District P Senator Gary Stevens of Kodiak spoke with KBBI's Kathleen Gustafson on Tuesday, about the State of Alaska's budget, the fate of the PFD and the first meeting of the new bi-partisan legislative work group in this Legislative Update.
Transcript
Senator Stevens
Yeah, the bipartisan work group starts today and they'll begin their efforts. Hopefully, they can move pretty quickly. We're scheduled for an August 2nd special session.
That is pretty fast. They may not be able to do that. We could postpone that a special session to say, September. I know several folks are interested in doing that.
KBBI
So, it their goal to bring a plan for funding the PFD to the second special session, or are there other goals for this group?
Senator Stevens
I think it's pretty broad and that would be certainly a major part of it. But how do we balance the budget? How do we pay for things? How do we protect the permanent fund?
But then, it's the responsibility of the entire legislature to decide whether they want to accept (their recommendations) entirely or in part or not at all.
KBBI
The Governor failed to veto the appropriation of $4 billion from the Earnings Reserve Account to the Permanent Fund, Bert Steadman in the Senate wrote that transfer clause.
Did you support it and why?
Senator Stevens
Absolutely. I do support it. I think it's important. First, I believe the Permanent Fund is just crucial to the future of Alaska. You know, we're earning more money now from the interest on that permanent fund than we get from oil.
So I hope people realize how crucial that fund is, and the part that's going to play, even more, should oil decline in the future as it undoubtedly will in the long-term.
The Permanent Fund will have a greater impact on how Alaska is going to be able to operate. So, I think it's important to move as much money as we reasonably can from the earnings reserve into the Permanent Fund corpus.
Now realize that all of that money that's in the permanent fund, both the corpus and the earnings reserve, they're all invested by the Permanent Fund. They all receive a pretty high, very high return. Actually, the average is over the years is about 7%. So it's good to lock it up into the Permanent Fund where the legislature can't touch it.
They can only be spent by a vote of the public. But realize, that the point, of the Permanent Fund is not to spend it. The point of the Permanent Fund is to make earnings.
KBBI
...is to grow it.
Senator Stevens
So, we get 7% of $81 billion every year. Every, every year.
And realize now that that interest that we get, that money that we get on that investment, that's a higher return than oil is. But that money that we get on that investment, under the magic of compound interest, flows into the earnings reserve.
And the right now the earnings reserve is around $20 billion. It doesn't need to be that high.
You know, a healthy reserve could be around $10 billion.
KBBI
...and still be healthy.
Senator Stevens
Yeah, absolutely. So we can move monies from the Earnings Reserve into the Permanent Fund, and that does protect it.
And what you were getting at, I think, has been, is that the legislature doesn't have a good track record when there's a pot of money that we can spend with simple majority. We went through a $16 billion in savings in our CBR a few years ago.
That money has gone and I'm just fearful of the legislature being able to appropriate monies out of the earnings reserve with just a majority vote. You know, that's dangerous.
I think so as often as we can, we should be transferring some of those monies from the ERA into the Permanent Fund.
KBBI
The next thing I want to talk about is this upcoming special session. Do you have a list of vetoes that you feel like should be overturned?
Senator Stevens
It's gotta be hard to overturn the governor's vetoes. It requires a three-quarter vote. As you well know, having watched the legislature this year, we have quite a few legislators, House Minority members, who see themselves as obstructionists and have said that they are obstructionists.
And so they're not going to help us out. We'll just have to find a way to work around them.
KBBI
The governor vetoed legislators' per diem.
Do you think the legislature can get together on that one?
Senator Stevens
Eh, well possible, but possibly not. You know, the per diem that he vetoed is for January next legislative session, starting in January. So that's the per diem we're talking about it.
Of course, we control the budget and we could veto his per diem and his staff's per diem and all of his commissioners. But it's not a good thing to do.
There's been a sort of a gentleman's agreement that we would not attempt to devastate the administration by getting rid of their per diem, and they would not do it to us.
So if it becomesthat, it's silliness. It shouldn't happen, but it may, and we would have to deal with it.
KBBI
It is really something, though, that the legislature can just let go until the next session and address it, then?
Senator Stevens
Absolutely, no need to deal with it now.
KBBI
Really, the only other thing I have on my list is to ask about ferry service and the plan to fund the ferry service in advance. Is there any information that you can share on ferry reform and that reform bill ?
Senator Stevens
Yeah, well, we're waiting for the governor to sign that bill and to establish that commission and have them begin work. And I'm really pleased with how that has turned out.
The members of that commission who will oversee the Marine Highway System, a lot of them are professionals. They've had experience with Marine Highway System, with ferry systems and they know how to make it work.
Remember that we did agree that there would be an 18 month funding of the ferry system and that's still in place.
And the problem with a one year funding in the ferry system is that you get the end of the year and you had to close down. So this gives them time to plan for a scheduling voyages beyond that. That's an unfortunate veto. $8.5 million, but it was money that had been added.
KBBI
Right, that's additional funding.
Senator Stevens
So what's the impact on the Marine Highway System?
Well, I think we'll probably see some reduction in the number of voyages, but the system will continue to work. It may just be restricted a little bit in the number of voyages we have.
KBBI
The only other thing I have is about the errand $4 billion error that the governor sent back because the, the legislature didn't accept the correction....It's a huge error.
So the legilature getting a letter that says, "Oh, I didn't mean to do that." isn't enough
But what do you expect to happen as a result?
Senator Stevens
Well, it's just too late. His vetoes came out and we respect those. He forgot or neglected to veto that money. Well that's okay. I mean, I think it's good to have more money in the corpus than we have in the ERA. The time has passed when he can veto.
And so I think he's stuck with where it is right now.
KBBI
Is there anything else that you'd like to share on the Legislative Update?
Senator Stevens
Well, I know one confusing issue that many people have been calling me about and asking about is, is the sweep.
As you know, things that are unresolved in this legislative session had to do with our inability to get a three quarter vote, and it was the minority in the house that couldn't do that.
And so when we couldn't get to the three-quarter vote, it left several things unresolved. Hopefully, they can figure it out in August, but maybe not.
And so I know that reverse sweep just confuses people. The constitution says that all funds and all special funds will be swept into the general fund on July 1st.
And that's what we did. And then normally what happens every year is the reverse sweep occurs to put those monies back into those funds, but that's just the way we have to do it by the constitution. So the minority in the house withheld their vote on the reverse sweep in order to get a leverage for a higher PFD.
That failed. And so again, that'll be put off until August.
KBBI
Thanks so much, Senator. I really appreciate your time and good luck in the next session.
Senator Stevens
Thanks so much. We'll talk to you then.
