Senate rolls out more than just a concept of a fiscal plan

It's Wednesday, Alaska!

In this edition: The Senate took a big step towards a fiscal plan today with the introduction of a pair of bills aimed at pulling the state out of its interminable financial quagmire through the largely foreign concept of taking proactive steps to raise revenue instead of banking on one more boom. They've set their sights on closing holes in the state's oil tax regime and corporate tax structure, arguing that it'll go a long way to paying for schools and other necessary spending. That's not all on the fiscal plan; the Senate is also moving ahead with an effort to update the state's dividend formula. Meanwhile, while Gov. Mike Dunleavy calls the Trump era "Christmas every day," legislators say it's like a never-ending supply of coal.

Current mood: 💸

Senate rolls out more than a concept of a fiscal plan with oil tax credit repeal, corporate taxes

The state's interminable financial quagmire has long been an interminable quagmire because of lawmakers' reluctance to address the underlying structural problems of state spending — namely that there's not enough money to meet the many expectations of what state government should be. When oil collapsed more than a decade ago, there was much talk of "right-sizing" state government that led to widespread, landscape-altering cuts throughout the state, particularly at the University of Alaska system. The presumption behind all the push to cut was that at some point, eventually, the state would then look at revenue to shore everything up and get the state back to a place where it was investing in itself and growing.

However, as the situation facing schools has shown, the "right-sizing" talk gave way to years of inaction as we settled into an uneasy and untenable status quo.

There have been blips of new revenue here and there, but the core imbalances contained in the state budget haven't really gone away. The dividend formula says one thing, the spending rules for the Alaska Permanent Fund say another, and inflation is making a mess of everything else. We've bought — and, more often than not, lucked — our way into a bit more runway on the fiscal cliff over the last decade, but we're still on a crash course with an unmanageable deficit as has been illustrated all too well over the course of several Finance Committee hearings.

That could be changing.

The Senate Bipartisan Coalition is taking the lead on new revenue in the form of Senate Bill 112, which would reduce but not eliminate per-barrel oil tax credits, and Senate Bill 113, which would update the state's corporate income taxes to capture businesses that primarily operate online. They've also proposed a long-overdue revision to the dividend statute, enshrining the de facto policy of a 75-25 split of the spendable revenue from the Alaska Permanent Fund between state government and the dividend.

"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 what 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 not immediately clear how much revenue that change would net the state.

Leadership has also signaled interest in a proposal to close a loophole that allowed S-Corporations, where corporate income is taxed at the personal income level, to avoid paying corporate income taxes. 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 includes U.S. Rep. Nick Begich III and U.S. 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 Alaskans. 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: "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.”

Stay tuned.

More coverage: Juneau Empire, Alaska Beacon, ADN

More news to fret about

• Disability advocates fear impacts from federal lawsuit in which state says Medicaid services are at risk
• Federal court rules Somali man in Anchorage being detained illegally by ICE
• Anchorage School Board makes broad cuts to staff, programs and sports in next year’s budget
• The U.S. House budget calls for health care cuts. Murkowski says they'd be ‘devastating’ to Alaska.
• 'Alaska Native’ removed from Alaska Native Science and Engineering Program website

A true icon

Historian David Reamer unearthed this Taco Bell ad featuring the great DeeDee Jonrowe, who even got a sweet commemorative cup! Unfortunately, it doesn't look like there are any floating around on eBay, but keep an eye out for me!