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Alaska House passes budget, but balks at Senate’s permanent fund bill

By Liz Raines Photojournalist: Cale Green - 7:35 PM March 20, 2017

The Alaska House passed a $4.2 billion budget Monday, but the move doesn’t mean lawmakers are on track to go home next month. They’ve got to figure out how to pay for it, and the issue has the House and Senate butting heads.

The House Finance Committee is switching gears this week to take up oil tax legislation and an income tax. Missing from the agenda is a bill the Senate passed last week to restructure the permanent fund as an endowment for state services.

A dramatic drop in the state’s income from oil has created a multi-billion dollar budget gap.

“Nothing else matters in this building if that bill doesn’t pass. We simply can’t fill that gap,” said Senate Majority Leader Peter Micciche, R-Soldotna, at a press conference Monday.

The Senate passed Senate Bill 26 last Wednesday. The measure establishes a fixed, annual draw from the permanent fund’s earnings while limiting Permanent Fund Dividend checks to $1,000 for the next three years. The Republican Senate majority wants to combine the measure with $300 million in cuts to help bridge the budget shortfall.

But its work may have hit a brick wall in the House. In order to get the bill across in the finish line, House leadership says it has to have a tax rolled in for balance.

“Theirs only deals with the permanent fund and the Permanent Fund Dividend and that’s a partial solution, but the problem was that that didn’t pass our body last time,” said Rep. Paul Seaton, co-chair of the House Finance Committee. “It needs a combination of the balancing portion of a broad-based tax with that.”

The Senate majority has opposed new taxes this year.

“To tax just to tax is not a reason to have policy conversation around that issue,” Sen. Anna Mackinnon, R-Eagle River, co-chair of the Senate Finance Committee, told reporters at a press conference Monday. “All I’ve heard is that the House wants an income tax. Well we only have about 300,000 to 350,000 [Alaskans] that could contribute.”

Friction between the two legislative bodies will likely slow progress this session. Both sides are now talking about potential overtime.

“We’re still on a 90-day schedule here, I mean if we have to run over a few days that’s all well and good,” said Micciche, referring to a slower pace of work in the House.

“We’re going to be a few days behind, but not too bad,” said House Majority Leader Rep. Chris Tuck, D-Anchorage, after finishing budget amendments Friday. “But then it also comes down to what we’re able to get agreement on with the Senate. So, that’s still up in the air.”

While they don’t yet know what an agreement will look like, neither legislative body denies that a draw from the permanent fund’s earnings should be a part of it.

As part of a broader fiscal plan, the Democrat-led House majority is calling for changes to the state’s oil tax regime. Up until now, the Senate appeared to draw in a line in the sand about changing current policy, but on Monday, Micciche indicated a willingness to compromise by reevaluating North Slope credits.

“We do admit that there are some credit exposures on a cash-flow basis that we would like to improve,” Micciche told reporters.

This year, the end of the 90-day session falls on Easter, April 16.

KTVA 11’s Liz Raines can be reached via email or on Facebook and Twitter.

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