Wrangell Sentinel -

Alaska's Legislature returns to work next week to begin its second regular session, and by far its biggest task will be to make the state's budget sustainable.

Convening in Juneau on Jan. 19, legislators in the House and Senate will begin putting together budgets for the 2017 Fiscal Year, which will have to address a projected $3.6 billion spending deficit.

Last month the office of Gov. Bill Walker released its budget plan, which proposes $100 million in net cuts to agency spending and $360 million in new revenue. Among new options being put forward were a cap to Permanent Fund Dividend payouts and the first income tax in over three decades.

Talking to Wrangell's representatives, the budget will remain the highest priority this upcoming session.

"The magnitude of our fiscal situation is going to consume all of our time," commented Sen. Bert Stedman, the Sitka Republican who represents District R. A senator since 2003, he currently chairs the Health and Social Services Committee, sits on the Resources and Transportation standing committees, and is formerly a co-chair of the Finance Committee.

"Like all governor's budgets it takes several weeks for Legislative Finances to go through it," Stedman explained. The Legislative Finance Division is currently reviewing the governor's budget and checking its numbers, after which a clearer picture of its impact will be available.

But on the macro level, the state will have to contend with a deficit of $3.6 billion. "It's a good number for the public to keep in mind," Stedman said. A solution will involve a combination of cuts and taxes, some of which may be unpleasant.

Stedman estimated the state pays out more than $1 billion in tax credits to oil producers and $900 million to its residents through the PFD. Taking the fiscal climate into account, he also reckoned Cook Inlet gas production subsidies needed to be reassessed. The last fiscal year they cost the state around $280 million.

"There's a fairness issue here that we need to put on the table," he said. "Your senator's not going to be quiet, and in some parts of the state not popular."

How best to readjust agency budgets and implementing taxes will be a matter of debate, but Stedman cautioned against doing too much too quickly. Taxes and cuts are fiscal restraints, he explained, and have a dampening effect on the state's economy.

Each will have a different effect from one community to the next. For instance, while legislators from Anchorage may view implementation of a statewide sales tax more favorably than one on income – currently the city does not have a sales tax of its own – how that will affect rural communities could be economically damaging as they are stacked atop local rates.

"I think Wrangell would get hit hardest among them because they have one of the highest sales taxes in the state," Stedman noted. The typical sales tax rates within Alaska range from two to five percent, with Wrangell's seven percent at the high end.

"We need to be careful with the severity of what we implement," he said. But compromises will be necessary in the coming session. "When you look at the other revenue-enhancing issues, income tax, sales tax – pretty much a tax on everything that breathes or walks – I think it's good not to have any sacred cows."

"In all of these items I would exclude the Permanent Fund," Stedman added. However, he felt the additional inflation-proofing appropriations put back into the fund's principal each year is redundant, and that significant funds could be saved by eliminating that.

"We've got a lot of things on the table that will need to be on the table at the same time," he said. Among them will be cuts to agency operations, including those important to local communities like the Alaska State Troopers and Alaska Marine Highway System. "It's going to be hard decisions to make, and it's not going to be fun."

The Sentinel asked Wrangell's representative in the House for his impression of the upcoming session:

"It'll be at the backdrop of everything we do," said Rep. Dan Ortiz, the Ketchikan Independent representing House District 36. Entering the second half of his first term, the former teacher sits on the Transportation and Community & Regional Affairs standing committees, as well as the education finance committee.

"We are going to need to cut some more, there's no doubt about that," Ortiz said of the governor's budget. He anticipated lawmakers would need to set partisanship aside and compromise to make the necessary changes, an approach Ortiz felt Walker's budget had begun to take.

"I commend him for that, I think it shows real good leadership," he said.

Ortiz was in Wrangell last week, meeting with constituents and following up on a mailed survey he has been conducting to gauge his district's opinions. Of the collected results, he found none of the potential revenue options found more than 50-percent support.

In the debates ahead, Ortiz felt legislators will have to have "good, honest discussion about each of those things."

Beyond the budget, Ortiz pledged to advocate this upcoming session for fewer cuts to the ferry schedule, and to continue work on transboundary mining issues. He felt the work group established by the governor's office was a positive step, but felt more work would be needed to gain stronger federal support.

"I think it's time that we request that the State Department engage in this issue," Ortiz said.

Other issues up for discussion this year include a proposal to take Alaska off daylight savings time and request its inclusion in the Pacific Standard Time Zone, a step neither Ortiz nor Stedman supports.

"It's an absolutely appalling bill, it should die," Stedman commented, pointing out he helped kill an earlier incarnation when he was Finance chair.

Whether such issues will have much time on the floor this session is debatable, but Stedman anticipated the Legislature will have special sessions to look forward to this year. Last year, three additional sessions were called, including one held to approve the state's buying out TransCanada's share in the LNG pipeline. However, he felt the current budget crisis called for legislators' full attention.

"It's not possible or even probable that we will finish in just 90 days," he said. "If we did, if I was the public I'd be scared to death the quality of the work was pretty poor."

Those interested in learning more about the upcoming session or who need help with PFD and other state filings can visit the Legislative Information Office on Front Street, weekdays from 8 a.m. to 4:30 p.m.

"I can follow legislation for people if they're interested," said the office's agent, Sarah Whittlesey-Merritt.