Daily Sitka Sentinel

Stedman in Battle To Save SE Funds

By SHANNON HAUGLAND

Sentinel Staff Writer

Sitka’s Sen. Bert Stedman says he spent a lot of effort in the last legislative session “playing defense” – protecting his district and the rest of Southeast from the Railbelt legislators with their sights on a piece of the cruise ship head tax and leftover money from capital projects across the region.

“There’s very little capital money for projects other than just coming up with a match for federal projects – and that is as far as the eye can see,” Stedman said. “So the cruise ship tax money is a juicy target. If the Railbelt can figure out a how to crack it ... It’s important to our economy, and we use the funds to enhance the visitor experience in Sitka.”

Stedman is in town for a few days during the recess in the special session called by Gov. Bill Walker. The special session followed the regular session, which ended April 19 without the biggest items on the agenda – Medicaid expansion and fully funding the operating budget.

On Medicaid, Stedman favors a hybrid bill of “expansion and retraction, cost containment.” As chairman of the Health and Social Services Committee, Stedman took up the governor’s Medicaid expansion bill, and also Sen. Pete Kelly’s bill on cost containment on Medicaid. Stedman says he thinks a combined bill will be the best solution.

“The reason is you need to do both together,” he said. “If you did just expansion, there is concern we would have too much budgetary upward pressure on the state. If you just do cost containment it appears you would put too much pressure on your smaller hospitals, like those in Sitka, Ketchikan and Wrangell. We tried to put a combination bill together that worked, and it’s sitting in Senate Finance right now.”

He estimated Medicaid expansion would provide tens of millions more dollars to hospitals across the state every year, and should not be held up.

“It’s politics, not economics,” Stedman said. “What we need to do is get beyond the political sound-bites, and actually start looking at the impacts on the state ... not political ideology at the expense of the citizens.”

Stedman is against the proposal to move the session to Anchorage when the Legislature reconvenes. The Senate plans to hold “technical sessions” every three days for the foreseeable future (see story, front page), and Stedman said today he didn’t know when the Legislature will reconvene in full session.

“You’ve got to give the governor a budget that’s fully funded,” he said. “You can’t leave (the administration) $3 billion under water and expect to make payroll.”

The state is projected to end the year with a $3.9 billion budget gap, and Stedman expects it will be the same in fiscal year ’16, in line with the steep decline in oil prices.

“The concern I had of low oil prices putting the squeeze on the state treasury a year ago turned out to be right on point this winter,” Stedman said.

In January the Legislature talked about budget reductions of $400 million to $500 million. Then, at the spring update a month and a half later, revenue projections declined by $400 million.

“By cutting we didn’t gain anything,” he said. “The state is in fiscal trouble and the public doesn’t quite recognize the magnitude of this yet.”

School funding, for example, has been reduced 3.3 percent for the base student allocation.

“Everybody’s going to get a haircut across the state,” he said. “3.3 percent hurts our schools. If you can’t pay your teachers, what are you going to do? If you don’t reduce expenditures you are going to burn through your cash.” 

If reserves are used to balance the budget this year, the state is forecast to have at the end of FY16 about $5 billion left. He said the state, instead of draining reserves, has to adjust to what he calls “the new normal,” similar to what Sitka had to do when it lost a third of its payroll when the mill closed in 1993. He said the state could learn from Sitka’s decisions.

“One of the things Sitka did that’s paying dividends today is we didn’t go in and liquidate the Permanent Fund,” he said. “If we had, it would be gone today and our taxes would be higher. As we look forward in dealing with the state’s fiscal challenges, the last thing we should do is start liquidating big chunks of our Permanent Fund.

He said it was a rough session, with little chance of Southeast and rural legislators pushing through their own agendas.

“We’re playing defense in the office for the first time,” he said. “We didn’t have time to advance legislation. We spent all of our time on defense, from 7 in the morning to 5:30 at night, every day. With the budget deficits of such a magnitude, the Railbelt-dominated leadership is very interested in the Railbelt.”

The other challenge for Southeast and rural legislators was keeping unused funds from capital projects in their districts from being put back in the general fund, instead of redistributed in the same district where they were appropriated, which has been the custom before now in the Legislature.

“We’ve been working with the communities to make sure those funds are identified and encumbered so they can’t be swept,” he said.

Stedman said he’s pleased to see some projects important to Sitka going ahead, including the road to Katlian Bay and the Mt. Edgecumbe pool project – which has been sent out for design.

“All in all, we’re in pretty good shape,” he said. “We just want to complete the projects, and we’re going to go from there, depending on the fiscal operations of the state.”

In offering some advice to the community, he encouraged Sitka not to expect a tax hike this year will fix its fiscal problems long-term, with ongoing challenges at the state level.

“So what are you going to do next year?” he asked. “You’re not going to be able to go to the taxpayer every year. ... Don’t look at tax escalation and think you’re going to fix it.”

Sitka instead should look at job creation of “livable-wage jobs,” and be open to new ideas – such as an industry for servicing the off-shore oil industry in the Arctic. He said Sitka is in a good position – with an ice-free year-round port – to provide those services to 350- to 450-foot vessels. He said he is working on this issue for Sitka and Ketchikan.

“We’ve got enough positives to at least be a legitimate contender,” he said.

Looking ahead to resolving budget challenges in the future, Stedman is an advocate for changing the oil tax structure, which is costing the state hundreds of millions of dollars a year under Senate Bill 21. He said there are discussions “behind the scenes” about fixing the bill.

“We’re not going to fix this structure until such time as the public becomes aware,” he said.

In the session, he said, he has appreciated the “Alaska first” attitude of Gov. Walker, who is finishing his first session. He said Walker relates well to small and coastal communities’ challenges, which has been a refreshing change from the past two governors.

On another issue, Stedman predicts that the Railbelt’s general lack of understanding of rural communities will mean public broadcasting “will be on the chopping block” again next year. “That’s being driven by the Railbelt, it’s not supported by rural communities,” he said.