PUBLISHED: 5:04 PM on Wednesday, May 10, 2006
Legislative Roundup
Capital budget flush with money for Juneau
Pet projects for Juneau and the governor's priorities for the capital city would get a bigger wad of cash from the state's capital budget, as proposed by House legislators.

The capital budget released by the House Finance Committee Sunday, May 7, would divvy up $697 million from the state's general fund to Alaska projects. Despite complaints early in the session that the Gov. Frank Murkowski's proposed capital budget was too big, general fund spending has now inflated 16 percent over what he had proposed.

The new version of the capital budget, Senate Bill 231, would spend roughly $61 million for 33 Juneau projects. That includes $53 million from the general fund and the remainder from federal or other sources, such as tobacco settlement bonds.

Juneau's legislative delegation squeezed in a few more big-ticket items into the House Finance bill, including:

• $4 million for a new Mendenhall Valley recreational sports center.

• $1 million toward the Juneau International Airport's planned expansion.

• Nearly $2.5 million for renovations and fire alarm upgrades at the University of Alaska Southeast.

Juneau voters turned down a ballot proposition in 2005 that would have used sales tax revenue to fund the airport expansion. They also turned down a similar proposition to fund a new indoor pool in the valley.

The valley recreation center is not related to the controversial indoor pool project, legislative staff said Sunday night. Also, the allocation for the airport project would most likely be directed toward terminal renovations, they said.

The proposal to fund the recreation center is "wonderful news," said Ken Leghorn, vice president of the Juneau Community Foundation, which has lobbied for improved indoor sports facilities in Juneau.

"Depending on the final design, this could fund a complete, multiuse sports arena, which is needed by the entire Juneau community for youth and adult recreation, especially given our rainy and cool climate," Leghorn said.

The House Finance capital budget also restored a few items for Juneau that had been crossed out by Senate budget writers. For example, it adds back $3 million for an environmental study of dredging Gastineau Channel and $300,000 for the Juneau Family Birth Center's new family health care center at Salmon Creek.

The biggest line item for the Juneau area - $45 million for the Juneau Access project linking the capital city by road to a ferry terminal at the Katzehin River - was unchanged in the capital budget.

The House Finance Committee also added $10,000 for an Alaska State Museum project to restore the late Gov. Jay Hammond's plane and $15,000 for a playground at Dzantik'i Heeni Middle School.

House waffles over oil tax

House legislators approved a 21.5 percent tax rate on oil company profits Sunday, May 7.

Then, minutes later, they rejected their own vote and voted again.

The 21.5 percent tax rate failed 20-20, with Juneau's Bruce Weyhrauch, a Republican, switching his vote from yes to no.

The House ultimately ended up back where it started - a 20 percent tax rate on oil profits - but only after legislators on both sides of the aisle pitched a volley of tax rates that just wouldn't stick.

The House considered amendments for tax rates of 25, 22.6, 22.5 and 21.5 percent. All of those failed.

"I feel like I'm negotiating for a used car," Rep. Harry Crawford, R-Anchorage quipped on the House floor.

Legislators on both sides of the aisle reiterated a common refrain in the Legislature this spring: They don't really know what is the proper tax rate for oil profits.

Even 25 percent could turn out to be too low, Rep. Ralph Samuels, R-Anchorage, said.

Rep. Beth Kerttula, D-Juneau spoke up in favor of a 25 percent tax rate, offered as an amendment by Rep. Eric Croft, D-Anchorage. "When you are negotiating like this, you should err on the side of the state," Kerttula said.

The state's consultants have recommended that a tax rate of 25 percent is a safe bet, but oil companies beg to differ. The companies claim anything over 20 percent would curtail their investment in Alaska oil.

The debate on the oil tax bill, Senate Bill 305, continued after 10 p.m. Sunday night.

It was a climatic evening following upon months of debate over the governor's proposed overhaul of the oil tax system. The current tax system is based on a severance tax. The new system would be based on net profits.

