Lawsuit seeks ruling that bonds to pay oil-tax credits are unconstitutional

ANCHORAGE (KTUU) — One of Gov. Bill Walker’s signature programs, the sale of up to $1 billion in bonds to pay off the state’s oil-tax credits, is under challenge in a citizen’s lawsuit in Juneau.

The plaintiff in the case, retired contractor Eric Forrer, seeks to have the governor’s bonding program declared unconstitutional. The Alaska Constitution allows bonds to be used to build veteran housing and other big projects, but not to pay off debt, Forrer said.

“If it isn’t housing for veterans, if it isn’t a real project, if it isn’t a revenue bond — that’s it, it’s unconstitutional,” Forrer said in an interview. “I’m a retired carpenter, and I can read the page and a quarter in the Constitution that deals with debt service, and you can’t get this rule, this bond sale, to fit into the Constitution.”

An opinion in April by the Legislature’s legal department said there was a “substantial risk” that a court would declare the program unconstitutional. But a counter-opinion in May by the Attorney General’s office asserted the program was legal.

The battle began because Walker says the state is obligated to pay the credits, a program that ended last year but was initially approved by the Legislature as an incentive to oil companies for exploration and drilling. While the Legislature has paid down the tax-credit debt as it has had money — something the original law allows — Walker said the bonds would pay the entire debt and cost the state less in the long-term.

The bond bill first passed the Alaska House on May 3 in a 22-16 vote, with most members of the Democratic majority opposed. It then passed the Senate May 11, 14-5, with most of the Democratic minority caucus opposed along with Sen. Mike Shower, who is not in any caucus.

Walker has not yet signed the bill, but an aide said he will soon. The administration has not yet responded to Forrer’s lawsuit. Department of Revenue officials said they can't comment on the suit while the matter is pending in court.

The Attorney General’s opinion said the bond program is legal, in part because the Legislature isn’t obligated by law to pay back the bonds — payments are “subject to appropriation.”

But Rep. Scott Kawasaki, D-Fairbanks, said in a floor speech in May that the assertion was a fiction — if the Legislature failed to make a payment on the bonds, it would wreck the state’s credit rating and make all debt cost more.

Kawasaki was one of the “no” votes. In an interview, he said that bonding for debt was too similar to the way Congress handles the $20 trillion national debt, by borrowing money to stay afloat.

Forrer said the bonds are unnecessary. The state has never been in default in paying off the credits in annual installments. With some of the credit certificates pledged as collateral for loans to oil companies, some of the beneficiaries of the bond program would be banks, not producers, he said.

Forrer, 72 and a Juneau resident since 1978, said his attorney, Joe Geldof, was working for free — for now. Forrer said he would pay fees, but was offered encouragement and money by acquaintances who have approached him on the street. So far, he said, he hasn’t taken any contributions. His sense of outrage is enough to keep him going.

“We’re getting a higher and higher ratio of students to teachers in the classroom, there’s a bloodbath at the university, there’s a bloodbath in the ferry system, everything is on the cutting block — and we’re going to sell a billion dollars worth of bonds to pay some paper off of the oil companies that we don’t owe them?”



 
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