JUNEAU — When the Legislature convened nearly five months ago, there was broad acknowledgement that something needed to be done to address Alaska’s multibillion-dollar deficit but no clear consensus on a way forward. Not much has changed.
With the clock winding down on the current special session, which followed an extended regular session, Gov. Bill Walker said realistically he won’t get the comprehensive fiscal plan he wanted this year to help pull the state out of a hole deepened by low oil prices.
Lawmakers have shown little interest in Walker’s tax proposals, including raising taxes that haven’t been touched in decades on highway fuels and mining. The centerpiece of Walker’s plan, using Alaska Permanent Fund earnings to help cover state costs, passed the Senate but faces uncertain prospects in a divided House.
“There is a wide disagreement about how the government should be financed and the order in which various steps should be taken,” said economic consultant Gregg Erickson. “And if there’s no majority for any particular approach, then it’s not surprising that the crisis has to develop before a solution is agreed on.”
Alaska has been using savings built up during more prosperous times to get by, but Walker says that can’t continue. Rating agencies have warned that Alaska’s once-sterling credit rating could be further downgraded without major progress in addressing the deficit.
Economist Gunnar Knapp told lawmakers earlier this year that Alaska is probably facing a recession and no matter what lawmakers do, the economy will take a hit. He also urged that significant steps be taken this year.
But what is significant? Senate President Kevin Meyer, R-Anchorage, has said he thought Walker would be satisfied with the Senate’s passage of oil tax credit and permanent fund legislation. Walker said the question is whether that’s enough for this year. He wants to see what happens with the permanent fund bill in the House.
Minority Democrats and some moderate House Republicans, dissatisfied with the level of changes made to Alaska’s oil and gas tax credit system, have been reluctant to support use of permanent fund earnings. House Minority Leader Chris Tuck, D-Anchorage, said earlier this year that his caucus doesn’t want to go to the permanent fund earnings reserve first or by itself. Some conservative lawmakers, meanwhile, like Republican Rep. Lynn Gattis of Wasilla, believe further budget cuts are needed before asking citizens to chip in.
The permanent fund bill would change how the annual dividends most Alaskans receive are calculated, limiting them to $1,000 the next three years, a bit below the historical average and down from $2,072 last year. It also would trim the estimated deficit for next year by about half.
Alaska has no state sales tax or personal income tax.
Gattis said Friday that she mentioned trying to get to a compromise when she called in to a radio program.
“And I mean, I had people hollering back, ‘We didn’t send you down to compromise,’” she said, adding: “And I understand what they’re saying. We continue compromising and we don’t move the ball forward.”
Asked why it’s taken so long to try to reach a resolution, Rep. Andy Josephson, D-Anchorage, offered an illustration. He said that if his vote was needed, say, to approve the Pebble Mine project, a project he deeply opposes, “they could keep me here until I became a very old man and I’m not going to cast my vote.”
He said he’s pretty depressed with how things have played out so far.
Rep. Paul Seaton, R-Homer, believes there has been a missed opportunity for a balanced plan. He had proposed combining an income tax with a Permanent Fund Dividend that is converted to a refundable tax credit. The idea got little attention.
Longtime political watcher Steve Haycox noted that lawmakers are dealing with complex issues. It can be difficult for them to think long term since they have to keep an eye on what they think their constituents want and often their constituents aren’t thinking long term, he said.
