Southeast Alaska’s Sen. Bert Stedman, a Sitka-based Republican, predicts a turbulent legislative session in 2019. As usual, the fights will be about money.
Stedman came by KRBD to talk about the session, which starts Jan. 15th. Here’s a summary of the discussion.
Newly elected Gov. Mike Dunleavy’s preliminary budget was submitted to the Legislature in late 2018 with a $1.6 billion deficit. Stedman anticipates the governor’s updated budget, not yet submitted, will have significant cuts.
“I expect him to take a very conservative approach to the budget. He may, as referenced in some of the news articles, match expenditures with the reoccurring revenue,” he said. “That’s a nice way to say we’d be looking at a $1.6 billion reduction from the basically $5.9 billion or $5.7 billion, somewhere in there. That would be roughly a 30-percent hit in ballpark figures.”
What the Legislature does with that budget is where the turbulence kicks in. Stedman points out that it’s not simple to cut that much out of an already lean state spending plan.
“The easy reductions are done. The positions that were never filled, the empty chairs, taking away the loose cash, cutting back the capital budget,” he said. “Oh, and spending down $14 billion in savings, which I think is deplorable, personally.”
The Constitutional Budget Reserve has been used to balance state spending over the past few years. Stedman said with that depleted, the Legislature now has to make truly difficult decisions about budget cuts and/or using Alaska Permanent Fund earnings.
Stedman said he’s going to push hard to constitutionally protect the Perm Fund. He’s not opposed to using some of that fund’s earnings to pay for government, but he said it needs to be sustainable.
“I haven’t changed my position that I’ve had last spring, and quite frankly ever since I became your senator, pushing for a percent of market value approach for managing the Permanent Fund, and blocking the Legislature’s ability to go over a set percentage of withdrawals per year,” he said. “Right now, we’re looking at 5 percent, 5.25, coming down to 5 percent per year.”
Then, Stedman said, the approximately 5 percent of earnings could be split between dividends and core government services, such as education.
“My concern, quite frankly, is the Legislature’s easiest course of action is to loot the Permanent Fund and not do the budget issues that they’re faced with until such time as the earnings reserve is gone,” he said.
Gov. Dunleavy campaigned on a promise of “full” dividends, rather than splitting earnings between dividends and government services. Dunleavy also promised to provide back payments for previous partial dividends.
Stedman said the Legislature isn’t beholden to those promises.
“He is one and we are 60, but we are each equal,” he said.
Stedman said it’s likely that eligible Alaskans will get a full dividend this year – about $3,000 each. Back payments, though, he said are unlikely.
If Stedman succeeds with his push to split a percentage of earnings, future dividends would be somewhat lower. He estimates they’d be closer to $2,000.
As the session draws near, the Alaska House remains without a majority caucus. Until that body is able to form some kind of majority, House lawmakers can’t do much lawmaking. Stedman said he’s not too worried about that.
“I’m in full support of the Senate just, you know, ignoring the House, taking care of business and having the House rubber-stamp our work,” he said, laughing. “I have trouble getting support in the House to do that.”
So, he said the Senate will work with whatever majority ends up in control of the House. He said a more conservative majority would make things run more smoothly. No matter what, though, Stedman said there will be challenging decisions this session for all lawmakers.
The Alaska Marine Highway is an annual challenge, partly because Railbelt representatives are less inclined to spend money on Alaska’s ferry system. Adding to the challenge this year is recent news that two brand-new ferries will need a $30 million retrofit to add crew quarters, plus more for shoreside improvements.
“I think we’re serving up a political football to the Railbelt to beat us up with,” he said.
Stedman said the state should have stuck with the original plan: $120 million for one new ferry to serve the Prince Rupert run.
“That was then changed to two ships, for the same price, with the road extension out of Juneau,” he said.
But then, the Juneau road project was canceled, rendering the day-boat concept impractical.
Stedman adds that one of his new roles in the Senate is operating budget chairman. In that role, he is required to put together a budget that will be approved by the Legislature and signed by the governor.
Stedman said because of that responsibility, he might have to vote against pro-Alaska Marine Highway System proposals, no matter how much he might personally want them to pass.
“When you see Sen. Stedman voting against Marine Highway amendments on the floor of the Senate, it’s not that I’ve turned into Benedict Arnold,” he said. “It’s the role I’ve taken on, knowingly, as the operating budget chairman.”
Stedman reiterated that the session this year is going to be messy, but the state does need to figure out a stable spending plan. He said he’d prefer a “step-down” approach over several years,
“Versus one bomb down the chimney, like the Japanese dropping a bomb down the Arizona’s smokestack,” he said. “But I think that’s pretty much what’s coming. And we’re the Arizona.”
As a result, he said, the figurative windows will be blown out. But, that will help start a rigorous debate on how to fix the problem.
Below is KRBD’s entire half-hour interview with Sen. Stedman.