It appears that Gov. Mike Dunleavy has had a change of heart on the state of the state’s budget and just how involved Alaskans need to be in shaping that process.
The governor met privately with legislators on Tuesday to discuss a statewide sales tax, according to reports by the Anchorage Daily News and the Alaska Beacon, leaving many with the impression he’s dropped his demand that any and all taxes be first approved by voters, a demand that has loomed large over legislative deliberations in recent years.
The governor’s office has been cagey about the details of the meeting and whether the governor has actually dropped his demand but, at the very least, that demand wasn’t mentioned during the meetings.
“That indicates to me willingness to potentially sign or allow to go into law those pieces of legislation without a referendum. So did he say it explicitly? No. Was that the message that I got? Yes,” House Minority Leader Calvin Schrage, I-Anchorage, told the ADN.
Details on the plan were scant on Tuesday, with legislators taking away sometimes differing ideas of what the proposal might actually entail such as the tax rate and whether it would exempt things like food and services. A proposal by Nikiski Republican Rep. Ben Carpenter would implement a sales tax with no exemptions for food but would see much of that revenue go out the door in simultaneous cuts to the corporate income tax rate.
That plan has been met with general derision from several legislators, who called out the proposal for being a “corporate giveaway” that would have a larger impact on rural Alaskans, who face much higher costs for groceries than urban Alaskans.
There’s also likely to be pushback from a contingent of legislators who believe it’s wrong to implement taxes in support of paying out a larger dividend. Several senators, including key Senate Finance Committee co-Chair Sen. Bert Stedman, have noted that the state could afford to increase school funding, increase its investment in infrastructure and avoid taxes if the dividend was reduced.
The Senate Finance Committee is currently considering such a proposal, which would set the dividend formula at 25% of the spendable revenue of the Alaska Permanent Fund or about $1,300 annually.
That legislation is being pitched as the groundwork for a larger fiscal plan and would give PFD-friendly legislators an opportunity to push the size of the dividend larger with benchmarks for increased revenue and increased savings. But at $1.3 billion in additional revenue and a target of $3.5 billion in the Constitutional Budget Reserve, legislative analysts have conceded that hitting such goals might not be possible.
Still, backers of the plan say the legislation illustrates the scope and scale of the problems facing the state: Alaska doesn’t have enough stable revenue to maintain a status quo budget, let alone meet the state’s needs in education and infrastructure, while also paying out a large dividend.
The operating budget, which passed with a smaller dividend than what the governor initially proposed, emerged from the House with a nearly $600 million deficit that key senators said on Tuesday will likely grow an additional $200 million by the time all the pending legislation this session is rolled together. Modeling shows without a change to spending or revenue, the state would be expected to burn through its little remaining savings in a matter of years.
Called a structural deficit, Gov. Dunleavy has so far provided little leadership on addressing it.
Ever since the governor proposed deep and deeply unpopular cuts in his first term, he’s taken a largely passive role in the state’s fiscal plan discussions. He’s proposed generally status quo budgets that are light on cuts, stymied legislative work on a fiscal plan with a blanket threat to veto anything that wasn’t first approved by voters—making good on that promise by vetoing legislation that would have raised the age to buy tobacco products because it contained a modest tax on tobacco vapes—and his few proposals have generally been outlandish suggestions like legalized gambling and monetize carbon sequestration.
Carbon sequestration, the act of selling credits for the state not logging trees and injecting carbon into underground storage, has been met with a chilly response from legislators who are skeptical about just every piece of the plan from the amount of revenue it’d actually generate to the cost to stand the program up and even the general concept of locking away public lands from development.
Still, the governor’s announcement on Tuesday was seen as a positive, albeit extremely late in the process step forward with fewer than 30 days left in the legislative session.
“I’m just hoping that he, in the end, will provide the leadership we need from a governor,” Stevens told the Alaska Beacon.
Matt Acuña Buxton is a long-time political reporter who has written for the Fairbanks Daily News-Miner and The Midnight Sun political blog. He also authors the daily politics newsletter, The Alaska Memo, and can frequently be found live-tweeting public meetings on Twitter.
