The House passed the operating budget along caucus lines Thursday, April 11, after restoring funding for a State dairy inspector and school bond debt reimbursement.

During the amendment process Wednesday afternoon, the House voted against further cuts to Medicaid, the Alaska Marine Highway System, and fisheries, but it failed, by one vote, to restore funding for dairy inspections.

Rep. George Rauscher (R-Sutton) had offered a $50,000 amendment to maintain dairy inspections, keeping the Havemeister Dairy in Palmer open.  Havemeister is the state’s only commercial dairy.

When that failed, House Minority Whip DeLena Johnson (R-Palmer) and Rep. Geran Tarr (D-Anchorage) offered Amendment 32 to fully fund the $180,000 State dairy inspector, while encouraging the Department of Environmental Conservation (DEC) to establish a fee structure to support the program.

Johnson noted there are two other dairies close to coming online.

“Fully funding this position this year will allow time to figure out how much we can receive in fees.  It will allow for the additional dairies to come online without pulling the rug out from underneath them as they establish their businesses,” she said on the House floor.  “If we really are truly out to cut this budget, we need to figure out a way to do it that makes sense, not just to… cut out people’s jobs.  That just doesn’t make sense.”

“In our small communities, in our more rural parts of the state, these small businesses with 6, 12, 10 employees, they’re so foundational to those economies,” Tarr added.

“The governor has always said that Alaska is open for business… Taking these few dollars away just makes no sense to me,” said House Majority Whip Louise Stutes (R-Kodiak).  “I think we ought to encourage these people and help them become thriving business owners.”

The amendment passed 24-13.  Johnson and Rep. Dave Talerico (R-Healy) joined minority members in support.  House Finance Co-chair Tammie Wilson (R-North Pole) and Rep. Gabrielle LeDoux (R-Anchorage) joined minority members in opposition.  Rauscher, Rep. Mark Neuman (R-Big Lake), and Rep. John Lincoln (D-Kotzebue) were excused.

With limited debate, the House voted to restore half of the $139 million that House Finance cut from school construction and repair.  Municipalities would have had to raise taxes to cover the costs.

The school bond debt reimbursement amendment passed 22-15.  Johnson again voted with the majority, while Wilson and LeDoux voted with the minority.

The House also voted to retain language forward-funding public education in FY 2021.  Rep. Ben Carpenter (R-Nikiski), who offered an amendment to strip the language, argued that it unconstitutionally binds future legislatures and limits their power of appropriation.

Carpenter is echoing the argument of Attorney General Kevin Clarkson.  Clarkson sent a letter to the legislature, published by the Alaska Landmine, arguing that forward funding appropriates future revenue and dodges the governor’s constitutional line-item veto.

Last year, the House passed HB 287, forward-funding FY 2020 public education.  The bill was subject to Gov. Bill Walker’s veto, but he chose to sign it.

House Finance Co-chair Neal Foster (D-Nome) said that the practice has not been ruled unconstitutional because legislatures can always vote to repeal previous actions.

The Legislative Finance Division and the legal arm of the Legislative Affairs Agency both agree with Foster.  Their memos are also available at the Alaska Landmine.

“The point of forward funding is to give school districts a funding level they can count on and budget to,” Foster said.  “Removing it puts school districts back in the position of sending out pink slips because they don’t know if they can afford the number of teachers that they have.”

Most legislators were not swayed by the administration’s/Carpenter’s argument.  His amendment failed 10-27.  Representatives Kelly Merrick (R-Eagle River), Sara Rasmussen (R-Anchorage), and Laddie Shaw (R-Anchorage) joined the majority in opposition.

The FY 2021 forward-funding language will be available to Gov. Mike Dunleavy to veto.

Minority Argues Budget Process Flawed, Calls for PFD Debate

The House adjourned at 7:30pm Wednesday evening with 20 amendments drafted but yet to be offered.

On Thursday, House Minority Leader Lance Pruitt (R-Anchorage) protested moving the budget into third reading, or final debate, without considering those 20 amendments.

Foster said most of the amendments dealt with the Permanent Fund dividend (PFD).

