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Legislature '93: on a spending spree.

Critics call this year's legislative fiscal frenzy a tale of pork and promise.

Who were the winners in this year's legislative session? Senate President Rick Halford (R-Chugiak) said it was just fine with him if a lot of bills weren't enacted in the Legislature this year, and they weren't. House Speaker Ramona Barnes (D-Anchorage) made a comprehensive energy package one of her highest priorities, and it passed. Gov. Wally Hickel claimed victory for his legislative priorities: school and municipal funding programs.

But even as the state's political leaders toasted the ultimate success of their often rancorous session, critics -- including minority legislators -- were thrashing them for presiding over the biggest spending binge since 1984. The political and economic fallout from passage of the $2.5-billion operating budget (only slightly less than last year) and a $730-million capital budget (more than double last year's) may not be felt for some time.

The most immediate unanswered question is whether Gov. Hickel will exercise his fiscal independence in July to veto the budgets down to what many analysts believe would be a more responsible level. While Hickel threatened vetoes to leverage votes for some of his priorities this session, he has a big-ticket reputation.

Of particular concern to many is the fact that the state doesn't yet have in hand all the money it has appropriated. According to media reports, the state spending total is about $1 billion more than legislators themselves expect the state to receive in taxes and royalties next year.

Furthermore, the fiscal feeding frenzy, prompted by a $630-million windfall from an oil tax settlement, postponed for another year consideration of long-term state policies (i.e., taxes, spending cuts) to address a still-looming billion-dollar spending gap as Prudhoe Bay royalties decline.

And while some lawmakers took quick credit for cutting budgets of more than half the state's agencies, operational spending is actually $30 million higher than last year. Their boast is made possible because next year's debt service will drop by about $54 million, which means the cost of state government did in fact decline by about $24 million.

Budget Battles

Ironically, some of the agency cuts that were made may adversely affect the business and development communities. The Alaska Department of Natural Resources was hit especially hard, and lack of funding there may hold up permits, plans and land transfers needed to spur development projects.

A surprising number of conservatives outside the Legislature, in addition to some prominent voices from within, questioned whether the BP settlement money should more properly have been deposited in the budget reserve account -- created for just such an eventuality -- and budgeted in a more orderly fashion over a longer period.

Other legislators tried to assure constituents the spike in spending was for backlogged and badly needed projects, especially school repairs. Good fortune, they say, simply made it unnecessary to postpone the inevitable any longer.

"It's one-time spending," explained House Finance Co-chair Eileen Maclean. "It was the House cleaning the house, addressing some major problems. The list is going to be shorter next year."

Jerry Reinwand, a longtime lobbyist and former chief of staff to Gov. Jay Hammond, agrees. "They're getting blistered for spending too much money, but there were kids' lives at risk."

However, there are deep philosophical concerns about the spending plans, too. Halford has used his Senate presidency as a bully pulpit to push the economic theory that government should cut welfare and push job creation with capital construction. Except for the welfare part, programs like Halford's are usually associated -- rightly or wrongly -- with Democrats. And predictably, labor union representatives lauded the Legislature for their efforts.

But no one thinks all the capital projects are essential, and even prominent players in the state's construction industry warned that the one-time appropriation would result in a boom that would inevitably be followed by a bust. Some say the state's contractors cannot absorb all the work, which may lure Outside firms into an artificially-inflated market. Once the money is spent, more firms chasing fewer dollars will pressure long-established local contractors.

And while Halford is fond of the refrain that government should get people off welfare and into jobs, Democrats say cutting welfare payments -- a controversial legislative move this year -- that benefit primarily women and children while funding a bloated brick-and-mortar budget makes no sense. No one really expects welfare moms to be wearing hard hats.

Energy Issues

Some analysts feel that aside from the budgets, the energy package is the most important bill passed this session. "I think it's going to have a positive long-term impact on Alaska," says Reinwand.

The legislation appropriated $99 million in cash grants to build energy interties in the state's railbelt, completing a power grid linking the railbelt from Kenai to Fairbanks. Two smaller interties, one from Sutton to Glennallen and one between Ketchikan and Wrangell, would be financed with $55 million in low-cost state loans to utilities.

The interties system has long been touted as a boon to future economic development, even though three different feasibility studies have shown prospects for only marginal returns on the state investments. Proponents point to projects like the Fort Knox gold mine in Fairbanks to justify the need for a more complete and reliable system.

In addition, the bill dismantles the Alaska Energy Authority, whose tendency to operate on a political basis has long rankled legislators. Essential functions will be moved to other agencies. It also reduced and reorganized rural electric subsidies, known as the power cost equalization program, a move that Sen. Georgianna Lincoln charged would hamper economic development in the Bush.

The interties had long been a priority of development-minded conservatives, who began the session by celebrating their ascension to leadership of both the House and Senate. Everybody assumed their agendas would enjoy smooth sailing in concert with a conservative governor. But there was trouble from the start.

Charges of sexual harassment against Pedro Bay Sen. George Jacko created a huge early-session distraction. Jacko was the only Democratic member of the coalition that gave Halford a one-vote majority in the Senate, and Halford took early salvos for attempting to downplay the allegations against Jacko in order to preserve his coalition. Later, unrelated ethics allegations about Sen. Dave Donley of Anchorage didn't help matter, either.

