With the governor weakened by an ongoing recall effort, moderate conservatives like Sitka Sen. Bert Stedman are returning a sense of stability to the second session of the 31st Legislature. Stedman will again co-chair the Senate Finance Committee. (KTOO Digital Services/Skip Gray)

The second regular session of the 31st Alaska Legislature gaveled in on Tuesday (1-21-20), and although most of the faces are the same, the power dynamics may have shifted.

Under threat of recall, Gov. Dunleavy has proposed a far less incendiary budget, giving moderate Republicans like Sitka Sen. Bert Stedman an opening to wield more influence than last session.

Sen. Stedman remains co-chair of the Senate Finance Committee, which holds the purse strings of government. Before heading over to Juneau, Stedman visited KCAW to speak in-depth about what is on his mind as the session gets underway.

Part 1 – State Finances

The big issue in the second legislative session is likely to be the same as the last session — the Permanent Fund Dividend.

KCAW – Is it going to be a drawn out fight over the $3,000 PFD again?

Stedman – Yes, yes. No doubt about it. $3,200 probably. Quickly heading to $4,000.

The Permanent Fund has had some good years recently, with the long bull market on Wall Street, plus has sold some real estate assets at a substantial profit.

But at the same time, low prices have reduced the state’s income from North Slope oil.

Gov. Dunleavy ran his 2018 campaign on a $3,000 dividend; Stedman and other legislators are trying to run the government.

Stedman — The challenge that the legislature has as the appropriator is we have to pay our bills. We can’t print money like the federal government. So something has to give. And either we take some modifying action on the dividend, and bring it down from $3,200 — last year it was $1,600  — or we will spend virtually all of our savings outside of the Permanent Fund. The Constitutional Budget Reserve would be down to half a billion. Right now it’s about $2 billion. And we need probably a billion-and-a-half — or at least a billion — just to cash-flow the state as a cushion. Some might even argue it should be $2 billion. Or, we go into the Permanent Fund and we draw too much of it, and we start eroding our purchasing power and take from our wealth that we’ve set aside for future generations and start consuming it today in our current generation. We’ve already consumed most of the oil revenue that was generated over the last 50 years.

Stedman chafes when people argue that the state’s $1.5 billion deficit can be cut by eliminating waste and fraud. “It’s not that easy,” he said. “Gov. Dunleavy would cut the waste and fraud if possible. It’s very difficult.”

Stedman is a seventeen-year veteran of the senate. He championed a percent-of-market value approach to the dividend, long before the current governor even joined the legislature.

He thinks reducing the issue down to the dividend alone is an oversimplification.

Stedman — We also owe about $800 million in oil tax credits. We have deductions within our structural system of $1- to 1.2 billion in credits every year. And we’ve got a corporate tax rate that has declined from the mid-30s down to 21 percent, which changes the balance of the sharing relationship with our oil basin. So we’ve got some structural problems there to deal with at some point. It’s a complex, multi-point problem that can’t be solved as easy as sticking something on a bumper sticker, or we would have done it years ago.

Gov. Dunleavy has posted a video on YouTube saying he’s ready to talk with Alaskans about revenue — in other words, taxes. While Stedman does not think the governor is posturing, increased taxes are not on his legislative agenda.

Stedman — I think he is serious about it. You can always think about revenue. I think most people think about the other guy’s revenue, when they think of revenue for the state (laughs), not their revenue. I’m not quite there yet. I think we have some other structural issues to deal with first, or we won’t get them dealt with. So the budgets are tight, but they might get a little tighter.

Stedman says his Senate Finance Committee will take a look at the operating budget and “if there are reductions that we can make, we’ll make them,” he said. “But it’s getting harder and harder every year.”

Part 2 – Alaska’s Institutions under fire: K-12 Education, Pioneer Homes, and Public Broadcasting

As the second regular session of the 31st Alaska Legislature gets underway, Sitka Sen. Bert Stedman believes some of the hot-button issues of last year’s session are likely to be less hot: Among them, funding for K-12 education and the Pioneer Homes.

In Part 2 of a three-part conversation with Stedman, KCAW’s Robert Woolsey asked Stedman about some Alaskan institutions that were caught in the crossfire of the ideological battle between the governor and the legislature last year.