Like Dunleavy’s budget, the PFD was deliberately left out of the House Finance CS.  Foster asked that the question of the PFD be considered separate from the budget and in conjunction with Dunleavy’s PFD bills. 

“We’re budgeting, and it should include the dividend,” argued Pruitt.

“There should be the opportunity of members to present their proposals on the floor,” he declared.  “There are a few of these that are sticky, and we might not want to vote on them.  But we should.”

Pruitt repeatedly cited Rule 39(c) of the legislature’s Uniform Rules, but that rule does not require members to offer all amendments that are drafted.

Several of the amendments were from majority members.

House Rules Chair Chuck Kopp (R-Anchorage) said the majority was simply trying to keep the budget moving.  He noted the volume of unenforceable intent language that the House considered on the first day of budget debate.

“We’re not here to delay.  We’ve got substantive issues that we want to talk about,” Pruitt insisted.  

Minority members couched the move to third reading as a violation of process and transparency.

Merrick said that when her children ask her why she wasn’t able to come home Thursday, she would reply, “Because Mom was in Juneau sitting in a chair and being ignored.”

“What are you afraid of?” Johnson asked Edgmon.  She later apologized.

It was not a cordial start to the budget debate.

“When my voice was disregarded in second reading… I was disheartened,” Shaw reacted.  “I can see that we truly are of a partisan nature on this floor.”

“My district had no representation in this budget,” Shaw claimed.

Wilson said she was tired of hearing remarks like that.  Every item in the budget was subject to amendment in subcommittee, House Finance, or on the floor.

Subcommittees voted on nearly every item in Dunleavy’s budget, though minority members chose not to participate in some of those votes.  Items in Dunleavy’s budget also resurfaced as minority amendments in House Finance.  Most were voted down.

Wilson took note of the red pens minority members were displaying on their desks, a show of support for Dunleavy’s line-item veto authority.

“Believe it or not, we vetted each and every amendment that the governor, the administration, put forward,” she said.

Wilson said it is better public process to discuss the PFD as a separate bill than to vote on it as a floor amendment.

LeDoux, the only majority member to vote with the minority to return to second reading for amendments, said she would support the core services in the budget in light of upcoming debate on the PFD bills.

“I support a full PFD.  My district supports a full PFD,” she said.  “There will be an opportunity to vote for that and lobby for that.”

Rep. Kopp on Cutting Budget for PFD: “Do the Ends Justify the Means?”

Debate on final passage of the operating budget lasted a little over an hour.

“This budget recognizes that we have a deficit, and it makes substantial cuts,” said Foster.  “We are continuing to put downward pressure on spending while protecting core services.” 

As amended by the House, the operating budget cuts $200 million in unrestricted general fund (UGF) spending.  $58 million of that comes from Medicaid savings, while $53 million comes from cuts to urban and rural school construction funding after Wednesday’s amendment.

Other than a $10 million cut to the University of Alaska and the aforementioned cut to school bond debt reimbursement, education was largely held harmless.

“We’ve made education one of our highest priorities,” Foster said.

“While we’ve cut some, it’s nowhere near our revenues,” Rep. Josh Revak (R-Anchorage) said in opposition.

Revak said the legislature is driving a “big-government clown car” toward a cliff, but only seems interested in filling the gas tank.

“We are behaving in a fiscally-irresponsible manner,” agreed Carpenter.  “We are sending the wrong message to Alaskans that we have their best interests in mind.”

But Rep. Gary Knopp (R-Kenai) said the Dunleavy budget was full of cost-shifts to municipalities masquerading as budget cuts.  He added that the $1.6 billion deficit is self-imposed by insisting on a $3,000 PFD.

“I’m happy with the budget.  I’m glad to support it,” he said of the House version.  “We’re trying not to decimate our economy, our communities.”

Rep. Cathy Tilton (R-Wasilla) said the Dunleavy administration has found efficiencies to support its reductions.  She said not cutting to that proposed level tells agencies, “We don’t believe you.  We want you to have more money.”

Many of Dunleavy’s proposed reductions, like a $250 million cut to Medicaid, cannot be realized in the next fiscal year because they would involve changes to law or require approval from the federal government.

Wilson said the Dunleavy administration is free to spend less than appropriated if it finds savings.

