah, those were the days), no one’s really had any interest in changing the formula. That’s starting to change, though, as some pro-PFD Republicans signal that, actually, they would back down from the dividend fight if only we change the formula. It’s about following the law, they argue… and also maybe the growing realization of just how dire things will get if Alaska really starts to overspend the Alaska Permanent Fund.

So that’s all to say, it’s going to be very interesting to see what happens with Rep. Kelly Merrick’s House Bill 202. The legislation would remove the traditional formula and designate 30% of royalties the state receives from oil and other sources to dividends (if we’re getting technical here, though, you can’t dedicate anything thanks to that Alaska Supreme Court decision). It’s an idea that got some attention several years ago with part of the thinking at the time being that it’d have that bonus effect of linking the health of the dividend, and therefore public interest, to the health of part the economy. One might point out that it’d be the resource extraction part of the economy, but the idea of connecting dividends/taxes to the Alaska economy has some merit (after all, a growing population is generally bad for the state’s budget under the current largely tax-free set up). It also is an attempt at satisfying the “The PFD is compensation for OUR resource” crowd by directly tying resource development to PFDs.

It’s looking like the House is going to give the bill a real shot in the waning days of session with a grand total of four hearings scheduled next week across the House Ways and Means and Finance committees.

Confirmations

With the days dwindling, the Legislature is set to hear the confirmation process on Tuesday in a joint session. As usual, expect to see fights over confirmations to the Board of Fish and the Board of Game in ways that will forever confuse me. There’s also the confirmation of Department of Revenue Lucinda Mahoney and Department of Public Safety Commissioner Jim Cockrell (though I’m not expecting Cockrell’s confirmation to be particularly controversial). The big one will be the appointment of Kristi Babcock to the Alaska Judicial Council. Rep. Matt Claman penned an op-ed against her, writing that it’d concentrate power in Southcentral while ignoring representation from rural Alaska.

Per the Alaska Landmine, Babcock has apparently been attempting to lobby the Legislature for approval… against the Legislature’s rules to limit access to the building:

On Friday afternoon, Babcock was spotted in the Capitol trying to set meetings with legislators to talk about her upcoming confirmation vote to the Alaska Judicial Council. Babcock had permission to be on the third floor (governor’s floor) but not the rest of the building. The Capitol is still closed to members of the public. Several confused staff and legislators took note of Babcock wandering the halls. So loose. Babcock then went to the wrong office. Her last stop was at Representative Sara Hannan’s (D – Juneau) office. Hannan chairs Legislative Council, and probably is not a big fan of Babcock. Hannan then booted Babcock from the Capitol!

An interesting wrinkle on the whole process is the Alaska Supreme Court’s decision in the lawsuit over Gov. Mike Dunleavy’s appointments. While that lawsuit was largely about the disaster declaration bill’s extension of a state law that says all confirmations not acted upon in joint session are rejected, the lawsuit ultimately found that that underlying state law itself was unconstitutional. What that means is if the Legislature fails to take up a particular appointment or a chamber simply refuses to meet in joint session, then the appointments get to stay on the job. In effect, this means the Legislature’s duty to confirm is really now a duty to reject. In reality, it makes for some potential shenanigans with, say, a governor-friendly presiding officer who refuses to meet at all, thereby giving the governor a free pass on their appointments. Just something to keep in mind.