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Note from Rep. Les Gara
Note from Rep. Les Gara  
Part 2 of 2: Facts Matter & Upcoming Public Testimony To Legislators
Note from Rep. Les Gara

February 26, 2016

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Dear Friends and Neighbors,

Yesterday I gave you a quick heads up about tomorrow’s chance to testify before your Anchorage legislators, and on next week’s public testimony on the House version of the Operating Budget.  The legislature writes the budget in old style Aramaic.  So I thought I’d decipher a few things you might be interested in.  Here’s the testimony schedule again:

I am cloistered in Juneau trying to do work that I hope will fix parts of a budget I do not feel are responsible.  Cutting waste is one thing, and should be done.  Cutting education, services for people battling Alzheimer’s and other terrible conditions, go too far.

Tomorrow in Anchorage you can testify on any issue you’d like to speak on.  Next week, there will be public testimony on the budget, which I consider a moral document that reflects our values, and of course, our tight budget situation.  A budget can make responsible cuts to achieve both our sense of what’s right, and the reality of a massive decline in oil revenue – and a need for a balanced revenue plan.  So, here goes.  If you skim, you might find the nugget of information that you’re most interested in.

School, Disability, Other Budget Cuts:
How Far Should They Go?

I’ll let you in on my personal views.  Last year the legislature cut the budget by roughly $700 million, and cuts, to help deal with a massive budget deficit were needed.  Today the budget is lower than it was back in 2007.  Adjusted for inflation, it is, per capita, less than it was 30 years ago. Here are a few charts from our Revenue and Legislative Finance analysts showing you that history.  Charts showing these budget numbers are attached to this newsletter.

This year the Governor has proposed another $100 million in state agency funding cuts.  His budget, at first, completely eliminated state funded Pre-K.  After public input, he restored those funds.  Members of the Republican-led House majority tentatively removed those funds the same week.

I will discuss some of these budget cuts below. 

But before I do, I should share a report conclusion from the University’s Institute of Social and Economic Research (ISER).  For every $100 million the state cuts to the budget at this point, Alaska will lose roughly 1,250 jobs.  Some more conservative legislators are pushing for $500 million in cuts or more.  In my view, that virtually guarantees a deep recession – a loss of over 6,000 private and public sector jobs. That means fewer people to shop at our stores, buy other local goods, pay for food, pay for rent and buy houses.  I think the Legislature’s legacy should be something better than a recession.  That’s why I am in Juneau, working this weekend.

A $4 billion Deficit:  The Plan Should Be Comprehensive and Fair To All (Hitting the Poorest and Seniors the Hardest Isn’t a Plan)

Alaska has a $4 billion deficit for a few undisputable reasons – and a few that involve opinion and value judgments.   In 2008, Alaska generated roughly $10 billion in oil revenue.  This year we are projected to generate, mostly due to a crash in oil prices, less than $2 billion in oil revenue.  For the last two years Alaska has paid more to oil companies in oil company tax credits than we receive back in oil company Production Taxes, and that’s expected to happen next year too.

There will have to be some cuts, and in a survey I did in my district the responses were – fortunately - consistent with my beliefs.  Most people said they believed in cutting waste, but most also said the cuts have gone deep enough, and they don’t support cutting more than what is waste.  People who responded opposed spending on the expensive new Anchorage Legislative Office Building; the $1.7 billion+ Knik Arm Bridge, the $6 billion Susitna Dam, and the $600 million Juneau Road (which just takes you to a different ferry terminal to connect to the road system).  Times are tight.  Folks would rather spend on needed, core services like road maintenance, public safety and education.  And, I think, to do things like help children succeed, allow seniors to live with dignity, and extend a hand to those born with physical, cognitive and mental health challenges.

Here are some revenue options after we reach the cuts folks think are appropriate.  Tell legislators – and me – what you think. 

Rep. Paul Seaton has proposed an income tax that would generate roughly $550 million in revenue.  The Governor has proposed a roughly 1.5% – 2.5% income tax (lower for wealthier folks who make the bulk of their money in stock and other “capital gains”).  His would raise $200 million, and only cut into 1/20th of the budget deficit.

Reps. Hawker, Millett, Senator McGuire, and the Governor have all proposed spending Permanent Fund Earnings and cutting the Dividend.  The various plans, after the first few years, would likely lead to Dividends between $400 and $1,000 depending on oil prices and market returns.  Rep. Hawker’s would go to $0 if Permanent Fund money from his plan is needed to fill the deficit, and his includes what I consider a double-hit.  If an income tax passes, then by the language of his bill no Permanent Fund Dividend would be paid.  These plans raise between $2.4 - $3.3 billion (the Governor’s raises the most in part because he would spend roughly $3 billion of our savings to create the plan.

I believe a plan should be balanced and fair – to all, and not just to the wealthiest among us.  For the 50% of Alaskans with the lowest income, 20% of their income comes from the Dividend on average according to ISER.  A balanced plan should include help from those with the greatest wealth. I have proposed items that seek this balance.  One bill would close Alaska’s corporate tax loophole.  Currently only C-Corporations, and no other corporations (LLC’s, S-Corporations and Professional Corporations) pay any Alaska corporate tax.  More than 6,000 corporations fall in this exemption.  I have proposed a modest 6% corporate tax on those corporations – but only if they earn more than $200,000 in profit.  It is anticipated that this would raise between $40  - $100 million.  The Department of Revenue has not calculated the revenue from that measure yet.  