Note: Sen. Stedman has already locked horns with the administration on funding for the Alaska Marine Highway System. See a detailed report here.

Education funding may not be such a source of strife  this year — but then no one last year expected Gov. Dunleavy to propose such dramatic cuts to the state’s university system and schools. 

Funding cuts for the university were eventually settled at the negotiating table, but school funding eventually had to be settled in court.

Now, the question is: Will school funding — called the BSA, or Base Student Allocation — prompt another brawl between the governor and the legislature?

KCAW — Is there going to be a fight over the BSA?

Stedman — No. I don’t expect it. The BSA will probably remain unchanged. I don’t think the legislature has ever lowered the BSA. And the courts ruled in favor of the legislature’s appropriating power several months ago dealing with K-12. Last winter, when there was talk in the administration over cuts to K-12, the legislature refused to move off of its previous appropriation. We had the authority to change it last winter, but we chose not to, and let the court rule. And the legislature prevailed.

In Sitka — and in many school districts around the state — uncertainty over litigation between the governor and the legislature forced administrators to hold off delivering final contracts to some teachers until just days before the start of school. The parent organization that formed in Sitka to support school libraries soon expanded its purpose to support schools — and then morphed into a local group supporting the recall of Gov. Dunleavy.

Another decision fueling the recall had nothing to do with the legislature. The Dunleavy administration created a new rate structure for the state’s Pioneer Homes, pushing the highest tier to $15,000 a month, 120-percent of its previous level.

Sen. Stedman didn’t necessarily agree with the administration’s rationale.

“I don’t want to see the Pioneer Homes financially crippled, and I don’t want to see them eliminated,” said Stedman. “Most of the solutions — including privatization — won’t work. You don’t privatize an entity that has a large deficit and expect you’re going to have people banging on your door to lose money.

The Pioneer Homes for Stedman — and for many Alaskans — are deeply personal. Both his mother and his step-mother live there.

You don’t have to guess his position on the administration’s policy to try and make the Homes more economically self-sufficient. You can hear it in his voice.

“The financial predicament that the state is in wasn’t caused by the Pioneer Homes and the seniors,” he said. “It’s just not. There’s a letter going out to all the families who have folks in the Pioneer Homes reminding them that they need to buy their own soap and shampoo for the folks in the Pioneer Home. Last I checked the state is one of the wealthiest states in the country — if not the wealthiest — and we can’t afford to buy a bar of soap for the folks in the Pioneer Home? Pretty embarrassing.”

Stedman thinks that the Homes in Anchorage — where there is a larger population — may have more options beyond a state subsidy. It’s representative of a widening political rift between urban and rural Alaska which is in play in other areas, too, like marine transportation, public safety, fish and game management, and what you’re listening to now: Public Broadcasting.

Gov. Dunleavy vetoed the entire operating budget of public television and radio last session — just $2.6 million.

Stedman doesn’t support that decision.

Stedman — Rural Alaska relies on public radio a lot. What do we do here in Sitka and Ketchikan, Prince of Wales, Petersburg, and Wrangell if there’s a tsunami warning? 

KCAW — You turn on the radio.

Stedman — You turn on the radio. Public radio. You find out what’s going on and how to respond. When we have community members that are overdue hunting, or there’s a boating incident, or what have you — weather, I can go on and on. It’s an urban-rural issue.

Part 3 – SE capital projects are a matter of urban/rural equity

As co-chairman of the Senate Finance Committee, Sitka Sen. Bert Stedman will once again wield significant influence over the state’s operating budget in the coming months. A decade ago, Stedman held a similar position, but his responsibility was the capital budget: Allocating money for state construction projects.

Generally speaking, capital projects have a life outside the yearly ebb and flow of the state budget. The money is set aside by the legislature or by the voters, and projects lurch forward — even when it seems imprudent.

That’s the case with the Katlian Bay Road in Sitka. This project was authorized in a transportation bill in the US Congress 15 years ago. Contrary to some critics, it’s not a scheme by Sitka Sen. Bert Stedman to build a road to Chatham Strait — even though that idea is still on the Statewide Transportation Improvement Plan — also known as the “STIP.”