The Legislature has been pulled in two directions, with a 20 percent tax rate proposed by Gov. Frank Murkowski and 25 percent suggested by the state's consultants.

Recently, the state Senate approved a 22.5 tax rate, splitting the difference between 20 and 25. The House Finance committee came back with a 20 percent tax rate.

Sunday's nearly successful bid for a 21.5 percent tax rate, offered by Rep. Paul Seaton, R-Homer, would have split the difference between 22.5 and 20.

The 21.5 percent tax rate had been tossed around as a possible compromise figure, said Rep. Kevin Meyer, R-Anchorage.

Some amendments to the oil tax bill actually passed Sunday night.

For example, Weyhrauch offered an amendment that would prevent oil companies from deducting spill clean-up costs from their standard tax deductions. The amendment passed with unanimous consent.

Also passed was an amendment by Rep. Mary Kapsner, D-Bethel, which would allow the Legislature to put an undetermined amount of money from oil tax revenue into a new fund to offset high energy costs. The amendment passed 26-14, with Kerttula voting in favor and Weyhrauch voting against.

Governor names 'must pass' bills

The governor is urging the Legislature to pass two bills before the end of its regular session May 9.

One of the bills would create new penalties for marijuana possession and limit access to the chemicals used to make methamphetamine.

The second bill would require forming a new state-run incentive program to distribute up to $5,500 in cash rewards to school employees who have made the best contribution to school achievement in their districts.

The bill has been held in a House special education committee after opposition from school principals and major state education groups.

In a Thursday, May 4, press conference, Murkowski said both of the bills serve the best interests of Alaska children.

The drug legislation, House Bill 149, is significant for children who are at risk from domestic abuse from meth addicts or want a future career in Alaska, Murkowski said. Too many military recruits and other job applicants in Alaska fail their drug urine tests, the governor and his labor commissioner, Greg O'Claray, said.

"I would encourage you to be as indignant as I am," Murkowski said.

The House has balked at the bill's criminalization of marijuana possession for a variety of reasons, including Alaskans' constitutional right to privacy. But House members' biggest objection was the Senate's insertion of the marijuana provision without allowing full deliberation by House committees.

The House narrowly rejected the Senate-packaged bill April 19 on a 19-21 vote.

Although Juneau Sen. Kim Elton, a Democrat, voted for the "methijuana" bill when it was on the Senate floor, he said Thursday that his preference would be to separate the bills, as legislators in the House have suggested.

The governor on Thursday accused a lone House member, Rep. Mark Neuman, R-Big Lake, of holding up his school cash incentives bill.

The bill, Senate Bill 235, has not left the House Special Committee on Education, which Neuman chairs. "I would urge that legislator to reconsider ... it's time to get it released," Murkowski said.

The bill was on schedule for its first hearing in the House committee on Tuesday, but the committee meeting was canceled.

House increases school funding

In the biggest debate on education funding this session, the Alaska House on Wednesday, May 3, passed a bill that gives school districts in smaller cities and rural areas an additional $35 million.

Lawmakers said they have struggled for some eight years to implement a new area cost differential formula that pours more assistance into rural areas, as the current one is deemed inadequate.

Instead, a sum of $24.3 million and a grant of $10.7 million were added to the bill to make the new numbers work for one year, with the promise to further study the effectiveness of the proposed formula.

The cost differential was inserted as an amendment to a school-construction reimbursement bill. The amendment passed 37-3 and the bill also being approved shortly after.

Historically, opposition to updating the cost differential has come from lawmakers in Anchorage and Fairbanks, who say their districts would lose the money that's being shifted to other areas.

But by adding another $6 million to the base student allocation this year, Anchorage was able to pick up some $2 million it needed to fill a hole in its budget.

"We worked hard to try to make sure that no school district was hurt," said Rep. Mike Chenault, R-Nikiski. "We think we've come to a compromise."

The House plans to increase the base student allocation by $96 million, making the per-student amount equal to $5,380. The funding is slightly more than the governor's proposed $90 million.