“The budget is the maximum amount that government should be spending,” she said.  “We’re not forcing them to spend money.”

“Is this budget perfect?  Ha!  Not even close,” Wilson continued.

She said she is a strong proponent of budget cuts, but it is important to consider how those cuts will affect the economy at large.

“Did we make a dent in the deficit?  A bit, a little bit,” acknowledged Rep. Colleen Sullivan-Leonard (R-Wasilla).  “Unfortunately, not enough has been done.” 

In contrast, Sullivan-Leonard said Dunleavy proposed a balanced budget.

“I’m a person who proudly voted for Governor Dunleavy,” began Kopp before highlighting Dunleavy’s proposals with the question, “What is a true balance budget?”

Is it fair — if you are trying to arrive at a predetermined dividend amount of $3,000 as being the highest value of your State budget and then everything else flows after that — is it fair to say that, in order to get there, we have to break promises, break faith with scores of communities across Alaska by confiscating their petroleum property tax revenue?  The North Slope Borough, the Kenai Borough, Valdez, and other areas.  Fairbanks.  In a moral sense, is it fair to confiscate the fisheries tax revenue that all these points of origin of these state fisheries host the necessary infrastructure and provide the very operational capacity for these industries to exist, so that they no longer can provide for their own public safety, their own roads, their own water and sewer, their own needs?  No, we’re going to pull all that back.  Is it fair to break faith with every bond proposal the State has put out in front of voters and said, ‘We’re going to cover 60 to 70 percent of this bond,’ so the voters diligently made a decision on whether or not they are going to vote for that?…  Do the ends justify the means?

“Are we reducing State spending to arrive at sustainable spending, or are we reducing State spending to provide for a $3,000 PFD?  It’s a fair question,” Kopp continued.  “Is it more important to blindly follow a certain dollar amount, no matter how you get there, or is it more important to arrive at a plan that leaves our vulnerable populations taken care of, our education system strong, our public safety protected, our workforce development healthy, our business community thriving, and doesn’t push us into a recession and delay our long-term economic growth?”

Votes Show Eroding Collegiality

After the operating budget passed, the Constitutional Budget Reserve (CBR) vote failed along caucus lines.  The budget does not pull money out of that savings account, but has “reverse sweep” language that restores money to myriad designated accounts at the start of the fiscal year.

A CBR vote requires three-fourths of each chamber to pass.  It has become customary in recent years for minority caucuses to vote against it as a sort of protest.

However, if the minority were to vote against the provision when it returns to the House from conference committee, it would mean all those funds would be swept into the CBR.  Restoring them would be an accounting nightmare.

The effective date clause of the operating budget passed 31-7.  A “no” vote is effectively a vote for a government shutdown because the budget would instead become law 90 days after being signed by the governor.  July 1, the start of the new fiscal year, is less than 90 days away.

Representatives David Eastman (R-Wasilla), Sharon Jackson (R-Eagle River), Sarah Vance (R-Homer), Carpenter, Rauscher, Tilton, and Sullivan-Leonard all voted against the effective date.  Merrick initially did, but changed her vote under reconsideration.

In a last show of crumbling collegiality, the $168 million mental health budget passed along caucus lines.  It is usually an uncontroversial or unanimous vote, as the budget receives matching funds from the Alaska Mental Health Trust Authority.

Eastman, Jackson, Merrick, Shaw, and Vance voted against the effective date.

The operating budget now goes to the Senate, where budget subcommittees are scheduled to close out next week.

The Senate Finance Committee is currently taking public testimony on the operating budget.  

The committee heard from Mat-Su, Fairbanks, Juneau, Nome, Bethel, Kotzebue, Unalaska, and Anchorage on Thursday.

On Friday, Kenai, Kodiak, and Dillingham will testify from 9am-9:45am.  Glennallen, Seward, and Homer are scheduled from 9:45am-10:30am.  Ketchikan, Wrangell, and Petersburg are between 1pm and 2pm.  Utqiagvik, Tok, and Delta Junction testify from 2pm-2:30pm.  Sitka, Cordova, and Valdez are scheduled from 2:30pm-3:30pm.  Finally, off-net callers are scheduled from 3:30pm-5pm.

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