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Day 37: The Financial Dance
"We're basically on a razor's edge right now. There's nothing to worry about, the checks won't be late. It's the internal financial politics in the Legislature."
Good morning, Alaska. It’s Day 37 of the legislative session.
Here’s the latest: Rep. David Eastman’s ghoulish remarks about the financial benefits of dead abused kids are continuing to get traction, but the most glaring thing about it all is the silence of most House Republicans. At least one House Republican, though, is willing to say they were bad and that Eastman has no place in the Legislature. A deeper look at the state of the state’s budget and the possibility we’ll run out of money before the end of the fiscal year. The daily schedule. And Senate President Gary Stevens says they probably won’t approve the proposed pay raises for the governor and his cabinet, just not for the reason you’d expect.
Happening today: U.S. Sen. Lisa Murkowski gives her annual legislative address.
Current mood: 🕺🏽
General GOP silence on Eastman
“He is entitled to his opinion and I won’t be distracted by one member’s question and will instead remain focused on the important work of the legislature.” Rep. Ben Carpenter on Rep. David Eastman’s questions about the financial benefits of the deaths of abused children.
Rep. David Eastman’s musings about the financial benefits of the deaths of abused children are continuing to grab attention, but perhaps the most glaring thing about the whole ordeal is the relative silence and near-complicity of many of his fellow Republicans in the House.
A report by the Anchorage Daily News included a lot of hand waving from Republicans on the House Judiciary Committee, who didn’t register any objections during the hearing. House Judiciary Chair Rep. Sarah Vance, R-Homer, said she wished he asked the questions “with a little more sensitivity” but understood it was probably an anti-abortion argument. Nikiski Republican Rep. Ben Carpenter who said Eastman’s “entitled to his opinion” and said essentially that everyone should move on.
And there’s also this line from the report:
Some House Republicans told the Daily News that they were appalled by Eastman’s comments, but they would not say that on the record. Eastman has a loyal and vocal band of far-right supporters who are known to call Republican offices and fight on his behalf when they feel he is being demonized.
But on Twitter this morning, one House Republican said he would be happy to go on the record about Eastman’s comments. That’d be Wasilla Republican Rep. Jesse Sumner, who ran against Eastman in 2020:
The Financial Dance
Earlier in the legislative session, we heard about the potentially precarious spot the state is in when it comes to this current year’s budget. Basically put, a string of worst-case scenario days of lower-than-expected revenues and high expenses could see the state’s budget temporarily dip into deficit territory. That wouldn’t be a problem in a typical year because the state has savings accounts that can serve as a buffer, but it is a problem because escalating budget politics in recent years (mostly House Republicans pulling whatever levers they can to get a bigger PFD or anti-abortion votes) has cut off access to the biggest account in the Constitutional Budget Reserve.
So, instead of having somewhere between $500 million and $2 billion available to cover those gaps, the state instead only has about $20 million in the Statutory Budget Reserve (which would be bigger if not for a veto by Gov. Mike Dunleavy).
The issue came up again at Tuesday’s Senate Finance Committee meeting with Legislative Finance Division Director Alexei Painter, who outlined the latest outlook of the budgets for both this year and next year.
The good news, Painter said, is the state’s latest oil price forecast has been generally accurate. The bad news, that even with a generally accurate oil price forecast, this year’s budget is coming in with essentially zero margin for error (seriously, it’d be about $300,000 once you roll in the supplemental budget for this year).
“Even if we absolutely nail everything, there’s still some margin of error because of individual (oil) company activity. There’s things that we don’t anticipate. It’s very much within the realm of possibility that we could completely nail price and production and still end up $20 million off, leaving an unfunded budget,” Painter said, urging legislators that it’s untenable. “If the Legislature does adopt the governor’s supplemental budget as it exists, the Legislative Finance Division would strongly recommend designating a source for deficits beyond the SBR balance. Having $20 million of headroom is just not sufficient to be safe and avoid an unfunded budget at the end of the year, after the Legislature has adjourned for the year.”
Senate Finance Committee co-chair Sen. Bert Stedman asked for some clarification on what that scenario would look like:
“What happens or what should we expect if we ran short of $100 million, $50 million or $200 million in June at the end of the fiscal year?” he asked. “Do we trigger the impoundment clause, do we shut the state down, does the world end? What’s the ramifications?”
Painter said it could the impoundment clause, a statute that allows the governor to halt some spending in the time of an uncovered deficit. The largest target would be about $75 million in this year’s budget slated to go to the Port of Alaska/Anchorage in the next budget year. He said, though, that doing so would create problems elsewhere in the budget.
