Assembly and Ortiz to meet on legislative priorities

The Wrangell Assembly will be holding a workshop with its state representative Tuesday, ahead of its regularly scheduled meeting. Set for 6 p.m., Rep. Dan Ortiz (Unaffiliated – District 36) plans to present thoughts on the budget and fiscal plan put forward by Gov. Bill Walker last month, which will be making the Legislature's agenda when it convenes for its next session on January 16.

"I just want to give the opportunity for the Assembly to give me some input with regards to what they would like to see happen in this upcoming legislative session, both with the operating budget and the capital budget," he explained.

Ortiz had met with Ketchikan's council on Tuesday, and had likewise met with Metlakatla's the previous week. While in Wrangell, he said he would be making the rounds with constituents, meeting with Wrangell Cooperative Association and going door-to-door to speak with residents.

"As much walking as I can do, I'm going to try to get that done as well," Ortiz said.

At the top of legislators' to-do list this year will be the state's ongoing spending deficit, now in its fifth year. By the state's own reckoning, Alaska's financial problems stem from historical over reliance on oil revenues, which accounted for 84 percent of its income from 1980 until 2014. Since FY13 the price of oil has halved, which when coupled with decreasing production translated to a revenue drop from $5.4 billion to $1.6 billion by FY18.

In a 10-year fiscal plan attached to Walker's proposed budget, the Department of Revenue forecasts that oil prices will recover gradually, but the decline in production – this year being half what it was in 2003, and a quarter of 1988's peak – will continue into the foreseeable future, diminishing revenue return.

To stem spending, cuts to agency budgets, freezing capital projects and consolidations among state services have been enacted since FY15. Some 2,500 state positions have been cut over the past three years, while cuts to a combination of spending items have reduced Alaska's expenses by 40 percent since FY13. But spending reductions have been unable to keep pace with declining revenues, with the Legislature failing to enact significant revenue-side changes in the meantime.

The primary fiscal solution being put forward by the Walker administration is a percent of market value (POMV) based draw from the Permanent Fund, based on a five-year average of earnings. The 5.25-percent draw it proposes mirrors similar bills which gained traction in both the House and Senate last year. As proposed by Walker, the POMV reconfiguring would be retroactive to FY17, with $1.8 billion would be used to partially fund government services.

The other $695 million yielded from the draw would still go toward individual dividends. Under Walker's proposal the PFD would be reformulated, basing dividends on a combination of fund earnings and oil revenue share. A transitional $1,000 dividend would be proposed for the coming two years, until the new formula could be realized.

Other revenue sources being considered include increasing the corporate income tax to reflect levels commonly seen in other states, ranging from zero percent for those making less than $25,000 taxable income up to 11 percent for those making $500,000 and over. The current model, devised in the 1970s, spaces a zero-9.4 percent rate over 10 tax brackets. By condensing the brackets and adjusting rates, the administration hopes to yield an additional $50 million from corporate taxes.

Fee increases and a rise in the state's motor fuel tax are also proposed, with the fuel tax anticipated to yield $120 million over two years. To help pay for increases being proposed to capital spending, state finances would also be bolstered by a 1.5-percent tax on payroll, capped at either $2,200 per year or double the amount of the previous year's PFD.

"At least that's how it stands right now," Ortiz said of the latter. "So that's one of the things people need to consider."

It was this item in particular that Ortiz said he hoped to gauge constituents' support for in the coming weeks. Though state residents have the lightest tax burden of any state in the country, adopting new taxes has proven a tough sell to legislators. Put forward already before, the payroll tax had narrowly passed the House during November's special session but was not taken up by the Senate. It was uncertain whether the Democratic-led House majority would support the measure a second time.

"Nobody wants to see a tax implemented, nobody's ever going to get excited about that," he said. "However, we do have some building-up infrastructure costs that need to be addressed and some foregone maintenance issues that need to be addressed, otherwise they get more expensive."

As for the rest of the proposed budget, Ortiz noted education funding would remain consistent with the previous year's. "While it's not going to cover inflation costs, at least it's not going to be a reduction," he said. "In this fiscal environment it's about as positive as we can hope for."