Stedman — They have it on their STIP — the Baranof Warm Springs Road — but it’s just a head fake. If they had any interest in it, I could assure you that I’d be aware of it, being on the appropriating body for a decade-and-a-half. And there is none. I don’t think that we will see an eastern connection into Chatham, or a northern connection, in my lifetime or my child’s lifetime.

Alaskan voters in 2012 approved $12.5 million in state transportation bonds to build the 7-mile road connecting Sitka to private land owned by the urban Native corporation Shee Atiká. Sen. Stedman scraped together a few million more from excess funds from other projects.

Even though it’s not crossing the island, he thinks Sitka’s first major road extension in 50 years will bring a number of benefits.

Stedman — The opportunity for the community to enhance jobs and more economic activity is immense out of the development, depending on what Shee Atiká wants to do. There’s a lot of flat ground in Katlian, and we all know we need flat ground. And there are gravel and sand resources, rock resources, recreation. There needs to be quite a bit of restoration into the drainage system. Unfortunately some of the restoration money that was wrapped up in this project ended up in Nakwasina. And I’m not saying Nakwasina doesn’t have some impairments, which it clearly does. But Katlian’s a bigger drainage and needs a lot of work. So over the next several years you’ll see quite a bit of effort put into trying to bring the drainage of Katlian back to some semblance of what it was in the 1940s and 50s before industrialized logging. Along with Nakwasina. 

Despite setbacks — including a fatality — the Katlian Bay Road is on schedule to be completed in 2022.

Another capital project — again, approved by voters a decade ago — remains hotly contested.

KCAW — Sen. Stedman, what about the Mt. Edgecumbe Aquatics Center? It was quite the political ping pong ball in the last session. What’s your feeling about it now?

Stedman — The ping pong game continues. The ball’s going to be accelerated and it’s my turn to hit it. And I expect to give ‘em a line drive.

The Mt. Edgecumbe Aquatics Center opened with a splash in the spring of 2018, eight years after the state’s voters approved almost $400 million in education bonds to build the pool and seven other school projects located primarily in the state’s railbelt.

Location matters. Sen. Stedman points to the discrepancy between the administration’s willingness to pay for the operation of voter-approved education projects in Alaska’s urban centers, versus Sitka’s Mt. Edgecumbe Aquatics Center. “Railbelt projects are getting an increase,” said Stedman, “and Edgecumbe’s getting kicked in the ass.” (KCAW image)

For Stedman, the Mt. Edgecumbe pool represents equity.

Stedman — The issue is broader than the Mt. Edgecumbe Aquatics Center. That project was one of eight in a statewide bond package. All those projects have been built. All of them this year got an increase in the budget. Their funds are roughly $5.5 million this year, of which the Aquatics Center got zero.

Few things generate a heated response from the typically-calm senator than the suggestion that the $26 million center is pork for Sitka. Stedman believes that pool also represents a promise between the state’s voters and its children.

Stedman — We in the community will use it, and hopefully be able to pay the fiddler over there to help reduce the subsidy. Along with the Coast Guard and SEARHC, and the Troopers. But you look at the student base at Mt. Edgecumbe High School, there’s a large percentage of them that come from the Yukon-Kuskokwim Delta. They have the highest drowning rate not only in the state, but in the nation. The young Alaskans that come from that region and the region farther north have very few opportunities to learn how to swim. And when you take that into account, along with the highest drowning rate in the nation, I don’t see how you could, with a straight face, tell those kids that even though the public — the state of Alaska’s citizens — went to the voting booth and voted to build it and operate it, you’re not going to fund it. That pool is not going to get sold, it’s not going to get torn down, and it’s not going to get pulled off the beach by a tugboat and floated somewhere. It’s not going anywhere. So if we can’t come to a resolution with this governor, we’ll come to a resolution with the next. 

Gov. Dunleavy last spring vetoed the pool’s “receipt authority” — its ability to charge entry fees — effectively shutting it down. He’s put it back in his new budget, but Stedman says the real conversation is going to be about the $400,000-to-$500,000 needed to operate the pool. “And we’re going to have that discussion in committee with the lights on and the TV cameras rolling,” he said.