First Session of 30th Alaska State Legislature

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Alaska State Legislature, House District 31
From the Desk of Representative Seaton:


December 22, 2016, Vol. 208

Happy holidays!  I thought I would take a few moments before the New Year kicks off to share how I envision this legislative session unfolding and to introduce you to my staff.  I’ll also provide a brief outline of the governor’s proposed budget.  As released, the budget includes reductions, wage freezes, and the expectation of a plan to draw on the Permanent Fund Earnings Reserve, but the budget is still not fully balanced.
I will be taking on a new role as co-chair of the House Finance Committee.  This is different than my past positions as chair of various policy committees, but it is an important role if we are going to get serious about addressing the state’s fiscal challenges.  In the past I provided you with a weekly update of what was happening in each of the committees of which I was a member.  My committee report will be different now that I am focusing on the finance committee, but I hope to keep you appraised of what is happening in other committees by connecting you with other Representatives.  
There is a new majority in the House this year.  Though we come from multiple parties, we are united by a firm commitment to pass a comprehensive fiscal plan.  We as a state can no longer afford to pay for our core services solely by draining our savings.  My goal this year will be to create a budget and revenue streams that will be sustainable in the future.  
Alaska faces a dilemma.  Over the past few years, we have balanced our budget deficit by spending from our primary savings account – the Constitutional Budget Reserve (CBR).  This year only 29% of our budget was paid for by current revenues.  For the last three years the legislature has worked to reduce the budget with strategic cuts, but balanced the remaining budget by simply taking whatever was necessary from the CBR.  Last year, even after the Governor’s large vetoes, we used $3.2 billion of the CBR, leaving only $3 billion, not enough for even one more year of a similar budget.  There is also the Permanent Fund Earnings Reserve Account (ERA), but because it is based on the fluctuating performance of investments, it is too volatile to sustain a large annual budget on its own (a 10% earnings correction on the $50 billion Permanent Fund value would be a loss of $5 billion).  If the ERA is drained too low, then no PFD can be paid.
Should we diversify our revenue sources to slow the depletion of our savings?  This is often called a sustainable fiscal plan and in my view contains four elements: a reduction in budget expenditures; diversion of a portion of the PFD to help fund the budget; a transfer of a formula specific portion of the ERA to the budget; and a broad based sales or income tax for new revenue.  The important thing is to strike a stable balance between these elements.
The other 49 states have figured out how to create revenue through a combination of state income, sales and property taxes.  Alaska currently has none of these relatively stable sources of revenue to support state government, although we had one in the past.  Using the ERA is not an option available to any other state, but no draw can be too large without negatively affecting individual Alaskan families and the economy of Alaska.  We cannot touch the core of this large wealth fund because it is prohibited by our constitution.  Budget cuts need to be made, including a reform of the oil tax credit and payment system.  Cutting too much from the budget, however, would eliminate the services Alaskans say they want such as good education, public safety, roads, airports, and an adequate resource permitting and management system.
A Sustainable Fiscal Plan must be realistically based on current revenues - anticipated to be about $1.6 billion for FY18 at the current range of oil prices.  The rest of the deficit must be covered by responsible cuts to the budget plus new revenues, including a sustainable draw from the Permanent Fund Earnings Reserve.  I have already put forward proposals that I believe will take us in this direction.  Exactly what the final plan will look like is yet to be determined.  It may change as we take into account the Governor’s budget and negotiation with the Senate and other House members.  What is important is that any choice we make is as fair as possible to all Alaskans.  All of the options on the table are tough decisions and all Alaskans will bear some responsibility in supporting the services and programs we all use.  If the new revenues and budget reductions are properly weighted, all families should see a proportional impact regardless of economic status.  I will strive for this sort of balance.
I rely on you to keep me informed on what is important to you.  I encourage you to read the rest of this newsletter for more detail on the budget.  If you have any thoughts, questions or opinions please share them with myself or my staff.  An easy way to follow a bill is to track it through the Bill Tracking Management Facility program on BASIS.  Simply create a folder and update it regularly with the bills you want to track.  You will receive an email alert any time there is an action for the bill such as a scheduled hearing or public testimony in a committee.  If you need help setting up a folder, contact our Kenai or Homer LIOs for assistance (information at bottom).  During the session my aim is to get this email newsletter to you by Monday so you will know what issues will be coming before the legislature that week. 
Happy Solstice and best wishes for the holidays from Tina and I.

