Shutdown averted. House approves key vote on budget, fiscal plan working group

The House floor shortly before the vote on the budget on June 28, 2021.

With less than three days until a government shutdown, the House today approved a key vote on the state’s operating budget that Gov. Mike Dunleavy had argued made it “defective.”

The 28-10 vote approves the effective date on the budget, allowing it to go into effect immediately after it’s signed as opposed to 90 days after it becomes law. Most legislators believed the budget could have gone into effect without the effective date, pointing to decades of legal precedent that Dunleavy ignored, but few wanted to leave it up to the chance (the courts). Instead, they sought to negotiate an agreement with the intransigent House Republican minority to garner the necessary votes, which culminated in the formation of a “bicameral nonpartisan working group” on the state’s fiscal future.

The effective date originally fell four votes short of the 27 needed in the House, but today gained six new votes after a tense-back-and-forth over a secondary agreement in the form of a Sense of the House to continue working a solution on the state’s fiscal woes. As the vote neared, several Republicans protested, arguing that they wanted to vote on the agreement first or, in some cases, argued that they would never vote for it without a full PFD, anti-abortion measures (that had been approved by the House but rejected in negotiations with the Senate) or a blanket rejection of taxes.

“We spent hours, literally hours in the last few days coming up with a Sense of the House, going through your Sense of the House,” said Rep. Kevin McCabe, R-Big Lake. “This is why when you leverage things like this (or the budget deal with the Senate that removed the anti-abortion language) we get angry.”

Rep. Sara Rasmussen missed the first vote due to an excused absence, but was one of the first to commit to becoming a new vote in support of the effective date on the budget. She said the budget process has already included the House Republican minority and that she supported hearing each and every one of their amendments, but said it was too late to reopen the book on the months-long budget process.

“I’m a little bit confused because I know that we had an opportunity for every amendment to be heard. There were no amendments with deep cuts to the budget,” she said. “The sand is gone, the hourglass is empty.”

Ultimately five members of House Republican minority joined the vote: Reps. James Kaufman, Ken McCarty, Tom McKay, Laddie Shaw and Cathy Tilton. Minority Republican Reps. Steve Thompson and Bart LeBon had already voted in favor of the effective date and did so today.

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The House and Senate both adjourned sine die following the vote, bringing an official end to the special session. The budget now heads to Gov. Mike Dunleavy, who can issue line item vetoes or a blanket veto, to be signed. If the governor, refuses to sign the budget or vetoes it, then a shutdown would still occur on July 1.

The agreement

While Dunleavy had sought to leverage the looming shutdown to get legislators to approve of a $2,350 PFD and other budget changes, the Dunleavy-aligned House Republican minority ultimately settled for a non-binding Sense of the House resolution that sets up a “bicameral nonpartisan working group” on the state’s fiscal plan. The group would have equal representation from the minority and majority caucuses in the House and Senate and be tasked with producing a larger fiscal plan ahead of the fall special session, which is currently set to be held in August. Per the letter:

“The working group will be tasked with developing policy recommendations that will provide fiscal certainty for Alaskans into the future through means of achieving a balanced budget and resolving the annual dispute over the Permanent Fund dividend, and will include, but not be limited to, a spending cap, new revenues and spending reductions.”

The agreement requires two public hearings and for the group to present the plan by the start of the next session. An accompanying letter notes that no group is guaranteeing anything specific will be part of the plan at this point. It’s not the first time the Legislature has created additional working groups on the state’s finances. Perhaps this is the time it’ll produce something… or not.

What’s not in the agreement or today’s vote

Still left unresolved is the three-quarter vote needed for the Constitutional Budget Reserve. This vote requires a three-quarter majority of both chambers to tap the Constitutional Budget Reserve in order to fund a handful of items as well as keeping several semi-dedicated funds in place to fund their semi-dedicated programs. The biggest and most immediate impacts will be felt by the roughly 85,000 recipients of the Power Cost Equalization program and Alaska students who qualified for state-backed scholarships. Neither has funding in place for it.

The Legislature’s budget negotiators had sought to spread out the pain of failure for the Constitutional Budget Reserve by tying its passage to half of this year’s PFD (It was cut from about $1,100 to $525) as well as more than $100 million in oil tax credits and a dozen other projects, most of which are focused in the Mat-Su valley. Without the passage of the Constitutional Budget Reserve all of those programs will be either unfunded or partially funded. Just what the House Republican minority requires for those votes is not currently clear, but it’s one of the goals of the fall special session.

House Majority Leader Chris Tuck, D-Anchorage, frequently reminded the House Minority that they still have significant leverage over the Legislature.

“There’s still a three-quarter vote out there. That’s leverage. That is still putting things in play,” he said.

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