A Citizen’s Guide

JUNEAU — Cracks appeared in the bipartisan Senate Majority on Wednesday over how much to tax the oil industry in Alaska.

With only two days remaining in the special legislative session there seemed to be enough Democrats willing to break ranks with the ruling coalition to ensure passage of the governor’s overhaul of the tax system adopted last year.

The tax plan put forward by Gov. Sarah Palin appeared headed for the ditch earlier this week with the Senate’s Republican leadership opposing efforts to boost the tax rate on oil companies’ net profits to 25 percent.

The bill regained mo-mentum Tuesday after Palin warned legislators she would call them back for a second special session if they failed to send her a bill with the higher tax rate.

“It was a reminder that the public gave us 30 days to conduct their business and if we couldn’t wrap it up in 30 days, we were not going to hold off until the regular session,” Palin said.

The Senate Finance Committee reversed its course Wednesday night and decided to back Gov. Sarah Palin’s tax hike on oil companies’ net profits.

By agreeing to raise taxes from 22.5 percent to 25 percent, the committee essentially paved the way for the bill to pass in both houses before the session ends at midnight Friday.

The Senate Finance Committee bill must still go to the Senate floor today for a full vote before returning to the House.

The governor’s comments Tuesday bolstered support among Democrats and at least one Majority Republican, Lesil McGuire of Anchorage, for raising the existing 22.5 percent tax rate, which Palin says has been tainted by the federal investigation into political corruption in the state.

Palin has been meeting the past two days with small groups of senators who have told her they support her plan. She called the meetings “reassuring” and said the level of optimism among the administration for a successful session was “very high.”

Senate Minority Leader Gene Therriault, R-North Pole, said Majority Republicans who opposed the tax hike simply realized they didn’t have the votes to block it.

“While there’s been a lot of debate about 22.5 percent or 25 percent, the Senate leadership finally realized the important number was 11,” Therriault said.

The bipartisan Majority includes six Republicans and nine Democrats. Sen. John Cowdery, R-Anchorage, has sat out the session because of the federal investigation. Cowdery’s absence means it takes a simple majority of 10 to approve an amendment, though it still requires 11 votes to move a bill off the Senate floor.

The Senate’s five remaining Republicans make up the Minority caucus — four of whom support the governor’s proposal.

Therriault has been working behind the scenes with Democrats to cobble together enough votes to push through the governor’s plan. He predicted the tax increase would pass the Senate with as many as 14 votes.

“Leadership decided to move things forward after it became clear they weren’t going to be able to browbeat their members from their individual positions,” Therriault said.

The House approved its version of the tax bill Sunday night with the 25 percent tax rate requested by the governor and a “progressivity” surcharge that would add 0.4 percentage points to the base rate for each dollar the price of oil delivered to the West Coast tops about $52 a barrel.

Based on a market price of $80 a barrel, that version of the bill would earn the state about $3.1 billion in fiscal year 2008, compared to $2.7 billion under the existing tax system, according to the Revenue Department.

Until Wednesday, however, the bill languished in the Senate Finance Committee. Chairman Bert Stedman, R-Sitka, has moved at a glacial pace in introducing a committee substitute.

Minority Republican Gary Wilken of Fairbanks said the Majority tried to slow down the committee process to give themselves more time to figure out how to stop the tax hike. “Any thought they were going to run out the clock just disappeared when they sat down and counted noses,” he said. “In the last 24 hours, people just started being realistic.”

Stedman denied trying to run the clock out on the bill, blaming the delay on an overworked legislative staff responsible for drafting the committee substitute.

Wilken said he’s comfortable with the way the bill came out of the House and predicts similar language will be approved by the full Senate before the session ends Friday.

“We just need to get a bill to the floor and be done with it,” he said.

Finance was set to take up amendments to the bill and then pass it out Wednesday night.

“There’s support for getting something acceptable to both bodies,” Rep. Joe Thomas, D-Fairbanks said.

House Majority Leader John Harris, R-Valdez, believes he’ll have a bill Friday in time for concurrence.

Meanwhile, Interior legislators are hoping they can reinsert a provision that would allow natural gas produced for in-state use to be taxed at a rate as much as 20 percent below future gas produced on the North Slope for export. The provision would bolster efforts to develop smaller gas fields in Nenana and other areas around the state.

“I would hope that when it comes time to vote that people will be embarrassed to vote against it,” Therriault said.

Contact Washington correspondent R.A. Dillon at dcnews@newsminer.com.