Senator Berta Gardner

April 15, 2015

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Serving Midtown, Spenard, and UMed

State Capitol Bldg. Rm 9
Juneau, AK 99801
 
Phone: 907-465-4930
Call Me: 1-800-331-4930

Sen.Berta.Gardner@akleg.gov
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Governor Bill Walker
Anchorage Office
550 W. 7th Ave, Ste 1700
Anchorage, AK 99501
(907) 269-7450
Gov.alaska.gov
 

Lt. Governor Byron Mallott
Anchorage Office
550 W. 7th Ave, Ste 1700
Anchorage, AK 99501
(907) 269-7460
LtGov.alaska.gov

Countdown to Endgame... or Has It Already Begun?

Dear Friends and Neighbors,

Sens. Gardner and Wielechowski rally to protest devastating education cuts
Sens. Gardner and Wielechowski rally to protest devastating education cuts

           As is often the case around this time in session, many office doors - once left invitingly open - are closed, hushed voices can be heard in the hallways, and decisions about the future of our state are being made.

          With just five days left to go in the voter-mandated 90 day session, we are now finally starting to see outlines of the endgame.

          As members of the Senate Democratic Caucus, we make up five of 20 senators. Our caucus represents some of the most experienced legislators in the building, and our members come from across the state. As the minority, our strongest asset is our voices. Tradition dictates much of the workings in the capitol, and that same tradition lays much of the power of decision making with the majority. With those of us in the minority rests the responsibility of keeping a watchful eye on those who wield so much power and to alert the public when power for power’s sake has become the true goal of the endgame. Who knew it had begun as early as February?

Alaska’s Fiscal Crisis

           No conversation about current issues facing Alaska can begin without acknowledging that the state is in serious financial trouble. We’ve tied 90% of the revenue the state collects to one commodity whose price is among the most volatile in the world. This causes dramatic swings in our budget and can, at times, mask the true problem of a growing government with overstuffed coffers. We’ve gone, in almost a one-year swing, to making billions in money from oil production taxes to making barely millions. This means we are now running the second almost $4 billion deficit in two years, forcing a possible draw of up to $8 billion from our rapidly depleting $11 billion savings account.

          Clearly, just a single year more of this kind of deficit means that the state will have no more cash to cover the shortfall. Something must be done. At the beginning of session, it was acknowledged that cuts alone would not solve Alaska’s Fiscal Crisis. And yet, dramatic cuts to the budget have become part of the endgame, with many of our colleagues using them as leverage.

Education Cuts  

           I’ve been incredibly passionate about education my entire legislative career, and never have I felt that it needed more defending than this year. Education is one of the most accountable functions in the state and I don’t think it should be any great surprise to anyone that it’s expensive to give students a quality education. Why then has education become the target of most of the budget cuts? I’m baffled.

          When I entered the Senate nearly three years ago, an argument over school funding had been going on for almost four years. Governor Parnell steadfastly refused to increase the statutory formula that defined how much per child the state funded education, a number that remained $5,680 from around 2011 to 2014. But, in refusing the increases to the Base Student Allocation (BSA) formula, Governor Parnell acknowledged the greater needs of schools and added in $25 million per year for student transportation costs realizing that inflation, and transportation costs, were eating schools alive. That $25 million ended with Parnell’s departure.

          Last year, the 28th Alaska State Legislature came together and made a promise to the state of Alaska, its children, its teachers, and its future generations. House Bill 278 codified that promise in finally increasing funding. The BSA was increased for three years by amounts that were known to be inadequate to the need, but additionally nearly $100 million was funded to schools “outside the formula,” to be appropriated over the next three years. At the time, the funding mechanism was questionable, but seemed mostly benign. Four years of flat funding, and fighting for more, had finally yielded some small results. Not the full $404 per student needed to keep up with rising costs, but still, a promise made to beleaguered districts.

          The Governor proposed cutting years two and three of the “outside the formula” money, amounting to an almost $50 million cut early on in session. Many of us were shocked and disappointed and schools, caught blindsided, were hardly able to quantify the effects of this cut. This left education classroom funding with only the small BSA increases (at about $150 for FY15/$50 for FY16/$50 for FY17). At this point, the once seemingly benign strategy of funding education outside the formula was clearly just an easy target for cuts. It was a frustrating time, but nothing prepared us for what came next.

          The two agencies with the largest budgets in the state are Health and Social Services and Education. This makes sense since we are offering programs and services to indigent people and students, neither of whom are expected to pay for services (I’ve never understood the fascination with these budgets being the largest….of course they would be, in almost any iteration of a state budget). Much of the funding for the cost drivers in HSS and Education are formula driven, that being Medicaid and the Base Student Allocation.

