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Legislators urged to avert shutdown with uncertainty over fisheries, millions of dollars at risk in the Permanent Fund

One House Republican said averting a shutdown would give up a “negotiating chip” for enacting a permanent fiscal plan
Alaska State Capitol
Alaska State Capitol(KTUU)
Published: Jun. 23, 2021 at 3:20 PM AKDT
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JUNEAU, Alaska (KTUU) - A looming state government shutdown has made the managers of the $81 billion Permanent Fund very nervous.

Angela Rodell, head of the Alaska Permanent Fund Corp., said trading would stop Friday afternoon without a budget agreement. She told legislators that a lingering shutdown could cost the state hundreds of millions of dollars without fund managers in place to execute trades.

“These high estimates reflect the punitive penalties standard for missed capital calls in the private equity industry,” she said in a memo to legislators.

Alaska fishermen are nervous, too. They’re unclear if a state government shutdown would mean commercial fisheries need to close on July 1 until an operating budget is signed by the governor.

Rick Green, a spokesperson for the Alaska Department of Fish and Game, said by email that the department is “continuing operations for now as if this will be resolved.” Further questions about what would happen if the ongoing budget impasse is not resolved were directed to the governor’s office.

Jeff Turner, a spokesperson for the governor’s office, said a list is being prepared about the impacts of a potential shutdown. He would not confirm whether commercial fisheries would be closed.

That uncertainty is frustrating to fishermen, including trollers in Southeast Alaska who are busy preparing for a king salmon opener on July 1.

“It’s almost too painful to contemplate,” said Amy Daugherty, executive director of the Alaska Trollers Association, about the potential closure of fisheries.

The uncertainty and frustration extends to Bristol Bay seafood processors who are concerned that the world’s most productive sockeye salmon fishery would close at its annual peak without state biologists in place to manage it.

Chris Barrows, president of Pacific Seafood Processors Association, sent a letter to the governor and all 60 legislators on Tuesday, warning them of the consequences of a shutdown.

“The result of this impact would be catastrophic to the fishing industry and the fishermen, processors, and communities that depend on the salmon season,” he said. “Please adopt an operating budget as soon as possible so that we have assurance that the season will proceed as normal. Using a possible shutdown as leverage as we approach July 1 is extremely detrimental to the state and should be avoided.”

Gov. Mike Dunleavy said he can’t sign a “defective budget” passed by the Legislature due to a failed procedural vote. Once a bill passes, it becomes effective 90 days later unless two-thirds of the House of Representatives and the Senate vote to change it.

The Senate approved that change last week but the House of Representatives didn’t.

Twenty-seven House members need to vote for a new effective date on the budget, meaning several House Republicans would need to change their vote.

Wasilla Republican Rep. Cathy Tilton, the House minority leader, said that her caucus wants a permanent fiscal plan and that the Legislature still has time to fix the budget issue.

Some legislators have argued the governor could disburse the funds on time to avert a shutdown, but that he’s choosing not to as a bargaining chip to push for a higher Permanent Fund dividend. The Legislature approved a $525 dividend that could double with the passage of a separate three-quarter vote.

With only one week until a shutdown, Tilton said the Legislature would need more time to enact a complete plan, but in the meantime, lawmakers should develop a framework, possibly using Dunleavy’s 50-50 Permanent Fund plan as a starting point.

The Alaska business community has long clamored for a permanent fiscal plan, but a coalition of Alaska business leaders sent a letter to legislators on Tuesday, urging them to avert an unprecedented state government shutdown.

”Collectively, we represent hundreds of businesses across the state who employ tens of thousands of Alaskans,” the letter reads. “While we look forward to working with the Governor and Legislature to address components of a long-term fiscal plan in the August special session, now is the time for our elected officials to show leadership and come together willing to compromise on a solution to this impasse.”

Jim Jansen, chairman of Lynden, Inc., a major Alaska transportation company, also told legislators that a shutdown would be “extremely harmful” for the state’s economic recovery from COVID-19.

Some House Republicans say pushing Alaska to the brink of a state government shutdown has pushed forward closed-door conversations about a fiscal plan.

“If the minority decides to not shut down the government, we lose one of our large negotiating chips,” said Rep. Tom McKay, R-Anchorage. “If the business community wants us to lose one of our big negotiating chips, then so be it.”

Anchorage Democratic Sen. Tom Begich, the Senate minority leader, said all four caucus leaders have pledged to continue debating a fiscal plan through August, during an already-scheduled special session. He said House Republicans have been successful in getting those conversations going, but their other demands have been muddled and confusing.

“If you’re going to take a hostage, at least know what your demands are,” Begich said about the budget impasse.

Some House Republicans want a much larger Permanent Fund dividend than the $525 approved by the Legislature. Others were frustrated that the size of the dividend and projects in the Matanuska-Susitna Borough were tied to a separate, failed three-quarter vote.

Rep. Ben Carpenter, R-Nikiski, speaking just for himself, said he wants to see a comprehensive fiscal plan in place. He wants the dividend in the constitution and debates about what the right size of government is before talking about potential new statewide revenues.

He isn’t entirely sure what can be achieved in the next week to enact a fiscal plan, but suggests the ongoing time pressure could compel legislators to act.

“I do know that the closer we get to July 1, the more people’s attention we have,” Carpenter said. “Continuing to do things as we’ve always done them, is going to continue to get us the same results, and we can’t continue that.”

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