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Alaska House rejects $5,500 payout, sends budget to negotiating committee

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Alaska House rejects $5,500 payout, sends budget to negotiating committee

May 14, 2022 | 7:11 pm ET
By James Brooks
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Alaska House rejects $5,500 payout, sends budget to negotiating committee
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House Minority Leader Cathy Tilton, R-Wasilla, is disappointed as she leaves the Alaska House of Representatives on Saturday, May 14, 2022. Tilton was among 18 lawmakers on the losing side of a vote to agree with the Senate version of the state's annual budget. (Photo by James Brooks/Alaska Beacon)

After three days of delay and doubt about the outcome, the Alaska House of Representatives turned down a Senate-written budget containing $5,500 payments for eligible Alaskans. Those opposed to the budget cited concerns about spending exceeding revenue.

The House’s 18-22 vote against the Senate proposal means two different plans will now go to a six-member committee assigned to craft a compromise that can pass both House and Senate.

Speaker of the House Louise Stutes, R-Kodiak, told reporters after the vote that it means Alaskans should not expect a $5,500 payment this year.

Other legislators said the final budget details are uncertain.

“This budget, regardless of the outcome today, is still a work in progress,” said Rep. Sara Rasmussen, R-Anchorage, who voted in favor.

I think the main sticking point here between the two budgets is the size of the dividend.

– Rep. Ben Carpenter, R-Nikiski

The Senate proposed hundreds of millions of dollars in spending on Anchorage’s and Nome’s ports, plus millions more on projects across the state, but it was a proposed $4,200 Permanent Fund dividend and an additional $1,300 energy payment that dominated discussion.

“I think the main sticking point here between the two budgets is the size of the dividend,” said Rep. Ben Carpenter, R-Nikiski.

Largest budget item

The payments’ combined cost of $3.6 billion was the largest single item in the Senate proposal. That cost, combined with other spending, would have resulted in the largest budget in state history.

Despite an expected multibillion-dollar windfall in oil revenue because of high prices caused by the Russian invasion of Ukraine, the budget would have resulted in a deficit of about $1 billion, requiring the state to spend from savings to close the gap.

Even as individual Alaskans wrote their lawmakers in support of the $5,500, other Alaska residents, plus business and labor groups, lobbied against the Senate budget. 

The AFL-CIO and the Alaska Chamber opposed it, as did the Anchorage Economic Development Corp., Alaska Miners Association, Associated General Contractors, Council of Alaska Producers and the Alaska Support Industry Alliance.

“A concurrence vote for the Senate budget is not conducive to a long-term, sustainable fiscal plan,” the latter groups wrote in a combined letter.

The leaders of the Senate and House majority and minority caucuses met with Gov. Mike Dunleavy earlier in the week. Several attendees said the governor told them he would veto about $1 billion from the budget — including the $1,300 energy payment — if House lawmakers agreed with the Senate plan. Doing so would have eliminated the deficit within the budget. Now, House and Senate negotiators could eliminate the deficit themselves. 

Payment supporters cite high fuel costs

Rep. Tom McKay, R-Anchorage, voted in favor of the Senate plan. He acknowledged the lobbying, some coming from within his own district, but said he wanted to take a statewide view.

He and others said the price of home-heating fuel and transportation gasoline requires that the Legislature make an extraordinary effort to distribute money to Alaska residents.

Rep. Ron Gillham, R-Kenai, said that when he comes into work at the Capitol, he frequently passes someone sleeping on the sidewalk.

The difference between $5,500 and $2,600 — an amount previously approved by the House but rejected by the Senate — could be the difference between getting that person off the street or allowing them to keep sleeping there, he said.

“If I can help that one person, it’s well worth it,” he said.

Lawmakers who spoke in opposition cited the risks of the proposal. If oil prices in the next fiscal year are lower than the $101 per-barrel average predicted by the state, the state’s savings accounts could evaporate, forcing lawmakers to spend more from the Alaska Permanent Fund.

Because the Permanent Fund’s investments provide between half and two-thirds of the state’s general-purpose revenue, overspending could create deficits in the future, encouraging significant budget cuts or tax increases.

Rep. Bart LeBon, R-Fairbanks, was a banker for decades before joining the Legislature. He said that if a business came to him with a business proposal akin to the budget, he wouldn’t approve their loan. 

“This budget, from the other body, does not balance,” he said.

Members cross caucus lines

The final vote crossed party and caucus lines: Four members of the House’s majority coalition voted in favor of the Senate budget, and three members of the House minority voted against it, as did Republican David Eastman, R-Wasilla, who isn’t a member of either caucus.

Stutes appointed Rep. Kelly Merrick, R-Eagle River; Rep. Dan Ortiz, I-Ketchikan; and LeBon to the budget conference committee assigned to negotiate a compromise. All three voted against the Senate version of the budget.

She skipped Rep. Neal Foster, D-Nome, who is co-chair of the House Finance Committee. Foster voted in favor of the Senate’s proposal.

Meeting later Saturday, Senate President Peter Micciche, R-Soldotna, appointed Sens. Bert Stedman, R-Sitka; Click Bishop, R-Fairbanks; and Bill Wielechowski, D-Anchorage, to the conference committee. Wielechowski voted in favor of the $5,500; Stedman and Bishop were opposed.

Stedman said the conference committee will have its first meeting at 3 p.m. Sunday.

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