In 1985, a reporter from the Christian Science Monitor flew out to see Jay Hammond.
The former governor obliged her, showing her around his 160-acre homestead in a section of wilderness named this year in his honor.
Hammond eventually sat down for an interview and made a prediction: The pinch is coming.
There would come a day, Hammond said, when oil revenue would slip and the state would be confronted with the bill for the service it provides its residents.
Hammond was right, and the pinch is today.
On Wednesday, Gov. Bill Walker proposed the biggest change in the state’s system of taxes and revenue since Hammond was in office. Walker’s plan includes tax hikes for alcohol, tobacco and gasoline. It erases the state’s oil tax credit program for drillers and raises the floor on production taxes. It would effectively halve the amount of the Permanent Fund Dividend and turn the Permanent Fund into a money factory producing $3.2 billion annually for state services.
Beyond all that, it would impose an income tax on Alaskans.
In his last book, “Diapering the Devil,” Hammond wrote: “In 1980, the legislature abolished Alaska’s income tax in what I, at the time, asserted was the most stupid thing we could do. Reduce or suspend, but don’t take it off the books completely, for it will prove almost impossible to resurrect, no matter how desperately needed.”
Hammond was right.
Walker’s proposal is all but certain to change when the Alaska Legislature convenes on Jan. 19. For the state’s sake, we hope those changes are improvements rather than an outright rejection of the governor’s ideas.
Alaska has run out of time. If we do not act in this year, we will have neither the money nor the time to change the way our state government operates. Without action, the consequences are catastrophic:
• No dividends after 2020;
• Massive budget cuts;
• Surging tax increases;
• Business flight;
• Population loss;
• Economic recession or depression.
Walker has proposed an income tax that, if implemented, would be the lowest among all states that collect such a tax. For every $100 in tax you pay to the IRS, you would pay another $6 to the state.
Without Walker’s plan, your dividend would be more than $2,000 next year — but it would disappear after 2020. With Walker’s plan, your dividend will be $1,000 next year, and you’ll keep getting dividends — and so will your children and grandchildren.
Walker’s plan also includes cuts, including millions from the Alaska Marine Highway that will lead to the layup of the state’s fast ferries.
Other state departments, including the state’s tourism and seafood marketing divisions, will face steep cuts as well. Juneau — whether you agree with the situation or not — depends upon state employment. More than 10 percent of the borough’s population is employed by the state of Alaska.
As Walker said Wednesday: “I guarantee that everyone in Alaska will find something in this plan they don’t particularly care for.”
The Alaska Legislature has one month until it meets and begins considering Walker’s plan. It is our conclusion that Walker’s notion is unpleasant but ultimately necessary. While we are open to other ideas, we have not heard a plan as comprehensive as the one unveiled by Walker on Wednesday.
Empty calls to “cut the budget” are not a plan. “Don’t take my PFD” is not a plan.
The worst plan of all, however, is the plan that involves doing nothing.
