It’s operating budget amendment time in House Finance, and it was a roller coaster day for public education funding.

The structure of the House majority made the outcome of votes uncertain.  

In subcommittees, majority Democrats were able to outvote Republican chairs, like Rep. Jennifer Johnston (R-Anchorage), who sought deeper cuts to the budget.

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However, those subcommittee chairs are concentrated in the full House Finance Committee.  Though the majority/minority split on the committee is 7-4, eight members are Republicans.  Only two members are Democrats, and one member, Rep. Dan Ortiz (I-Ketchikan), is unaffiliated.

The House Finance committee substitute for the operating budget cuts unrestricted general fund (UGF) spending on agency operations by $28 million.  The CS would spend nearly $750 million more on agency operations than Gov. Mike Dunleavy recommended.

Dunleavy was very much on the minds of committee members who offered amendments Wednesday, April 3.

Rep. Ben Carpenter (R-Nikiski) combined a pair of amendments that removed the forward-funding from FY 2021 public education and removed $139 million for reimbursement of school construction costs in urban areas and the Rural Education Attendance Area (REAA).

“This brings it down to what the governor’s budget proposed,” Carpenter said during a hearing.

“We must resist the urge to add spending to the governor’s budget because we’ll be doing the wrong thing for our long-term fiscal health,” he continued.  “These amendments are a portion of the necessary reductions in State spending outlined by Governor Dunleavy.  The amendments don’t pass judgment on the program it refers to.  All of our State programs are valued by somebody.  But this amendment speaks to our duty to be fiscally responsible, and we must reduce our expenses.”

Carpenter’s generalized comments about State finances and failure to speak specifically to his amendments eventually drew a gentle rebuke from the House Finance co-chairs.

“I think that to suffer this hit, in combination with the likely passage of continuation of the moratorium, is pain beyond which we shouldn’t inflict,” Rep. Andy Josephson (D-Anchorage) said in opposition.

“While it’s true we do need to look for cost savings, this is not a cost savings; this is just a cost shift down to local municipalities,” Ortiz added.  “The impact would be a significant impact on almost all the different school districts and/or communities throughout the state of Alaska.”

The amendments passed.  Johnston and House Finance Co-chair Tammie Wilson (R-North Pole) joined minority members in support.

But in the afternoon, Wilson moved to rescind that action.  Instead, the committee divided the subjects of forward-funding and school bond debt reimbursement.

“I think forward-funding education is a great idea,” Carpenter said in protest. “The problem is this isn’t part of a comprehensive fiscal plan.”

Carpenter’s amendment to erase forward-funding then failed on a caucus-line vote.

Rep. Gary Knopp (R-Kenai) did not offer an amendment that would have cut $30 million in one-time FY 2020 public education funding the legislature passed last year.

Committee Votes to Remove School Bond Debt Reimbursement

Knopp did move to amend Carpenter’s other amendment to remove all funding for school bond debt reimbursement.  Knopp proposed to fund the program at 50 percent.

“It’s less of a cost shift than what the original amendment would call for,” Ortiz said in support of Knopp’s move.  “By adopting the amendment to the amendment, we are continuing to assist municipalities with their school bond debt, albeit at a 50-percent reduced level.”

Referring to Wilson’s HB 106, which would extend the moratorium on school bond debt reimbursement until 2025, Josephson said, “We’re now looking at a ten-year moratorium.  A full cessation of our contribution is more than we need to do.”

He estimated Knopp’s proposal would increase average Anchorage property taxes by $250, as opposed to $450 for Carpenter’s underlying amendment.

“The alternative is to take PFD checks to pay for this spending,” Carpenter argued, ignoring the options of broad-based taxes or increasing oil taxes.  “We either take PFD checks to pay for things, or we pay for them at the local level.”

“It just kicks the can down the road, just not as hard,” he said of the 50-percent reduction.

Wilson also spoke in opposition, saying the Fairbanks North Star Borough has proudly paid 100 percent of the costs of school construction and repair since the moratorium went into effect in 2015.

“I truly believe that the State made it very clear that it was subject to appropriation,” Wilson said.

Knopp countered that the 50-percent cut was a step-down approach.

“At some point, we think this program is worth continuing when funds are right,” Knopp said, also referencing Wilson’s HB 106.

Dunleavy has proposed an outright repeal of school bond debt reimbursement.

Knopp’s motion failed 4-7.  He was joined by Josephson, Ortiz, and House Finance Co-chair Neal Foster (D-Nome).

Carpenter’s underlying amendment eliminating all school bond debt reimbursement and REAA construction funding then passed 7-4.