          The Department of Education provides support services, professional development, pre k grants, assessments, certification, oversight and a myriad of other things to school districts. In the “agency budget” conversations, the formula is rarely touched. A 27% decrease in the agency budget was proposed, eliminating every state run early childhood program, killing the principal mentoring program, and severely limiting broadband in schools, among many other cuts. This was among the hardest hit agency budget, with every other department seeing only a 6 to 8 percent decrease. It was heartbreaking, especially in light of the $50 million cut to the “one time funding” that went into classrooms, and even more tragic since we know how helpful early childhood programs are in ensuring success later in life. Yet, more was to come.

          About a week ago, the Senate Finance Committee, with no public testimony or forewarning, cut another $47.5 million out of direct classroom funds, flaunting the statute that defines how much money goes to students and simply underfunding the education fund. This narrative was as much for me to organize the flow of cuts to education in my mind as I feel the legislature has simply gone too far, and cut so deeply that legislators have completely lost track of the cuts and how they hurt children. This is irresponsible and plainly, bad public policy.

          So, how does that play into the endgame you ask? Politics are being played right now with education funding as legislators seek to gain leverage over others in order to forward different goals. I personally doubt the additional $47.5 million cut will stay; that is, I predict the public is so “sticker shocked” by the enormity of the proposed cuts that they will settle for a smaller cut proposal.  This shock gives the majority the upper hand and allows them to obfuscate the complex funding history that comes along with education. Our own position has been clear from the start: we don’t ever play politics with children’s futures.

         Other issues under negotiation now as the legislature winds down are:

HB105/AIDEA

        Fairbanks has long been beleaguered by expensive home heating costs and inefficient delivery of energy. The problem continues to morph as the city grows, energy prices increase, and delivery methods change. Years of frustration over this issue finally led to the creation of the Interior Energy Project last year by Governor Parnell. The project was a collaborative effort between the Alaska Industrial Development and Export Authority and the Alaska Energy Authority to build out infrastructure and develop a transportation mechanism to deliver natural gas to the people of Fairbanks.

          In January, Governor Walker announced his intention to realign the project by purchasing Pentex, the Fairbanks utility and parent company of Titan Alaska who owns an LNG plant at Port MacKenzie. The realignment involves using the Alaska Railroad for transport, intends to make use of already available infrastructure, and will allow for more widespread use of natural gas outside of just Fairbanks. I support the plan and think it is well-advised.

          Members of the House Majority, on the other hand, have much different thoughts, and have worked to stymie the plan at every opportunity. I know the Governor is determined to bring affordable energy to Alaskans, and this plan is the way to do it. We know the gas trucking plan had its benefits, but as cost estimates came out, the price was less and less affordable to us and Fairbanks residents. This change in project course may ruffle some feathers, but it is the better plan for affordable interior energy. The Governor has signaled that he will do whatever it takes to get affordable energy to Fairbanks. Expect this issue to be a driver of extended or special session. 

HB132/Natural Gas Pipeline

         Alaska is a resource rich state with a long future ahead of it in managing its resources to the maximum benefit of the people. Our natural gas reserves, like our oil reserves at one point, rival that of many deposits in the world. The challenge, as always in Alaska, is how to traverse the great distance of our state to bring the product to market.

              Last year the legislature passed SB138, which I voted against. The bill brought together the state, the big three producers, and TransCanada into “alignment” on a natural gas pipeline. I think the bill gave too much power and leverage to the oil companies, at the state’s expense with our stake in the project at 25%. I think the contracts went too far in binding the legislature’s hands by allowing veto power for each party.

          The Governor made a decision upon entering office to upsize a second natural gas pipeline plan, originally designed to only deliver gas to Alaska residents, with full state ownership. I applaud his decision to look at a variety of options as I think having a fallback plan vastly improves our negotiating position. 

          Members of the majority who have great interest in seeing SB138, or the AKLNG project move forward exclusively, have worked hard to stop the Governor’s plan, going as far as introducing legislation to block him in statute with HB132. The bill has been transmitted to the Governor for signature. He has indicated he will veto the legislation, setting up a battle with the legislative majority, who will need a 2/3 majority vote to override the veto.

Medicaid Expansion

          One of Governor Walker’s highest priorities is to expand Medicaid. He campaigned on the issue from day one and has been working since he arrived to make it happen. Once again, though, the Governor’s actions have been met with great resistance by the legislative majority in both the House and Senate. Despite great support across any number of public opinion surveys, the majority caucuses continue to be staunchly opposed to expansion.

          The Governor included increments for Medicaid expansion but those were stripped from the budget as the majority demanded that he introduce a bill for them to work from. The legislature has failed to act on Medicaid expansion, moving the Governor’s bill from committee with no changes onto the Finance Committee where no hearings are scheduled.

