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AP NewsBreak: Judge dismisses Alaska bonding plan lawsuit

January 3, 2019

JUNEAU, Alaska (AP) — A state court judge has dismissed a challenge to former Gov. Bill Walker’s plan to use bonding to pay Alaska’s oil and gas tax credit obligations.

Superior Court Judge Jude Pate, in a written order dated Wednesday, granted the state’s request to dismiss the challenge by resident Eric Forrer.

Pate said his role is not to make economic policy judgments or second-guess the Legislature but to apply the law of the state Constitution as interpreted by the Alaska Supreme Court.

Lawmakers last year passed legislation to establish a new state corporation that would be empowered to sell up to $1 billion in bonds to pay off remaining tax credit obligations. Legislators previously voted to end a tax credit program geared toward small producers and developers because they said it was no longer affordable.

Pate said key to his order were a section of the constitution dealing with state debt and a state Supreme Court case involving a lease-purchase agreement. Within that context, Pate wrote that the bonding proposal passes constitutional muster.

Jahna Lindemuth, as attorney general under Walker, last year wrote the proposed bonds at issue with Walker’s plan would be “subject-to-appropriation” bonds, with payment contingent upon whether the legislature sets aside money for them each year.

She said the high court concluded in the lease-purchase case that the agreement did not constitute impermissible constitutional debt because the state’s obligation was subject to appropriation, the deal limited recourse against the state and it did not bind future legislatures.

Pate said the bonding proposal has similar features.

Forrer’s concern the proposal “may saddle future generations of Alaskans with a crushing economic burden are genuine and deserve serious consideration,” Pate wrote.

But, the judge added, the decision in the lease-agreement case shows when an agreement does not create a legally enforceable debt against the state, “the court should not engage in second guessing the wisdom of the legislature’s fiscal policy decisions, even when those decisions may have a negative impact on the State’s credit rating.”

Joe Geldhof, an attorney for Forrer, by email Thursday called the decision “a seismic shift in how Alaska deals with debt and interprets our state’s constitution and the impact of allowing this kind of non-debt ‘debt’ will likely be enormous.”

“The original framers of Alaska’s Constitution would be stunned at this kind of loose interpretation of our most fundamental organizational document,” Geldhof wrote.

Forrer said an appeal was probable.