Alaska Supreme Court rules bonding plan is unconstitutional

Headline Legal News

The Alaska Supreme Court on Friday rejected as unconstitutional former Gov. Bill Walker’s proposal to use bonding to pay Alaska’s oil and gas tax credit obligations. The court, in a written ruling, said the plan, which was approved by the Legislature in 2018, is “unconstitutional in its entirety.”

The bill passed by lawmakers approved the creation of a state corporation that would be empowered to sell up to $1 billion in bonds to pay off remaining tax credit obligations. The Legislature previously voted to end the tax credit program geared toward small producers and developers, saying that the program had become unaffordable.

The state constitution limits the power to incur state debt. But a 2018 legal opinion by then-Attorney General Jahna Lindemuth said the proposed bonds would not be considered state debt subject to the constitutional restraints because they would be “subject-to-appropriation” bonds and contingent upon annual legislative appropriation decisions.

Superior Court Judge Jude Pate dismissed the lawsuit brought by resident Eric Forrer, who had challenged the bonding plan. Forrer appealed.

The Alaska Supreme Court, in its decision, said subject-to-appropriation bonds are “contrary to the plain text of the Alaska Constitution and the framers' intent.”

“If the State intends to utilize financing schemes similar to HB 331 in the future, it must first seek approval from the people — if not through a bond referendum then through a constitutional amendment,” the opinion states. HB 331 refers to the bonding bill.

Joe Geldhof, an attorney for Forrer, said “the real winner here" is Alaska's constitution and the citizens of the state who won't incur “needless debt based on a scheme.”

Gov. Mike Dunleavy's office, in a statement, said the departments of Revenue and Law are reviewing the decision to understand its impacts.

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