July 5, 2016
Serving Midtown, Spenard, and UMed
716 W 4th Ave Suite 411
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Governor Bill Walker
Lt. Governor Byron Mallot
Musings on the Governor's Vetoes and the Upcoming 5th Special Session
Dear Friends and Neighbors,
Until now I've not commented on the Governor's budget vetoes or on the call to a 5th Special Session. I've been thinking about what it all means and how best to proceed.
I agree with the Governor that a comprehensive and durable fiscal plan is both critical and urgent. We can already see the consequences of the state's failure to move promptly and decisively, a failure which is arguably making the situation worse than it has to be. While we wait to take decisive action on this colossal issue, we draw more than $10 million a day in savings to pay for essential services of government. In fact, when regular session began in January 2016, Alaska had a $3.4 billion deficit. We currently are at $4.1 billion, and rising.
Regular readers will know that I believe a fair and durable fix starts with correcting the unfair and unsustainable oil company subsidies before using permanent fund earnings or implementing other taxes to be paid only by Alaskans.
The Legislature hardly scratched the surface with a re-write of oil credits which the Governor signed into law, HB247, just before making his budget vetoes. The bill did not address the systemic problem, leaving Alaska still carrying much of oil company investment without expectation of appropriate return to the state and, importantly, taking the entire issue off the table for the near future. For this reason I was a no vote and hoped the Governor would veto until the legislature got it right.
The Senate passed a bill to allow use of permanent fund earnings for state government while temporarily propping up the dividend. However, because the Legislature did not properly correct oil subsidies, the funds made available through this legislation will largely cover oil company subsidies and not be available for K12 education, for a healthy university system, for services to abused and neglected children.
We know this is true because after signing HB247, the oil tax bill, the Governor addressed the budget bills and made $1.2 billion in cuts, which includes:
What this says to me is that so far oil companies are held harmless (with delays in payment) and Alaskan students of all levels are taking it on the chin. Shortfalls in funding are collected later for our children.
What is our Best Course of Action for the Special Session?
The Governor points out that his vetoes have broadly impacted oil companies, education and PFD's. He might be anticipating that those interest groups will rise up in support of a comprehensive fiscal plan as the best or even the only way to change things.
I believe we should pay the oil tax credits now. The majors apply the credits against their production tax bill so their credits cannot be vetoed. The vetoed credits apply only to the small and new producers who are starting out and do not have enough of a tax bill to get direct value. They apply to the state for cash payments to keep them afloat as they go into and ramp up production. Again, they are exploring and developing in good faith, relying on our commitments to them.
One House Democrat said today that "We did not give the Governor the funds to protect the things we most care about" ...because the legislature did not pass new revenue measures. He is right of course.
I’m Berta and I’m still listening,
If you have any questions, please feel free to contact my office.