By Representative Andy Josephson
Published in the Alaska Dispatch News June 4th, 2017
The clock ticks. The June 30th deadline to fund Alaska’s budget marches closer. A state government shutdown looms. Because I know Alaskans depend on state government services, I am working hard to avoid this calamity. I’m advocating—as I have for years—for a comprehensive fiscal plan that protects our economy. I’m aiming to achieve not just one year’s budget, but also a long-lasting comprehensive fiscal plan that protects Alaskans and the thousands of jobs threatened by our lingering recession.
At issue are key differences between the House and the Senate fiscal plans. These significant differences amplify the competing visions of our bipartisan Alaska House Majority Coalition and the Senate Majority.
The Senate Majority is calling for lawmakers to ignore the experts and the data and just embrace its Permanent Fund Dividend-only solution. This is a half-measure that leaves in place the fiscal uncertainty that has long plagued Alaska.
The decisions we make in the next few days will clearly demonstrate our priorities. When it’s all said and done, will the priority be inaction and dysfunction—politics as usual—or, as I hope, a commitment to putting Alaska on stable fiscal foundation with a sustainable balanced budget.
A prime example of the divide between the House and Senate is the debate about the massive liability facing the state of Alaska from continuing to subsidize the oil industry with cash payments and unsustainable tax credits. Our coalition made reforming this flawed system a priority, and we worked diligently to craft a bill that ends cash subsidies, limits our current nearly-unlimited liability from excessive tax credits, and protects the state of Alaska during times of low oil prices. The House passed House Bill 111 in April and sent it to the Senate for consideration. Instead of making HB 111 better, the Senate Majority made it worse by removing nearly every provision that ensures the state of Alaska receives a fair share for our oil at low prices.
Our version of the bill will bring in an additional $15 million in new revenue in Fiscal Year (FY) 2018, and the total positive fiscal impact will be over half a billion dollars by 2026. The Senate version of the bill does not bring in any new revenue in FY 2018, and the total positive fiscal impact is just $145 million by 2027. Our bill hardens the four percent minimum tax floor so Alaska could expect some production tax revenue at low prices. The Senate is more concerned about oil company revenues, and would allow them to deduct a lot more expenses from their taxes than the House would, $800 million more by the end of 2027. Those deductions would also seriously impact our bottom line.
Perhaps the most telling difference between the competing fiscal plans is how they treat public education and higher learning. Our proposed FY 2018 budget funds K-12 and the University of Alaska at the same levels as in the FY 2017 budget. This provides some fiscal certainty to school districts and the University so they can hire and retain teachers and professors. However, the Senate Majority chose to jeopardize our children’s education by cutting K-12 funding nearly $70 million, which could cost 700 to 900 teacher jobs statewide. They also proposed a $22 million University cut that University officials have called devastating.
The House carefully crafted our comprehensive and complete fiscal plan with input from Alaskans to be balanced and fair, with contributions spread out across every region of Alaska and every segment of our economy. In contrast, the plan from the Senate Majority bypasses fairness in favor of determining winners and losers. The big winners under their plan will be the oil industry and the wealthy. Unfortunately, if they are successful the big losers will be the people of Alaska, who will lose half of their dividends and have a state government so crippled by budget cuts that nearly every essential service will be in jeopardy.
The people of Alaska and the members of the House and Senate have two clear choices in front of them. A responsible fiscal plan that incorporates the best available data and the advice of the experts who have studied our economic challenges, or a partial plan based on politics and fear that continues the uncertainty and worsens the recession.
The choices made in coming days will determine if Alaska goes into a deeper and darker recession or moves into an economic recovery that features more jobs, more opportunities, and more hope.