And I believe we should fix an oil tax system that gets Alaskans ZERO DOLLARS in Oil Production Tax Revenue from any future oil field (and any field that went in production after 2002), even if the price of oil more than doubles to $73/barrel.  That, in my view, is a giveaway.  Here is a speech I gave today on that problem, and a state report showing some of the problems in this system.;

At current prices oil companies are earning little, but as prices return to the $50/barrel and higher levels, legislation I propose would raise roughly $200 million a year, up to more than $1 billion a year at very high prices.  We should share fairly in the value of our oil resource, and we do not under our current system.   The bill would also include modest incentives to help companies research and develop the technology to produce more of the known 30 billion barrels of heavy oil we have in existing oilfields.  That is our greatest known reserve of future oil.

Some Budget Items That You Might Be Interested In.

I believe a continuing disregard for school funding will cause families to leave Alaska.  I’d like to reverse a trend of falling classroom dollars and falling educational opportunity.  I think we can do this.  The current tentative House proposal has been crafted with largely GOP-led House majority votes, though there has been some consensus across party lines on other items.  I’ll mention some that cause me the most concern.   

K-12 School Funding:  School funding has been reduced over the past two years by roughly $20 million.  That is because in 2015, the first year of a 3-year education plan, $43 million in funds were added on top of the per student funding formula.  Since then, that $43 million has been deleted.  Between last year, the proposal by the Governor for next year, schools will receive $12.5 million a year in per student funding increases.  The loss of the first year’s $43 million, is $18 million more than the gain of $25 million in “base student allocation” increases.

State Funded Pre-K Eliminated: The proposed House Budget deleted all $2 million for our state pre-K grant program, roughly $500,000 for lower cost, parent to teacher pre-K help (called “Parents as Teachers”); and all funds for the state’s Best Beginnings Pre-K effort.  That just leaves Alaska with federally funded Head Start (there is state matching money).  But Head Start has been so underfunded that the state no longer keeps waiting lists of parents who seek to get their children into a Head Start classroom.  

I voted against the following cuts in our Health and Social Services Budget today.

Eliminating Senior Benefits Payments for those who earn between $14,721 and $25,000.   The House proposal is to stop the $125/month Senior Benefits payment for seniors who earn above $14,721.  It leaves the payments of lower income Seniors in place.

Cutting Services for those Battling Alzheimer’s Disease, Developmental Disabilities, Other Conditions.  The proposed House budget cuts $640,000 from “Community Development Disabilities Grants” – which help those with developmental disabilities live with more independence and dignity in homes and community-based residences.  $450,000 was cut from “Senior Community Based Grants”, which help seniors battling frail conditions and Alzheimer’s live more independently and with more dignity.

Cutting Heroin, Other Drug and Alcoholism Addiction Treatment.  $3 million was cut on top of the Governor’s proposed $5.7 million in “Behavioral Health” grants.  We have a heroin epidemic.  We have an alcoholism epidemic.  When people are willing to fight these addictions, they should not be turned away, and turned back to their drug dealers, liquor stores, and, sometimes, ON their children and spouses.  The Governor’s cut was sensible.  Alaska has, through Medicaid Expansion and other Medicaid Programs, qualified for an additional $5.7 million in federal treatment funds.  So, the Governor’s cut works out as an even wash.  It is not known who will not receive drug and alcoholism treatment from this additional $3 million cut.

Some Other Cuts Of Concern

We are waiting to see some other proposals.  But from last year, including the Governor’s proposed cuts this year, Alaska will reduce funding for job training at our Construction Academies by roughly $1.5 million.  Job and career counsellors have already been eliminated across the state though the now defunct Jobs First effort formerly run by the Department of Labor.

University:  After years of major cuts, state funding is proposed to be cut by another $50 million this year, which will jeopardize the university’s ability to continue to qualify for roughly $1 billion in research and other grant funds brought into this state; and our ability to be a leader in cold climate research, arctic policy issues and other areas.   The Governor proposed a $15 million cut and the House proposal is to cut $35 million more.

Renewable Energy and Alternative Energy Grant Funds:  What was over $30 million a few years ago has either been completely eliminated, or cut to $2 million (we are researching this).  If we are going to make headway in moving towards a brighter renewable energy future, especially for rural communities relying on expensive diesel fuel, eliminating these funds isn’t the smartest thing to do.  The Alaska Energy Authority is Alaska’s agency responsible for saving Alaskan’s money through helping communities build a renewable energy infrastructure, and saving us money by promoting energy efficiency (the cheapest kilowatt is the kilowatt we don’t use).  Those efforts are in jeopardy today (we are still trying to get confirmation about what, if anything, is left of the state’s energy efficiency section under the draft budget proposal).


Budget subcommittee recommendations will be forwarded to the full House Finance Committee next week.  These are some of the low-lights I thought you might want to know about.

With that, I hope you are doing well.  I’ll keep battling for what I hope will be a smarter budget plan.

My best,

[signed] Les Gara


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