Parnell won't cut deal over possible vetoes LETTER: Governor says he won't negotiate vetoes, wants budget moved to House.

JUNEAU -- The muck of the Legislature's special session got even deeper Tuesday when Gov. Sean Parnell said he won't negotiate with the Senate over what projects he might veto as a result of lawmakers refusing to pass his bill to cut oil taxes.
Parnell sent a letter to legislators blaming the Senate for the logjam. The governor's office then confirmed that Parnell is not going to negotiate with the Senate over what projects he may or may not veto. That closes what senators thought could be an exit out of the special session.
"Writing a letter like this is like throwing a bomb down the chimney," said Sitka Republican Sen. Bert Stedman.
Stedman said Parnell earlier expressed openness to talking about projects and working out a deal. "I don't quite know what to do now," he said.
Parnell said in his letter that Stedman and his Senate Finance Committee needs to just pass a budget.
Action slowed to a crawl at the Capitol on Tuesday with no progress toward a solution and no clear sign when the special session might come to an end.
Most legislators aren't part of the leadership and have little to do. They worked on packing up their offices or took a walk in Juneau sunshine. There was constant speculation about when the impasse might break, but little optimism it would be soon.
The bad blood between Parnell and the Senate started when senators refused to pass the governor's bill slashing taxes on the oil companies.
Parnell said if the tax cut didn't pass he was going to want less state spending in the capital budget, which funds construction, maintenance and other projects lawmakers want. Parnell has the power to line item veto projects to shrink the budget.
Parnell argued that the spending reduction would be needed because without lower taxes legislators would doom the state to declining oil production. Senators called that absurd and said Parnell's bill would flush away billions of tax dollars from the state without enough justification.
They responded to Parnell's threat by putting language in the budget saying if Parnell vetoes a single energy project, none of the energy projects will be funded. The list includes $65.7 million Parnell wants for the proposed Susitna River dam, as well as smaller hydro and other projects that senators want.
House leaders rejected that language, saying it's inappropriate and they don't have a fight with Parnell. At this point it is the biggest sticking point keeping the Legislature deadlocked in special session. Neither side is willing to budge on it.
Parnell did not say he'd specifically veto projects from areas represented by legislators who opposed cutting oil taxes. But lawmakers figured he would.

ENERGY PROJECTS
Projects senators are trying to protect with the disputed budget language include $28.5 million for expanding the Blue Lake hydroelectric project in Stedman's hometown of Sitka. There's $17.6 million for a Chikuminuk hydro project in Western Alaska, another area where legislators opposed Parnell.
But the projects span the state. There are dozens of them, ranging from $25 million for the Anchorage to Quartz Creek transmission line to $25,000 to retrofit the photovoltaic system in Lime Village. Senators said this is a year in which they particularly wanted to concentrate on energy projects.
Senators thought a deal with Parnell was doable after the governor told reporters Sunday night he thought he could vet the projects and come to an agreement on which ones he wouldn't veto.
But Parnell's letter on Tuesday appeared to dash those hopes. Parnell won't say how big he wants the budget to be. He said the Senate needs to follow the legislative process and pass the capital budget over to the House for it to work on.
The Senate refuses to do so because the House would take out the language protecting its projects.
The House, for its part, is holding on to the budget for state agencies until there's a resolution.
Anchorage Democratic Rep. Les Gara gave a speech on the House floor Tuesday calling the special session Parnell's fault. He said the veto threat was retaliation for the Senate's refusal to give away oil tax dollars in a poorly crafted proposal.
Gara said Parnell's letter doesn't help and he should withdraw the threat. But the leaders of the House Republican-led majority take the position that the special session is the Senate's fault because it refuses to pass over the capital budget. Chugiak Republican Rep. Bill Stoltze spoke in response to Gara. "I've seen less spin in a Tulsa trailer court during one of those big tornadoes," Stoltze said.