- Associated Press - Thursday, March 24, 2016

JUNEAU, Alaska (AP) - House Speaker Mike Chenault said Thursday that talks are underway with the chamber’s Democratic-led minority in an effort to craft a spending and revenue package that can garner broad support.

The two sides aren’t deep into those talks but they’re taking place, Chenault told reporters. He said they will look at whether they can put together a package that meets the needs of the state but also can pass the Legislature and be signed by Gov. Bill Walker.

In a letter to legislators Wednesday, Walker said three things must happen this year for a sustainable balanced budget: reduced spending; restructuring of Alaska Permanent Fund earnings and the dividend program that provides an annual payout to most Alaskans; and new revenues that include some form of a broad-based tax.

The state is facing multibillion-dollar budget deficits amid chronically low oil prices. A preliminary spring revenue forecast estimated unrestricted general fund revenue of $1.2 billion for the fiscal year beginning July 1. That’s down from an earlier forecast of $1.8 billion. Two years ago, unrestricted general fund revenue totaled $5.4 billion.

The state has been using savings to help cover costs. While some legislators have said they aren’t interested in raising or creating taxes at this point, others say all options need to be on the table.

Chenault said he told Walker early on that he doubts each of the bills in Walker’s revenue package will pass. But he said the bills will be vetted in committee and legislators will look at what level of support there might be for them.

“I think our fiscal regime is in such shape that we have to pass some revenue measures. Now what that is? That will be determined by 21 votes in the House and 11 votes in the Senate in order to pass any of those revenue measures,” he said.

Walker wants a fiscal plan in place this year. The centerpiece of his plan would involve beefing up the permanent fund’s earnings reserve account and drawing an annuity-like payment of $3.3 billion from it. Consultants to the Alaska Permanent Fund Corp. recently lowered a 10-year forecasted return for the fund. Revenue Commissioner Randall Hoffbeck said Wednesday that the administration was awaiting details on the basis for the adjustment to know whether it would affect the modeling for Walker’s proposal.

Walker has proposed reinstituting a personal income tax, which is scheduled for a hearing in House Finance next week but has garnered little apparent support among legislative leaders so far. He also has proposed increases in alcohol, tobacco and motor fuels taxes and in various industry taxes.

His plan to change the oil and gas tax credit program was scaled back by a House committee, which also rejected his call for raising the minimum tax on North Slope oil producers. Minority Democrats believe the bill has been reduced too much. The bill continues to work through the committee process.

House Minority Leader Chris Tuck, D-Anchorage, said the minority wants a comprehensive package similar to what Walker put forward and one that’s balanced.

Tuck said that he and Chenault, R-Nikiski, agree that “revenue needs to happen this year,” but what kind of revenue specifically has not been discussed yet. Tuck said his caucus doesn’t want to go to the permanent fund’s earnings reserve first or by itself.

Legislators have been evaluating how money could be reliably drawn from permanent fund earnings to help pay for state government, proposals that also would change how dividends are calculated.

Legislators also are working on bills to curb costs within Medicaid and make changes within the criminal justice system. There’s interest, too, in looking at state pension plans.

Rep. Bryce Edgmon, D-Dillingham, and a member of the House’s Republican-led majority, said lawmakers face “some of the hardest decisions we’ve ever made as legislators.”

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