Legislative leaders focused on the Permanent Fund dividend and taxes as they described the budget choices facing lawmakers trying to find a combination that will win enough political support to balance state spending.
“The dividend has been the massive rock in the middle of the road,” making it difficult to find an affordable path to a long-term state fiscal plan, Anchorage Sen. Cathy Giessel, the Senate majority leader, said during an online discussion with Alaska Common Ground last week.
“The dividend provides a lot of benefits to Alaska families,” added Anchorage Rep. Calvin Schrage, the House minority leader. But the state cannot afford a dividend so large that it takes away from funding essential public services, he said to the 32-year-old civic group at the April 25 event.
The state has paid out a dividend each fall from Permanent Fund earnings since 1982, but it’s been a fiscal and political struggle in recent years as state revenues have been squeezed by declining oil production, tax and royalty dollars.
Giessel, a Republican, and Schrage, an independent, talked and answered questions about the status of budget negotiations and a state fiscal plan as the Legislature approaches its May 17 adjournment deadline.
“I think what is new … we have our Republican governor” acknowledging the need for new revenues to bolster state finances, said Schrage, referring to Gov. Mike Dunleavy’s recent announcements that Alaskans need to look at paying taxes as part of an overall fiscal plan.
While the governor as of Monday had yet to introduce his proposal for a state sales tax, legislators have offered multiple tax proposals. Though none appear headed toward likely passage in the final weeks of the legislative session, lawmakers are hearing the bills.
“We’re still in a little bit of an arm wrestle with each other,” Giessel said of proposals to boost the state tax take from oil companies. The Senate majority is a coalition of Republicans and Democrats.
The Senate is considering a bill to extend the state’s corporate income tax to closely held oil producers, such as Hilcorp, which bought out BP’s Alaska assets in 2020. Currently, the tax applies only to publicly traded corporations, such as ConocoPhillips and ExxonMobil.
Extending the reach of corporate taxes could raise maybe $200 million a year for the state, the senator said.
Another bill in the Senate would increase the oil production tax take by as much as $500 million a year by reducing a tax break at certain price thresholds. The Senate Finance Committee is hearing the bill this week.
Other tax measures introduced this year include a personal income tax, state sales tax, extending the state corporate income tax to capture more revenue from digital businesses, increasing the state tax on oil and gas property, and adding a tax to e-cigarettes and vape products.
Giessel noted that the House majority, led by Republicans, has shown no interest in moving any tax legislation this year.
Instead of looking at new revenues, the House majority proposed taking $600 million out of savings to cover its spending plan for the fiscal year that starts July 1. Differences between House and Senate budget plans will need to be resolved before lawmakers adjourn.
Passing any tax bills in the last weeks of the session will be challenging, Schrage acknowledged, adding that the prospects may be better if lawmakers meet in a special session in the fall, as the governor has suggested, or perhaps legislators may decide to delay the hard decisions to next year.
It’s a tough choice for many lawmakers between raising new revenues and reducing the dividend to its average of around $1,300 the past 10 years before last year’s election-year record-setting payment, the representative said. But without a decision, “we run the prospect of running out of money.”
Dillingham Rep. Bryce Edgmon, who was not part of the Alaska Common Ground event, said in an interview that the large number of first-time legislators this year — one-third of the 60 members — may help explain the increased willingness to consider taxes as new members see the budget reality.
“It’s a little bit of a lottery,” with members putting in their own ideas for taxes, he said. Edgmon, a member of the House majority coalition, serves as co-chair of the Finance Committee.
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