Committee Report

I will be co-chairing the House Finance Committee and will be in charge of the operating budget.  Most bills introduced during the session alter expenses and/or revenue to some degree and therefore come through the Finance Committee.  With a focus on passing a sustainable budget plan, I anticipate several bills dealing with new revenue sources, such as the update to my HB365 – explained below under Personal Legislation.  The Governor released a copy of his Motor Fuel Tax and Permanent Fund Protection bills on December 15 to both the House and Senate.  I anticipate the Governor will also introduce an expanded corporate income tax bill instead of individual small industry taxes as he did last year.   
Governor’s Motor Fuel Tax bill: $40 million annual revenue in FY18, increasing to $81 million in FY19, to be used to help fund highways and airport maintenance, ferry system and the municipal harbor program.  This tax will be the first significant statewide fuel tax increase since 1970.  The cost per Alaskan is estimated to be $44 per year.
  • Motor Fuel: from 8 cents per gallon to 16 cents in FY18 and then to 24 cents in FY19
  • Jet Fuel: from 3 to 6 cents in FY18 and then to 10 cents in FY19
  • Aviation Gas: from 4 to 9 cents in FY18 and then to 14 cents in FY19
  • Marine Fuel: from 5 to 10 cents in FY18 and then to 15 cents in FY19
Governor’s Permanent Fund Protection Plan bill: This bill will start where it ended last session after passing the Senate: a $2.5 billion draw from the Permanent Fund Earnings Reserve and PFDs reduced to $1,000 per person starting in 2017.  It will also include a similar draw from the Earnings Reserve for the FY17 budget as a supplemental appropriation (had the bill passed both the Senate and House in 2016, this draw would have happened in FY17).  
The Governor also shared the following:
  • He will propose legislation to place a freeze on steps and merit increases for exempt and partially exempt state employees which include executive agencies, legislature, judiciary, university and state corporations;
  • Increase state employee contributions to health care premiums;
  • Future state employee union contracts will be negotiated with these step freezes and health care premium increases;
  • Reduce his own salary by one-third.
Talking about sustainable budget plans at the Common Wealth North event earlier this month.
The Governor released his draft FY18 budget and the Department of Revenue released their Fall 2016 Revenue Forecast on Dec 15. 
Revenue Forecast Fall 2016:  Estimated total FY16 unrestricted general fund totaled $1.5 billion which is a sharp decrease from our FY13 and FY14 totals ($6.9 billion and $5.4 billion, respectively.)  Unrestricted general fund revenues are forecast at $1.4 billion for FY 2017 and $1.6 billion for FY 2018.  Though oil production increased slightly to 514,900 barrels per day in FY16, oil production is expected to decline over the coming decade, to roughly 331,000 barrels per day by FY 2026. 
Here is a summary of some areas in the FY18 operating and capital budgets that affect our district.  If you have any specific budget questions, please contact my staff Jenny Martin.
Operating Budget: $4.2 billion Unrestricted General Funds (UGF) which is nearly $47 million less than FY17.  $30 million of the reduction was provided by the Medicaid and Criminal Justice reform bills passed by the legislature in 2016.  Most departments will have smaller budgets which will affect our district through reductions in state services.  Though the FY18 budget eliminates 795 jobs, the jobs being eliminated in our district are ones that have been vacant for several months.
  • Public Radio: $2 million UGF – same as FY17
  • Education: $5930 Base Student Allocation (BSA) – but no additional funding.
  • Pupil Transportation: $72 million UGF – same as FY17
  • Pre-K Grants: $2 million UGF
  • Early Learning Coordination $8 million UGF / Parents as Teachers $500,000 / Best Beginning $320,000; all funded at FY17 levels
  • Youth Courts $530,000 UGF - same as FY17 
  • Senior Benefits Program: $19 million UGF – down $43,000 from FY17
  • Senior Community Based Grants: $10 million UGF – same as FY17
  • Family Prevention / Reunification grants: $1.7 million UGF - same as FY17
  • DNR – Recorder’s office: Homer’s office was closed this year.  In FY18, Kenai’s office will downsize from 3 to 1 staff.
  • State Parks: $2 million UGF – down $700,000 from FY17
    • Reduced 1 Kachemak Bay State Park ranger from full time to part time in the winter (starting winter of FY17).
  • Fire Marshals: 1 building plan examiner will be cut in Anchorage and 1 Office Assistant will be cut in Fairbanks from statewide operations, which will increase wait time for plan approval from 2 weeks to 4 weeks.
  • Troopers: $112 million UGF – down $1 million from FY17
  • Domestic Violence & Sexual Assault programs: $10.8 million UGF, down $300,000 from FY17
  • Transportation: $145 million UGF – down $72 million from FY17, but this will be offset by the new proposed legislation to increase the motor fuel, aviation fuel, and marine fuel taxes – which is expected to generate $80 million in new revenue to be used for DOT maintenance (see above under Finance Committee Report).
  • AK Marine Highway – Ferries: $85 million UGF – down $3 million from FY17