Cooperation, Confrontation

On the House side, it quickly became a cliche to refer to the "Year of the Woman" as female legislators rose to the four main leadership positions: Speaker (Rep. Ramona Barnes, R-Anchorage), Majority Leader (Rep. Gail Phillips, R-Soldotna), Minority Leader (Rep. Fran Ulmer, D-Juneau) and Minority Whip (Bettye Davis, D-Anchorage). Add to that group the finesse of Finance Co-chair Eileen Maclean of Barrow, and the assemblage really went beyond cliche. Veteran observers conceded that things worked pretty well with women in charge of the House. Furthermore, when things soured with the Senate, Sen. Drue Pearce became a critical liaison.

"It's the first time we've really had that. It's a very healthy sign," says lobbyist Reinwand. "Those women leaders on the House side functioned as a cohesive unit."

Complicating things in both houses was an unusually large crop of new and sometimes independent-minded legislators faced with steep learning curves. Reinwand, recalling a favorite quip of his old boss, Jay Hammond, noted the difficulty of getting 60 Alaskan lawmakers to pull together:

"There's not a lack of leadership in the Legislature. There are leaders. The trouble is you don't have followers," he says. "I'm surprised Halford didn't have a lot more problems than he did. And I think the press has created this aura of confusion. They've overplayed it."

Much of the drama during this year's session came from the apparent friction between Halford and Barnes, stemming in part from very different leadership styles. One agency director monitoring several bills described the spatting as pure power politics, and it helped fuel speculation that one or more coups might be in the offing.

"If they can't get together, something is drastically wrong," observed Sen. Georgianna Lincoln of Rampart. "I think it could unravel."

The in-fighting may have prevented the kind of sweeping political change that might otherwise have been expected. Although Republicans trumpeted victory for their philosophy, more objective analysts say there was no political revolution in Juneau this year.

Budget Priorities

A diplomatically-worded press release from Governor Walter Hickel's office noted that this year's session was "very productive, in the final analysis." That could be because Hickel's team, nearly three years into its tenure, finally hit its stride.

While Hickel didn't get anywhere with two of his top economic priorities -- a constitutional amendment to dedicate fuel taxes to a road maintenance fund or efforts to tax offshore fish processors (based primarily in Seattle) -- he did strong-arm the Legislature into requiring communities to match state grants with 30 percent to 40 percent of the costs of some public works projects based on a sliding scale of population.

Hickel compromised with lawmakers on a plan to build and repair schools. Life and safety issues, which have been growing at alarming rates with deferred maintenance, will be addressed this way: The state will spend $172 million next year on public school construction and repair and $20 million on similar needs for the University of Alaska.

The state will spend another $175 million to reimburse municipalities in urban areas for bonded school projects over a 20-year period, essentially committing future legislatures to uphold the formula. Such promise-making could pose a problem as political currents shift and oil revenues continue to decline.

In addition to the budget priorities, some other long-contentious matters were resolved by this year's Legislature:

Resource Development: Although Halford, like Hickel, is itching to open up Alaska's virgin hinterlands to mineral and oil development, it's easier said than done. But conservatives have long had it in for state resource bureaucrats who they say are committed to slowing development. To prevent future roadblocks, a bill was passed to prevent the Alaska Department of Natural Resources from unilaterally closing large state-owned tracts to mining development.

Longevity Bonus: A plan was adopted to phase out the $250 monthly payments to senior citizens. No new applications will be accepted after 1997. Those already in the program at that time will continue drawing the bonus for the remainder of their days. Two critical questions remain: Is this the beginning of fiscal reform, of taking the financial bull by the horns to reduce state spending to levels that can be sustained in the future? And, is the plan legal? It has been suggested that letting payments continue to some while taking the bonus away from others makes the state vulnerable to the kind of legal challenge that forced the state to make it available to every senior in the first place, rather than those who had lived in Alaska for a long period of time.

Kachemak Timber: The stars finally lined up for the Kachemak Bay timber buyback, 17 agonizing years in the making. The Legislature appropriated the balance needed for a $22-million buyout of Native timber interests in Kachemak Bay State Park. Plans for Koncor Forest Products to log areas within the park this summer have been scrapped.

Gaming Reform: A law that would revise state gaming laws to send more operator profits (30 percent instead of 15 percent) to charities was sent to the Governor for a likely signature. The measure was projected to double the amount of money forwarded by contract operators to charities who actually hold the gaming permits for pull tabs and other games of chance. The bill also allows local communities to ban gambling.

There were also many things that didn't get done, and their fate will remain unknown until next session, when some of the proposals will be put back on the table. These include: a property tax exemption for the elderly that was left on the books; capital punishment; and open meetings law revisions. There was no royalty-debt relief for oil refiners and no tax relief for oil companies charged by the state for oil spill prevention and cleanup.

The War Continues

With the few but noteworthy issues addressed this year, conservative legislators will have more room to take the offensive next session, especially on pro-development bills, a top Halford priority. If Senate Republicans can hang onto Jacko, the modest progress made this year could form the basis for more concerted attacks on environmental regulation, resource planning and federal land controls next year.

Still, no one assumes the work will be easy in the next session. Efforts to resolve another complex issue, the mental health lands trust, could easily tie even a cooperative body of lawmakers in knots. In the present case, there is a legacy of hard feelings both within the Senate and between the House and Senate leadership that has to be overcome. Says one legislative consultant who declined to be identified:

"We ended up with one of the worst sessions in terms of non-productive legislation and overspending. The conflicts from this session will not go away soon. We'll be paying for this for a long time. There's too many festering wounds. People will be dealing with getting back instead of getting ahead."
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Title Annotation:excessive government spending
Author:Richardson, Jeffrey
Publication:Alaska Business Monthly
Date:Jul 1, 1993
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