Despite the growing push for higher public school funding, the state’s gloomy financial outlook has cast doubts on just how much is actually possible. That could be changing.
The Senate’s bipartisan majority rolled out a pair of new revenue bills this week that would revise the state’s oil tax regime and increase taxes on Outside companies doing online business in Alaska. Together, the measures would raise as much as $465 million annually, more than enough to pay for a sizeable increase to school funding and balance the budget.
The effort also comes hand in hand with a push to finally revise the state’s dividend formula, which legislators have mostly ignored since oil prices collapsed a decade ago. The measure would enshrine the de facto policy of spending 25% of the spendable earnings from the Alaska Permanent Fund on dividends while spending the rest on schools and government services.
Legislators and budgeters have long recognized the need for the state to get its financial house in order, with many calling for the state to balance its budget with new revenues and revise the dividend laws. Despite continued calls for cuts, several legislators in the Senate Majority said that cuts have been the main policy for the last 10 years and it’s time to start looking at investing in the state.
“It’s time to really seriously start talking about what is a sustainable dividend and where is new revenue coming from?” said Sen. Cathy Giessel, R-Anchorage, in a news conference on Tuesday. “How much do all Alaskans sacrifice to provide effective government services to support our social and economic network in this state? … What I’m hoping to prepare people for is the gravy train is over and we’re going to have to make some serious decisions.”
According to a 2022 Department of Revenue estimate referenced in the Senate Majority’s announcement, changes to the corporate income tax’s application to online businesses are estimated to net the state between about $25 million and $65 million annually.
Meanwhile, the per-barrel oil tax credit change is more of a haircut than the wholesale elimination many have hoped for, reducing the range from $8-$1 per barrel to $5-$1. What’s interesting is that the $5 rate was largely the agreed-upon rate for much of the process leading up to the passage of Senate Bill 21 in 2013 but was hiked with little notice or input in a House Resources Committee hearing that I’ve heard grumbling about more than a decade later. It’s expected to generate about $400 million annually.
Leadership has also signaled interest in a proposal by minority Republican Sen. Robert Yundt to close a loophole that allows S-Corporations, which tax corporate income at the personal income level, to avoid paying corporate income taxes in Alaska. That’s expected to net more than $100 million annually. The Senate Finance Committee stripped a similar provision from a carbon storage bill last year.
In the big picture, senators framed the latest round of efforts as an attempt to bridge the near-term problems facing the state. Several noted that the Trump administration and Trump-aligned Republicans — which include U.S. Rep. Nick Begich III and U.S. Senator Dan Sullivan — are pushing for dramatic cuts to social services and other spending to pay for massive tax cuts for the wealthy that could leave the state picking up the tab to care for those in need. The federal employees union also now expects at least 1,378 Alaska federal employees will soon be out of work.
“The work we’re doing now is just to close the gap this fiscal year and the upcoming one in FY26, just so the two ends meet,” said Senate Finance Committee co-chair Sen. Bert Stedman. “If Washington does something dramatic to Medicaid, Medicare, school funding, you name it, that’s another set of challenges.”
On that note, Juneau Empire reporter Mark Sabbatini asked senators about Dunleavy’s recent comments at CPAC where he said, “It’s like Christmas every day now.”
Did they agree?
“It’s Christmas every day if all you expect is coal in your stocking, ” Senate President Gary Stevens, a Kodiak Republican, replied. “It’s a tough, tough time for all of us.”
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 Bluesky.