  • University: $325 million UGF and $332 Designated General Funds (incorporates the 5% tuition increase).
  • Courts: $104 million UGF– down $2 million from FY17
Capital Budget: $115 million UGF of which $75 million is used to match $1.2 billion in federal funding.  The Governor has chosen the “no bid alternative” for the Juneau Access Road project, meaning the project will not continue.  The excess money will be used to fund transportation infrastructure projects in the Juneau and Lynn Canal areas. No federal funds spent to date on the project will have to be repaid and any studies already done will be available for future use.
Capital projects in our district:
  • Exxon Valdez Oil Spill -  EVOS Parks Habitat Restoration & Protection: Using EVOS funding (not state UGF) this project will restore and protect fish habitat and improve managed access at six park units: Kenai River Flats Unit, Eagle Rock Unit, Crooked Creek State Recreation Site (SRS), Kenai River Ranch Unit, Pipeline Crossing Unit, and Anchor River State Recreation Area (SRA).
  • Exxon Valdez Oil Spill -  EVOS Purchase of Interest Land in Kachemak Bay: Using EVOS funding (not state UGF) this project will purchase approximately 2,000 acres of surface estate in Kachemak Bay, including lands on Gull Island, other nearby Barrier Islands, and a portion of a spit in China Poot Bay.  All of these parcels are within the Kachemak Bay State Critical Habitat Area. The purchase also includes nearby uplands encompassing portions of the Jakalof and Rocky River headwaters immediately adjacent to Kachemak Bay State Park.
  • Labor & Workforce Development:  Many in our district get training through Alaska Vocational Technical Center (AVTEC).  This project will provide improvements and deferred maintenance to 16 buildings on campus.
Other capital programs that affect our district:
  • Harbor Facility Grant program: $5 million from the state will match $5 million from municipalities to fund various harbor infrastructure projects.  Though our district does not have any projects being funded this year, we have in the past and will again in the future.
  • AK Marine Highway System maintenance: $12 million UGF
  • Village Safe Water program: $12 million state funds will match $52 million in Federal Funds to help plan, design and construct water and sewer systems improvements.  Many communities in our district have benefited from this program.
  • AK Travel Industry Association – tourism marketing: $1.3 million UGF and $1.7 million Designated General Funds.
  • Hope Community Resources: $90,000 UGF for upgrades to facilities for people with disabilities.
  • Code Blue Project: $500,000 UGF for equipment that benefits our volunteer fire departments and EMTs. 
Community Revenue Assistance:  This fall, we monitored the Borough’s community meetings on revenue sharing and priority projects for unincorporated communities in preparation for FY18 capital budget requests.  As anticipated in our fall meetings, $30 million in community revenue assistance will go out to communities in FY18 based on the new formula and funding source (Power Cost Equalization Fund) that passed through legislation in 2016 (SB210 and HB196). 
CAPSIS:  Similar to the last two years, I do not anticipate any available funding for community capital projects entered through the CAPSIS system due to our state’s fiscal deficit and need for a sustainable budget.  However, I recognize that it can still be helpful for some organizations and municipalities to enter these projects as a way to keep the state informed of community needs.  For those wishing to enter a capital project into CAPSIS, the system is now open.  The deadline is February 13, but if you would like Jenny to review your request before you submit it, please enter into CAPSIS by January 31.  You can contact Jenny for any CAPSIS questions including login information.  Note that identified community projects approved at the revenue assistance meetings this fall will be submitted by the Kenai Peninsula Borough and organizations do not need to complete a separate application on their own.
This past September, I was pleased to talk with the Kenai Peninsula Borough School Board about the state's fiscal budget and ways to generate new revenue to maintain vital services such as education for our children.
Personal Legislation
With my focus on a sustainable fiscal plan, I plan to pre-file my revised HB365 Permanent Fund / Income Tax bill introduced during the 29th Legislature.  The bill will receive a new number once it is introduced on the House Floor in January.
HB 365 version P, heard in House Finance - links a moderate reduction of the Permanent Fund Dividend and a moderate income tax.  It allows a PFD to be applied as a tax payment against a state income tax which would be 15% of your federal tax liability.  If the PFD was greater than the tax liability, the remainder would be refunded.  The bill also has a 2.3% annual Percent of Market Value draw from the Earnings Reserve Account (ERA).  Altogether, this bill will reduce the deficit by $2.4 billion.  Dividends will be reduced but stable and the life of our savings accounts will be extended; under this draw the ERA remains steady and increases over time, allowing for the ability to pay back the money that was borrowed from the Constitutional Budget Reserve to balance our budget these last years. 

