Legislators in Juneau are scrambling to get key bills passed and to call a recess before the first case of COVID-19 shows up in the capitol building, where office conditions are cramped and six-foot social distancing is problematic,
The holdup, as usual, is agreeing on a Permanent Fund Dividend. A state operating budget passed by the Senate Monday has two $1,000 PFDs, one to be paid in early summer and the other later in the fall, when dividends are usually paid.
The House did not concur in changes the Senate had made, including the PFDs, and a House-Senate conference committee will meet shortly to negotiate a compromise. State Reps. Neal Foster, D-Nome; Jennifer Johnston, R-Anchorage and Cathy Tilton, R-Palmer, were the three House members appointed to the conference committee. The Senate conferees include Sen. Bert Stedman, R-Sitka; Natasha von Imhof, R-Anch., and Donny Olson, D-Golovin.
Johnston and Foster are co-chairs of the House Finance Committee and Stedman and Von Imhof are co-chairs of the Senate Finance Committee. Olson represents the Senate’s Democratic minority while Tilton represents the House Minority.
The issue on the PFDs is how much the state can afford this year given the plunge in oil prices, an effect of sharply lower oil demand and the COVID-19 virus. Until a few days ago seemed problematic that any PFD would be paid because the budget for Fiscal 2020, the current state financial year that ends June 230, is already facing a deficit of several hundred million dollars even without a $1,000 PFD, which would add another $680 million in red ink.
However, the peril now gripping the state’s economy due to COVID-19 with hundreds of people laid off from jobs in recent days, has created a new urgency to get relief fast to unemployed workers, which the PFD payments would do.
The second $1,000 PFD, is it is agreed on, will be part of the FY 2021 budget, for the financial year beginning next July. It would add $680 million to that year’s deficit, also now estimated at several hundred million dollars.
If the PFDs are approved they will likely require money to be taken from the Permanent Fund’s earnings reserve account for both years, and pushing draws on the earnings account above the 5 percent Percent-of-Market Value, or POMV, limit set out in Senate Bill 26, passed by the Legislature two years ago.
The regular PFD was added to the budget Saturday by the Finance committee with the additional payment added through a floor amendment to the budget offered Monday by Sen. Mike Shower, (R-Wasilla).
An aspect of Shower’s early-PFD plan, critics point out, is that it would pay to people who enrolled and were qualified for the dividend last year. The 2020 dividend, in contrast, will be paid to people who qualify this year.
The distinction in this that some people who qualified in 2019 have moved out of state and are no longer residents but would be receiving the early PFD anyway.
Another criticism is that the PFD money, totaling almost $1.3 billion for both dividends, would be more efficiently used if it was targeted to the newly-unemployed and other Alaskans in distress with a rapidly deteriorating economy.
Meanwhile, the Legislature’s action is playing out against a severe economic downturn that has hit the state. The speed with which the COVID-19 virus has spread is causing shutdowns of businesses and institutions across the nation, but in Alaska the effects are severe because virtually all of the state’s private sector economic pillars are challenged.
The collapse of oil demand and crude oil prices is now threatening a promising renaissance of North Slope activity. ConocoPhillips has already cut development drilling and is laying down two drill rigs. Oil Search has delayed a preliminary production start of the Pikka project, where Repsol is 49 percent owner.
Southeast Alaska may lose its entire 2020 summer tourism season because of cruise ship cancellations, and commercial fisheries may be peril because of virus-related uncertainties on whether workers can be mobilized to coastal processing plants and over transportation issues and economic issues in China, a major customer.
If the Legislature takes a recess all bills remain active so that when lawmakers reconvene they can pick up work on legislation. However, under the state Constitution the Legislature must actually adjourn its 2020 session by the 121st day of the session, which will be in mid-May. When that happens all bills die, and must be re-introduced.
Meanwhile, other bills getting relief to distressed workers are being enacted. A bill enhancing Unemployment Insurance Compensation payments to laid-off workers, House Bill 308, has moved quickly and was approved Sunday by the Senate after passing the House earlier. The bill changes waiting periods so as to get money out quickly and increases allowances for dependents.
So far, however, there is no action to increase the weekly maximum benefit of $370, which is one of the lowest benefit amounts in the nation. A change in statute would be needed for that. Alaska is also one of three states where employees pay UIC taxes on wages along with employers.
Meanwhile, the state unemployment compensation fund has a healthy surplus and will be sustainable through the present crisis, state labor officials told the Senate Finance Committee last Saturday.
A bill that is advancing fast but is not yet approved is SB 115, which would increase the state motor and marine fuel taxes. The bill was before the House Finance Committee last weekend. Sen. Click Bishop, R-Fairbanks, is sponsor. A provision added in the House Transportation Committee allows commercial fishing vessel operators to apply for a refund for part of the tax.
Even at the higher rate 16 cents per gallon Alaska’s tax would be among the lowest in the nation. The new motor fuel tax revenue would help support highway maintenance; the marine fuel revenue would support harbor and other maintenance.
Another bill close to final passage is SB 155, which would streamline and improve reporting requirements for work on state mining claims. Also sponsored by Senator Bishop, the bill has passed the Senate and passed our of House Finance Committee Tuesday, March 24.
Karen Matthias, Executive Director of the Alaska Producer’s Council, explained the bill this way: “Under the current system, Alaska miners—ranging from small placer miners to large commercial operators—have encountered significant problems, including loss of land tenure, from minor mistakes and clerical errors relating to affidavits of labor and qualifications requirements.
“Some miners have spent thousands of dollars to resolve issues with competing claimants that arise due to vague laws and regulations that do not clearly define what is required to maintain mining claims,” Matthias said.
Another bill that has passed both the Senate and House, and is now before Gov. Mike Dunleavy, is SB 123, which establishes a framework for independent electric cooperatives along the Interior-to-Southcentral “railbelt” power grid to work together. The utilities, and legislators, have been working for years on such an agreement.
SB 123 is now headed to the governor’s desk after passing the House March 19. It had passed the Senate earlier. Language from a telecommunications bill, SB 81, was added to SB 124 in the House, a change that was accepted by the Senate. SB 81, which had been approved by the Senate earlier, is mainly a technical cleanup of the state Electric and Telephone Cooperatives Act. SB 124 also strengthens the Regulatory Commission of Alaska’s authority over independent utilities.