“There would not be particularly great options on the table,” he said.
Later at the Senate Majority’s weekly news conference, Stedman said it’s not likely to come to that. He said the Legislature still has an opportunity to build some breathing room into this year’s budget by either cutting some spending in this year or finding new pockets of funds to cover the deficit. He said, though, it’s a tricky”.
“What we’re going to be doing is looking at the current budget year and seeing if we can’t shave a few areas off or, if oil prices hold up and go up a little bit, then we might skate through. It’s just a nip and a tuck. The concern is brought to the surface because there doesn’t be seem to be support within the Legislature to get a three-quarter vote to allow access to one of our main savings accounts: the Constitutional Budget Reserve. There’s plenty of money there to fix this little hole,” he said. “If we can’t get the votes or if elected officials demand additional spending for their vote, that just digs the hole deeper and makes matters worse. Then we have to do the financial dance to get us through July.”
But is it a potential shut-down-the-state scenario? Will the world end?
Stedman says there’s no need for alarm, at this point.
“I wouldn’t worry about the state missing payroll. It’s just not going to happen. What we’re talking about here is being on the razor’s edge of the end of the fiscal year and how we’re not going to get sliced up at the end,” he said, later adding. “Worst-case scenario, we might have to address it in July. … We’re basically on a razor’s edge right now. There’s nothing to worry about, the checks won’t be late. It’s the internal financial politics in the Legislature.”
Other meeting takeaways:
The forward funding for education, which started out around $1.2 billion when the governor signed the budget last year is now expected to be zero.
The whopping $2.5 billion that Gov. Dunleavy wants to spend on a statutory dividend might be a bit smaller. That’s because the Alaska Permanent Fund is performing well below expectations and the PFD formula runs on an average of several years. With a down year coming onto the books, that would lower the total spend to about $2.2 billion (going from a dividend of $3,800 to $3,400). That is also moderately good news for the projected deficit in the upcoming year, taking it from an anticipated $435 million to $160 million.
Follow the thread: The Tuesday Senate Finance Committee meeting
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The House budget subcommittee on Environmental Conservation met at 7 a.m. for a presentation on air quality standards.
The House budget subcommittee on Education meets at 8 a.m. for an overview
At 11 a.m. Alaska’s U.S. Sen. Lisa Murkowski gives her annual address to the Alaska Legislature.
The House budget subcommittee on Natural Resources gets an overview at noon
The House budget subcommittee on Military and Veterans’ Affairs also gets an overview at noon
House Judiciary meets at 1 p.m. for an overview of the Department of Public Safety operations with Commissioner James Cockrell.
House Resources meets at 1 p.m. to hear HB 50, the governor’s carbon storage bill; and SB10, extending free hunting/fishing/trapping license to service-disabled veterans, active National Guard and reservists.
Senate Judiciary has a hearing with appointees to the Police Standards Council, as well as a presentation on an Alaska-specific police policy manual at 1:30
Senate Labor and Commerce meets at 1:30 to hear about oil and gas workforce
House Labor and Commerce has a 3:15 hearing with governor’s appointees to the Workers’ Compensation Board and the Real Estate Commission
Senate Education meets at 3:30 for a hearing on SB29, civics education in schools; and SB24, mental health education in schools
Senate resources meets at 3:30 for a presentation on carbon offsets
The House budget subcommittee on Labor has a 4:15 budget overview
The Senate budget subcommittee on Public Safety has a 5:15 budget overview
The Senate budget subcommittee on Law has a 5:15 budget overview
House Ways and Means has a 6 p.m. meeting
The Senate budget subcommittee on Administration has a 6:30 budget overview
Legislature probably won’t approve pay raises for governor and cabinet, Senate President says
Senate President Gary Stevens said at Tuesday’s Senate Majority news conference that the Legislature probably approve the recommended pay raises for the governor, lieutenant governor and the cabinet. But where the House Minority staked out their opposition to the increases based on school funding, Stevens had a far different reason: He’s worried the cabinet-level pay increases aren’t enough.
“That’s a pretty complex issue. We have received a report from the commission. It doesn’t really, I believe, go into the detail it should,” he said. “We’re not sure if the salary increases that are indicated for the commissioners are enough. As you may know the administration is having trouble filling some of those positions. … I’m not sure the salaries we offer are adequate.”
Under the commission’s report, the governor’s annual salary would increase to $176,000 from $145,000, the lieutenant governor’s annual salary would increase to $140,000 from $125,000, and commissioners would go to about $168,000 from $141,160.
“In the immediacy, we will probably disprove that report from the commission and hope to go into more detail to study all of the issues more thoroughly.”