Rep. Paul Seaton

Thanks for signing up for my newsletter and engaging in the public process. I try every week to keep you abreast of issues and bills discussed at the committee level, where YOU have an opportunity to participate.

Meet the Staff
We have two new staff joining us in Juneau that will assist me with the Operating Budget; Joan Brown and Arnold Liebelt.  Both Joan and Arnold have many years of previous experience working with the state budget and I am pleased to welcome them to our team.  Jenny and Taneeka from my Homer office will also join us in Juneau.  Please don’t hesitate to ask them any questions you might have; their contact information can be found at the end of every newsletter and through my website. 
Joan Brown
For the last six years, Joan has worked as a legislative operating budget staff for three previous House Finance Committee Co-chairs.  Prior to working for the legislature, Joan was the Chief Budget Analyst in the Office of Management and Budget for over a decade.  Joan has lived most of her life in Juneau.
Arnold Liebelt
While this is Arnold’s first year working for the legislature, he worked for the Office of Management and Budget for many years and has a wealth of experience working with fiscal notes, which will be a great help in our office.  Arnold also hails from Juneau.
Taneeka Hansen
Taneeka was born and raised in Homer, Alaska where she spent most of her time reading, performing, or hiking across the bay.  She graduated from Whitman College in 2012.  Taneeka has worked in our Juneau office for four and half sessions and was most recently my Health and Social Services committee aide.
Jenny Martin
Jenny is heading into her third year working with me.  She has lived in Homer for 23 years and worked at various non-profits including the Kachemak Bay Campus, Big Brothers Big Sisters and as coordinator for the Homer Early Childhood Coalition.  Jenny looks forward to helping us pass a sustainable budget that will support the valuable services which benefit our communities and especially our children.
Following Bills & Committees
Access bills and committee schedules through the Legislature’s BASIS home page.  Get automatic alerts when a bill is scheduled for hearing or public testimony by signing up for “Track Bills in BTMF”.  Most committee hearings are broadcast on Gavel-to-Gavel at www.360north or through Live Now tab on the BASIS home page. 
Public testimony (when scheduled) can be given in person at your LIO or call (907) 465-4648 for a phone option.  Written Comments are best addressed to the chair of the committee where the bill is being heard.
Legislative Information Offices (LIO)Our Homer and Kenai LIOs are a great resource for tracking bills and participating in hearings.
Homer: Amber Corey 235-7878, 270 West Pioneer Avenue
Kenai: Mary Bea Byrne 283-2030, 145 Main St Loop, Suite 217
POMs Please do not use them to send your input as that system currently does not work well.  If needed, contact your local LIO office who can email us your comments.

Contact Us

If you would like to speak to me regarding a specific issue, it is helpful to first get in touch with the member of my staff handling related issues. 

Homer: May-December
270 W. Pioneer Ave., Homer AK 99603
907-235-2921 or 1-800-665-2689; Fax: 907-235-4008

Juneau: January-April
State Capitol – 120 4th St., Juneau, AK 99801
New location: Room 505
907-465-2689 or 1-800-665-2689; fax: 907-465-3472

Kenai: 907-283-9170 (will transfer automatically to Homer or Juneau)

Rep. Paul Seaton
Note: we will have a new Majority Coalition website soon!  The new link will be provided in future newsletters.

Jenny Martin
Constituent issues and questions, General Capital & Operating Budget information,CAPSIS requests, Personal Legislation

Taneeka Hansen
Legislation & Sustainable Fiscal Plans in House Finance, Personal Legislation
Joan Brown
Operating Budget, Finance Subcommittees
Arnold Liebelt
Operating Budget, Finance Subcommittees
Follow me on Facebook at Representative Paul Seaton

Rep. Seaton's Session Contact Information:

Mailing Address:
State Capitol - 120 4th Street,
Juneau, Alaska 99801
Phone: (907) 465-2689
Toll-free: 1-800-665-2689
Fax: (907) 465-3472


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