Leading members of the Alaska House of Representatives said Friday, Feb. 6, that Gov. Mike Dunleavy’s ambitious long-term state fiscal plan has almost no support among legislators and is almost certainly dead on arrival.
House leaders spoke with reporters a day after members of the House Finance Committee heard two hours of public testimony on the governor’s proposed statewide sales tax, the cornerstone of his multi-part proposal to bring state expenses and revenue into line over the next five years.
Every Alaskan who testified — almost 30 in total — was against the tax.
“This is just pure speculation on my part, but what you hear folks in the hall say is, if there’s a vote today on the sales tax, it could be a zero to 60 vote,” said Nome Rep. Neal Foster, a Democrat, co-chair of the House Finance Committee.
House Minority Leader DeLena Johnson, a Palmer Republican, said there might be a handful of legislators who would still support the governor’s plan, but it’s pretty clear that it lacks the support it needs to become law.
“From the testimony that was taken last night in House Finance — when everyone who called in spoke in opposition — it certainly makes it hard to think there’s a lot of people that aren’t very cautious about saying they’re for the governor’s plan,” she said.
The governor’s overall plan calls for a summer-heavy statewide sales tax of 4% half the year and 2% the other half, changes to the state’s oil taxes, elimination of corporate income taxes, a constitutionally guaranteed Permanent Fund dividend formula, changes to the structure of the Alaska Permanent Fund and a tighter spending cap in state law.
Those changes are being proposed because oil and investment revenue can’t keep up with demand for services and dividends, and lawmakers are unwilling to cut services any more than they already have.
Since 2015, legislators and governors have cut state agencies’ budgets by 16.6%, after accounting for inflation. The state’s capital budget, which pays for new construction and maintenance, has been cut by more than 80%.
Every year since 2016, the Permanent Fund dividend has been cut below the amount called for in state law.
With so much deferred maintenance, public schools — particularly in rural Alaska — are decaying and literally collapsing. The state is now facing a lawsuit alleging that school funding is so low that it violates the Alaska Constitution.
Dunleavy’s proposal would be a way to stanch the fiscal bleeding. The new taxes are intended to be temporary because the Dunleavy administration expects North Slope oil production to rise, boosting state revenue, and it expects that a proposed trans-Alaska natural gas pipeline will be built and generate more money for the state.
The gas project developer has not committed to constructing the $44-plus-billion venture.
Even before last week’s presentations and public testimony, many legislators were skeptical of the plan, and saw the new taxes as merely a way to pay a larger Permanent Fund dividend.
“I’m a logic person,” said Senate Minority Leader Mike Cronk, a Tok Republican, on Jan. 28, one day after the governor debuted his plan. “We’re going to tax those people that are productive so everybody gets a check? That don’t work for me. … That’s just not logical to me,” he said.
Lawmakers analyzed the sales tax first, in a series of hearings last week, but because it received such a negative reaction in public testimony, legislators are now wondering if it’s worth considering any other part of the governor’s fiscal plan, given that they are all viewed as one package.
Foster said it doesn’t look like the governor’s proposal could be amended and improved enough to get sufficient support in the Capitol.
Some lawmakers have concerns beyond the sales tax. Johnson thinks the governor’s proposal for a revised spending cap is inadequate. Because it would be in state law, rather than in the constitution, future legislators could ignore it just as they do the current Permanent Fund dividend formula.
That’s why she calls it a “spending beanie,” instead of a spending cap.
Speaker of the House Bryce Edgmon, a Dillingham independent, said he’s skeptical of this proposal’s chances after years of other attempts to enact a fiscal plan.
“I won’t regale you with tales from years past, but on the Finance Committee, we have spent weeks and weeks going through a lot of this stuff, and it never got a compromise when it came to the floor. So that’s the issue at hand here,” he said.
“I think folks are just kind of waiting until next year before we, you know, really take a serious stab at some of those things, like the income tax,” Foster said.
“I have higher hopes for next year than I do this year. You know, a new executive leadership branch and the leadership there,” he said.
In a one-on-one interview with the Alaska Beacon on Feb. 6, Dunleavy said lawmakers are going to be disappointed if they think that negotiating with a new governor will be any easier.
Dunleavy is term-limited and leaves office in December.
“A governor who goes in there and puts out a plan like this in their first or second year, they’re going to get the same thing we’re getting now,” Dunleavy said. “And that doesn’t work.”
The Alaska Beacon is an independent, donor-funded news organization. Alaskabeacon.com.
