State wants Lawsuit Challenging Bonding Proposal Dismissed

    JUNEAU, Alaska (AP) — A judge said Monday he wants both sides to submit additional briefs before deciding whether to dismiss a lawsuit challenging the constitutionality of Gov. Bill Walker's plan to pay Alaska's oil and gas tax credit obligations.

    The state wants the case brought by Juneau resident Eric Forrer to be dismissed.

    Superior Court Judge Jude Pate said a decision probably would not be made until early November.

    The Legislature earlier this year passed a bill, proposed by Walker, to establish a new state corporation that would be empowered to sell up to $1 billion in bonds to pay off the state's remaining tax credit obligations. Lawmakers had previously voted to end the tax credit program, which had been geared toward small producers and developers, because they said it had become unaffordable.

    How much to put toward paying down the obligation had, in recent years, become a political fight.

    The state constitution limits the power to incur state debt. But Attorney General Jahna Lindemuth has said that her office is confident the proposed bonds would be lawful.

    She said the proposed bonds would not be considered state debt subject to the constitutional restraints. The proposed bonds would be "subject-to-appropriation" bonds, she wrote, meaning that payment of the bonds would be contingent upon whether the legislature sets aside money for them each year.

    The state has pointed to an Alaska Supreme Court ruling involving a lease-purchase agreement. In that decision, the state says the court concluded the agreement did not constitute impermissible constitutional debt because the state's obligation was subject to appropriation.

    Arguments before Pate on Monday focused in part on procedural matters. But Pate also questioned Forrer's attorney, Joe Geldhof, over legal arguments, particularly surrounding that court decision.

    Geldhof said the two cases — this one and the one involving the lease-purchase agreement — are different. The constitutional provisions on debt are narrow in scope, he said.

    "If this court wants to sanction that kind of creative financing, to transfer public wealth to private hands, then we'll all get out the black magic markers and start redacting big hunks of our constitution," he said. "Because that's where we're headed."

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