“This is an opportunity, probably a once-in-a-lifetime opportunity, for us to do the right thing,” Carpenter said.  “Trees don’t die because you prune them.”

Committee Follows Dunleavy’s Lead, Pays Oil Tax Credits With AIDEA Receipts

Some amendments mimicked the governor’s budget moves.

Dunleavy proposed paying $254 million (including $84 million in FY 2019) for oil tax credits from Alaska Industrial Development and Export Authority (AIDEA) receipts.  AIDEA uses that money to invest in private projects.

While the House Finance CS switched the fund source to UGF and limited it to $70 million, Josephson and Ortiz offered an amendment Wednesday to keep the fund source as AIDEA receipts.

“This amendment’s in the spirit of the administration,” Ortiz explained.

“This falls underneath my ‘cheating mode,’” complained Wilson.  “If this is UGF, then that’s where it should be spent at.”

“The question is are we going to play the game that we like to play here, and instead of it being unrestricted general funds, we’re going to take it out of another savings account.  And not just any savings account, but a savings account from the Alaska Industrial Development and Export Authority, which does a lot of projects around the state that they can’t get funding necessarily through the bank,” Wilson expounded.  “This is something that I have never seen us do, and I’m going to assume… that we haven’t done it before because it’s not the smart thing to be able to do.” 

“My votes are to not go into any type of savings,” Johnston agreed.

Carpenter moved to increase the amount to $200 million of AIDEA receipts, despite the fact that $70 million is the projected amount that will be paid to oil companies that don’t participate in a tax credit bond program.

“$70 million does not pay our obligations; it pays a portion of our obligations,” Carpenter argued.

Rep. Bart LeBon (R-Fairbanks) said he was opposed to either amount coming from AIDEA.

“This is the investment bank for the State,” he said.  “To handcuff them and to reduce their ability to make these major investments would be a wrong move on our part.”

“I think we have all heard from Alaskans that they are tired of the legislature taking money and switching funding and, at the end of the day, make it look like we made savings when, in reality, we didn’t,” Wilson concluded.  “I think it’s time that the game stops.”

Though Carpenter’s higher amount failed, the switch to $70 million of AIDEA receipts passed 6-5.  The four minority members joined Josephson and Ortiz in support.

Committee Rejects Cuts to Public Broadcasting, Local Fisheries Taxes

House Finance members offered amendments that matched Dunleavy’s efforts to cut all $3.6 million in State support for public broadcasting.

Carpenter, who offered amendments to eliminate funding for public radio and television, again said he did so because of Dunleavy.

“While public radio may not be a necessity in urban communities, it is a necessity in rural communities,” Ortiz said, noting the use of public broadcasting in emergencies.

Carpenter responded that State funding is the least efficient way to fund anything.

“It will be okay.  We will find a way to communicate,” Carpenter assured without evidence.

The cuts failed 5-6, with Wilson joining the minority.

Wilson then offered an amendment to eliminate funding for public broadcasting satellite infrastructure.

“I just don’t know why we’re giving public money for this particular grant,” Wilson said.

Johnston told her that a similar cut failed in subcommittee.

“Most of this is very much tied to our emergency services.  It’s our statewide system that says if there’s a tsunami or an earthquake,” Johnston explained.

With that information, Wilson withdrew her amendment.

Wilson and LeBon joined minority members in passing a Dunleavy-proposed 50-percent travel reduction for the Office of Public Advocacy.  Similar cuts to the Alaska Oil and Gas Conservation Commission (AOGCC) and the Public Defender Agency failed.

Rep. Cathy Tilton (R-Wasilla) offered an amendment to withhold $28 million in fisheries landing and business taxes from coastal communities.  The State is at a point where it can’t share with communities, she said.

“These are resources that belong to all of Alaska,” said Tilton.

“It’s a problem shift, rather than a problem solver,” Josephson said of the amendment.  “It’s someone else’s revenue.”

Wilson noted that Dunleavy has a bill (HB 65) that would repeal the fish taxes and transfer that money to the State.  Wilson said she would prefer to wait to hear that bill before amending the budget.

Tilton’s amendment failed along caucus lines.

A $100,000 cut to the Alaska Legal Services Corporation (ALSC), offered by Rep. Colleen Sullivan-Leonard (R-Wasilla), also failed along caucus lines.  Sullivan-Leonard argued that ALSC, which provides pro bono services to underprivileged Alaskans, can get funds from federal grants or private donations.

House Finance continued to debate amendments late into the afternoon.  The committee will meet twice a day on Thursday and Friday to consider more amendments.

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