          On a messaging note, we in the Senate Democratic Caucus have begun to see a rhetorical strategy that says Medicaid expansion and Medicaid reform must be tied together in order to pass. Where, I ask, were these same “reformers” a year ago, or two years ago before expansion became an issue? They were silent, because they know reform is always ongoing. What’s being doing is political, in its entirety. The reform argument is a red herring to distract legislators and the public from the more important and substantive question of Medicaid expansion.

          I’m not optimistic that the legislature will do the heavy lifting of passing a Medicaid expansion bill before Sunday, although I do think there will be some sort of half-hearted effort at reform which the Governor has indicated he may also veto if it comes without expansion. I will gladly sit for a special session, as long as it takes, to finish the people’s work of expanding Medicaid.

CBR Vote

          The Constitutional Budget Reserve was created in 1990 by amendment to the state constitution. It was in response to the boom and bust cycles that came with rapidly changing oil prices and their effect on the Alaska economy. It is, essentially, a savings account with a few sideboards on it.

          The money in the CBR may be accessed by a simple majority vote if the amount available for appropriation is less than the amount appropriated in a previous fiscal year. That is, if the state is making less money in total than it physically appropriated to fund government in the previous year, then a draw from savings in permitted with a simple majority.

          On the other hand, if the amount available for appropriation is more than the amount appropriated last year, then a ¾ majority is required to access the CBR. Framers of the amendment knew the temptation of lawmakers to drain savings before looking elsewhere for money, so they set a high hurdle for accessing the account.

          We in the Senate Minority do not have the requisite numbers to hold a CBR vote in order to negotiate. Our colleagues in the House, the Independent Democratic Caucus, on the other hand do have enough members to fail a CBR vote, giving them one small piece of leverage among this field of majority advantages.

          The majority must work with the minority to access this account. Unless of course, they don’t. The CBR amendment was passed just after an incredibly bruising bust cycle that drained much of the state’s accounts. Since then, much has changed, including the balance of the Permanent Fund which is today one of the largest sovereign wealth funds in the world. A number of boom and bust cycles have come and gone since then, and many subaccounts have been created where the legislature can park money.

          In 1994, former Governor Cowper sued the state and Governor Hickel and forced the Alaska Supreme Court to rule on what the term “available for appropriation” meant. A number of accounts, including the corpus of the permanent fund, were not included. Some other accounts, like the Alaska Housing Capital Corporation account, are considered not available for appropriation and so are a perfect place to leave money and reduce the total amount available for appropriation. Should the majority bring the amount available for appropriation below the amount appropriated in FY15, they will be in the clear to drain the Constitutional Budget Reserve without, well, reserve.

Confirmations

          There are hundreds of board and commission seats the Governor appoints every year on a rolling basis as people resign and term out. The Governor also appoints his cabinet, or the heads of his departments, called Commissioners. The legislature is vested with the power to confirm all of these nominees.

          As the Governor works to forward his priorities, he must also work with the legislature to get his nominees confirmed. I’ve never seen a legislature take up confirmations so late, but then again we’ve also never had an Independent Governor either (with the exception of Wally Hickel’s run on the Alaska Independence Party ticket, of course)

          Confirmations were scheduled for this Friday (session ends on Sunday), but were abruptly removed from the calendar. A news story was also published yesterday discussing a legal opinion requested by the majority all the way back in February asking legislative legal counsel what the consequences would be if the legislature simply didn’t confirm any of the Governor’s nominees. The answer? He’d have to start from scratch, and nominate a new person for every one of the positions, of which there about 140. Not an easy task.

          Clearly, the Governor needs his Commissioners to run the government. I’ve only ever seen a few people not confirmed as it is tradition that the legislature simply determine whether someone is fit for the job. It is not our place in this setting to make political statements about people who are qualified to serve as a Commissioner, yet I fear politics have taken over even this simple duty.

Conclusions

          There are lots of moving parts in the building as the session ends. What I’m most disappointed in is the priorities of the majority in cutting the budget. Why are we cutting so deeply into education, at nearly $100 million hit, yet we can’t even look at the more than billion dollars we are paying out in oil tax credits this year?

          I’m also disappointed in seeing politics being played with nearly every issue. This is normal for session, and for politicians, but to use education funding to leverage votes from unwilling legislators by confusing the public into believing the cuts they are making “aren’t as bad as they could be” is disingenuous and will have repercussions not just electorally, but also on our children.

          The majority holds the keys on HB132 (gas pipeline) veto override, the Governor holds the keys on the Interior Energy Project (interior legislators are unlikely to go along with a veto of a project that so directly effects them), and the House Independent Democratic Caucus holds the keys on the CBR vote. The Governor is determined to see Medicaid expanded, and Democrats are determined to see that education is not gutted entirely.

          With days left to go, I think it’s fair to say that the endgame, and the various strategies that go into finishing it successfully, have been on the drawing board since January. We’re keeping a close eye on it all.

          I’m Berta and I’m still listening,

          If you have any questions, please feel free to contact my office

signed: Berta


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