Budget Battle: Republicans Search for Workaround In Lieu of Courting Democratic Support

For weeks, the Legislature has been at a stalemate over its budget deficit. The Republican majority has been trying to secure a three-quarter vote to tap the state’s rainy day account, but they need Democratic support to do that — which means increasing education funding and expanding Medicaid. Now that the Legislature is in its second special session, some Republican leaders are trying to find an accounting workaround that would let them plug the deficit without reaching a deal with the Democrats. APRN’s Alexandra Gutierrez joins us from the Anchorage Legislative Information Office, where lawmakers are meeting.

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TOWNSEND: So, the annual costs of running the state are about $5 billion, but the Legislature has only $2 billion in revenue that it can apply to that amount. What’s the plan to find the rest of the money?

GUTIERREZ: Well, it’s not like the state is broke, even though we’ve got a budget shortfall. Beyond the state’s unrestricted general fund — which is the pot of revenue that the Legislature can use with no strings attached and which mostly comes from oil taxes — there are a few other accounts that count as state money. The traditional rainy day account is the Constitutional Budget Reserve, but there are some pretty weird rules for accessing it. It requires a three-quarter vote, unless there are no other accounts you can readily tap. If the budget reserves your only real option, then you can tap it with just a majority vote.

The rub is that the state does have another big pot of money it can access with just a majority vote, and that’s the permanent fund earnings reserve. To get easy access to the rainy day account, you need that money to go away.

TOWNSEND: So is the Legislature looking at using the Permanent Fund to fill the budget deficit?

GUTIERREZ: The short answer is no. They’re just looking at playing an accounting trick.

The way the permanent fund is set up, is there’s the corpus, which requires a vote of the people to access, and then there’s the earnings reserve account, which comes from investment earnings off the corpus. That earnings reserve is where dividends come from.

What the Republican leadership is considering doing is moving money from that dividends reserve account into the corpus.

The Legislative finance director, David Teal, describes it like this: “The Permanent Fund has a savings account and a checking account. And all we’re doing is moving money from the checking account to the savings account.”

The Legislature would leave enough money to pay dividends, but they would move most of the money into the main fund itself, which lets them get an easier vote on the rainy day account.

TOWNSEND: Does the Republican leadership have the support in their caucus to do this?

GUTIERREZ: It’s not unanimous by any stretch. On Wednesday, a group of six members of the House Majority caucus — basically a mix of some of the moderate members and some of the Bsh Democrats who caucus with them — sent a letter to the House Speaker saying they didn’t like the plan. They’re worried that if you went through with it and then had a stock market crash, your dividends would be at risk. Rep. Jim Colver, a Wasilla Republican who signed the letter, the Fairbanks Daily News-Miner described the group as the “musk ox coalition” and the approach they were taking to the Permanent Fund was like a bunch of musk ox circling around a baby to protect it.

Without these six members of the majority on board, you basically don’t have the votes to implement this plan. That empowers the Democrats more when it comes to negotiations, and makes the three-quarter vote look more necessary.

TOWNSEND: So, does it sound like they could figure out a solution to all this soon?

GUTIERREZ: Well, if they don’t figure something out by June 1, layoff notices get sent out to state employees, and if they don’t pass a fully funded budget by July 1, we get a partial government shutdown. Those are some pretty important deadlines that could spur lawmakers to action.

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Lori Townsend is the News Director for Alaska Public Media. She has worked in print and broadcast journalism for nearly 30 years. Radio brought her to Alaska, where she worked as a broadcast trainer for Native fellowship students at Koahnic Broadcasting before accepting a reporting/host position with APRN in 2003. APRN merged with Alaska Public Media a year later. Through her freelance work, she has produced news and feature stories nationally and internationally for Independent Native News, National Native News, NPR , Pacifica, Monitor Radio, Radio Netherlands and AIROS. Townsend is the recipient of numerous awards for her work from the Alaska Press Club, the Native American Journalists Association and a gold and a silver reel award from the National Federation of Community Broadcasters. 

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