Almost two weeks after Gov. Mike Dunleavy told lawmakers he would propose a new sales tax, legislators have yet to see the governor’s bill — and are still far from reaching agreement on the state’s fiscal future.
Lawmakers broadly agree on the need for new revenue sources amid declining oil taxes. But any proposal from the governor, along with other revenue measures considered by lawmakers this year, are unlikely to pass with only two weeks until the constitutional deadline marking the end of the regular legislative session, key lawmakers said.
“It’s going to be hard to move a tax bill across the House and the Senate in that time,” said Senate President Gary Stevens, a Kodiak Republican.
“Normally big issues like that take a couple years. Certainly, it wouldn’t be 20 days,” said Sen. Bert Stedman, a Sitka Republican who co-chairs the Senate Finance Committee.
“The likelihood of anything happening this particular session — I don’t see it as very likely at all,” said Rep. Dan Ortiz, a Ketchikan independent. “We’re not going to get that fiscal plan between now and the next two and a half weeks. I just don’t see it.”
Dunleavy’s promise for a sales tax bill has reinvigorated discussions among lawmakers about competing revenue measures. In the House, Rep. Ben Carpenter, R-Nikiski, has already introduced his own sales tax. Rep. Alyse Galvin, I-Anchorage, has introduced an income tax on earners who make more than $200,000. In the Senate, lawmakers have introduced legislation that would increase the amount of taxes owed by oil companies and other corporations.
But no proposal has advanced out of either body, and the window for action is shrinking.
Dunleavy spokesman Jeff Turner said by email that the governor’s sales tax legislation is “in the drafting stage” and will be introduced “as soon as possible this session.” He did not respond when asked by email why the legislation had not been introduced earlier in the session, which began in January.
Even if the sales tax legislation were to advance, it is not necessarily the most popular among the revenue options considered by lawmakers.
“I’m not hearing from the people I talk to a lot of support for a sales tax,” said Rep. Louise Stutes, R-Kodiak. She is one of several lawmakers who represent communities that already have local sales taxes, and pointed out such a tax would have a disproportionate impact on rural communities.
In the House, all bills related to the state’s fiscal future, including ones to reform the dividend and change the state’s taxes, have been referred to the Ways and Means Committee. Any bill that advances out of the committee must then be considered by the more powerful House Finance Committee, which has yet to consider any of the bills pertaining to taxes or the Permanent Fund dividend.
In the Senate, leadership members have focused their attention on advancing a bill that would reform the way the Permanent Fund dividend is calculated each year. Senate leaders now favor a new 75-25 formula for calculating the dividend, which would divert one-quarter of the Permanent Fund’s earnings to the dividend, leaving the rest for spending on public services.
But some lawmakers, including House majority members, prefer a 50-50 split, leaving half the Permanent Fund’s earnings for the dividend — and requiring new revenue streams to make up the difference.
Rep. Kevin McCabe, R-Big Lake, said a 75-25 split “would be a nonstarter” for him. The 50-50 formula, which translates to a $2,700 dividend this year and would require hundreds of millions of dollars from savings to make up a revenue shortfall, “was the compromise position, not the starting position,” McCabe said.
Still, members of the Senate Finance Committee are pushing for the smaller dividend — which would translate this year to a $1,300 payment per eligible Alaskan — with increased fervor.
“The Senate is staying within the bookmarks of no overdraw of the Permanent Fund and no overdraw of the CBR, because it’s perilously low in backup funds for the state,” said Stedman, referring to the Constitutional Budget Reserve — a stop-gap savings account that can be used by lawmakers to make up funds if their budget calls for more spending than the state has in revenue.
“We’re going to live within our revenue stream this year, which means something has to give,” said Stedman. With lower-than-expected oil prices translating to lower revenue, Stedman said that avoiding a draw from savings would translate to a $1,300 dividend, a one-year boost in education funding, and a “stripped down” capital budget — which covers building and infrastructure maintenance and repairs.
That is a far cry from the House majority’s spending plan, which includes a $2,700 dividend and an estimated $600 million budget deficit, setting the stage for a battle over the size of the dividend and education funding in the final weeks — and leaving little time for the demanding conversations needed to reach agreement on new taxes or revenue sources.
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