Representative Matt Claman's Alaska Matters
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Protecting Your Rights: Serving Sand Lake, Spenard, and Turnagain
May 19, 2017
In this issue:
• Governor Calls First Special Session
• Work Continues for a Responsible Action Plan
• Solving Alaska’s Fiscal Challenges – Status of Bills
• Anchorage Constituent Hours

Dear Friends and Neighbors,

On Wednesday evening, the legislature adjourned without an agreement on a budget, a restructuring of the Permanent Fund, or revenue measures to address the state's $2.7 billion deficit. Shortly after adjourning, the Governor called the legislature into a special session to continue our work. 

Governor Calls Legislature into First Special Session of 2017 

At 9:10 p.m. on Wednesday, Governor Walker signed an executive proclamation calling the legislature into a special session in Juneau to consider eight specific matters:

  • ​the operating budget;
  • the mental health budget;
  • the motor fuel tax;
  • oil and gas tax credit reform; 
  • opioids prescription and monitoring;
  • the capital budget;
  • the Permanent Fund Protection Act;
  • and a broad-based tax.

It is disappointing that the legislature did not complete its work within the 90-day voter-mandated limit or the 121-day constitutional limit. I remain hopeful that we can reach an agreement on a responsible action plan that puts Alaska first. 

Work Continues for a Responsible Action Plan

At the close of the extended legislative session, the House and Senate failed to reach a compromise. The Senate has proposed closing most of the state’s budget deficit with a combination cuts and restructuring the Permanent Fund to use earnings to pay some of the costs of government. Even with extensive cuts—nearly $100 million from schools and the university—and restructuring the Permanent Fund by using about $2 billion in investment earnings, the Senate’s plan continues to carry forward a deficit of hundreds of millions.

Last week, the Senate voted to approve a capital budget that includes using $288 million from state savings to pay down the state’s oil tax credit obligation. This appropriation to the Oil and Gas Tax Credit Fund would use what is left of the Statutory Budget Reserve Fund (SBR). The Senate’s “drain and pray” approach—depleting state savings and hoping for higher oil prices or a considerable production increase—appears hasty and unsustainable. Moving forward, we don’t know how oil prices will change. We can hope they rise, but we can’t count on it.

Economic experts have told us repeatedly that Alaska’s only significant and practical options are a combination of further spending cuts, use of Permanent Fund earnings, and new revenues. While some of these options aren’t easy or popular, we can’t delay making hard choices by spending down our savings and leaving less for future Alaskans.

Alaskans deserve a comprehensive plan to address our financial challenges. During the special session, I will remain committed to a responsible action plan that makes sense for Alaska.

Solving Alaska’s Fiscal Challenges – Status of Bills

Throughout the legislative session, both the House and the Senate have worked on items that the Governor asked us to consider during the special session. Here is an update on the status of those bills:

House Bill 57 – Operating Budget

In March, the House passed House Bill 57, an operating budget with responsible cuts that delivers essential services to Alaskans and protects our economy. Last week, when the Senate did not rescind its changes to HB 57, the House and the Senate each appointed members to a conference committee to begin negotiations on the operating budget.

Since 2013, we’ve reduced state spending by 44%. Those cuts have drastically reduced critical government services including public safety and public education. I am also concerned that continued cuts to the Department of Natural Resource and the Department of Environmental Conservation may show our natural resources development industries that Alaska is not ready and open for business.

Economists agree that Alaska is now in a recession. While the pressure for cuts and cost savings will continue, the public and the members of the legislature have come to realize that we cannot bridge the deficit with budget cuts alone. I remain optimistic that both legislative bodies can compromise on a budget that provides reasonable funding for public safety, public education, and a strong economy.

Senate Bill 26 - Permanent Fund Protection Act

Last month, the House Substitute for Senate Bill 26, which we wrote about in April, passed the House of Representatives. The House version made substantial changes to the Senate’s version of the bill. These changes created a sustainable draw from the earnings of the Alaska Permanent Fund while still paying out Dividends and protecting the principal of the fund. 

SB 26 was sent back to the Senate for concurrence, but the Senate failed to concur. A conference committee of members from both bodies was tasked with resolving the differences between the two versions. Since the committee was appointed three weeks ago, the members have held one meeting to discuss the two versions of the bill.

House Bill 111 - Reformation of the oil tax system

On Monday, the Senate passed their version of House Bill 111, the oil tax credit reform bill. Like the House version, the Senate version eliminates purchasable net operating loss credits and increases the percentage of carry-forward of the losses to 100%. While the House version adjusts the tax system to address issues raised by the shift to carry forward losses, the Senate version includes less of a tax increase and creates additional opportunities for oil tax credits to be used to reduce tax payments below the four percent minimum floor. The Senate version is primarily focused on reducing the purchasable credit backlog, preventing future cash calls, and not changing the current tax system. While the House version is projected to bring in an additional $20 million in new revenue in FY18 and $475 million a year by FY27, the Senate version is estimated to bring in no additional revenue in FY18 and $145 million a year by FY27.

The House failed to concur with the Senate's changes, and both bodies will now appoint members to a conference committee to discuss the bill.

House Bill 115 – The Education Funding Tax

Last week, the Senate failed to pass House Bill 115. While it’s disappointing that the Senate did not approve the bill, there are still bills the legislature can consider that follow the Governor’s call “to increase an existing tax or to establish a new broad-based tax for the purpose of generating new revenues for the State.” For example, I introduced the School Tax Bill, HB 146, which would raise $540 million in additional revenue.

HB 60/SB 25 – Motor Fuel Tax

One revenue generating bill still “on the table” for consideration is the Motor Fuel Tax. Alaska currently has the lowest motor fuel taxes in the country—which haven’t been updated since 1970. The fuel tax proposed by the Governor, which we wrote about in February, would raise the tax on Alaska’s motor fuel by 8 cents in 2017 and 8 cents in 2019. The proposed motor fuel tax increase would generate approximately $80 million in FY18.

HB 60 and SB 25 were both referred to the House and Senate Finance Committees in February and have not received a hearing.

Anchorage Constituent Hours: Saturday from 3:00 to 4:30 at Kaladi Brothers

This weekend, I will be back in Anchorage and available to meet with constituents at the Jewel Lake Kaladi Brothers at the corner of Raspberry and Jewel Lake Road.

Kaladi Brothers Coffee Shop

When: Saturday, May 20th from 3:00 PM to 4:30 PM 
Where: Jewel Lake Kaladi Brothers – 6861 Jewel Lake Rd, Anchorage, AK 99502

I look forward to hearing your suggestions and comments!

As always, please let us know if you have any question or concerns.

Sincerely,

signed: Matt Claman

    Rep. Matt Claman

    P.S. follow me on Facebook and Twitter

Contact Information

(907) 465-4919

Rep.Matt.Claman@akleg.gov

State Capitol Bldg. Rm 405
Juneau, Alaska 99801

www.repmattclaman.com

Contact the Governor

550 West 7th Avenue, Suite 1700
Anchorage, AK 99501
T (907) 269-7450 F (907) 269-7461
EMAIL: Governor Bill Walker

STATE of ALASKA
http://alaska.gov/

State Info (907) 269-5111

Serving the Anchorage Neighborhoods of
Sand Lake, Spenard, and Turnagain

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