By Rep. Sam Kito (D-Juneau)
Published in the Juneau Empire June 23rd, 2017
Juneau – Governor Bill Walker’s decision to call the Alaska State Legislature into a Second Special Session provided the spark needed to bring all sides to the table to negotiate a compromise budget to prevent a devastating government shutdown in Alaska. Passage of the budget Thursday night means the ferries will continue running, commercial fisheries can go on uninterrupted, and State Troopers will still be available to respond to emergencies. Preventing a government shutdown was of the utmost importance but there is more work to do to secure a stable economic future for Alaska.
This session, the Alaska House Majority proposed and passed a fiscal plan and a responsible budget. The Senate Majority rejected our plan in favor of a budget reduction plan funded by cutting Alaskan’s Permanent Fund Dividends. The plan our House Majority passed provides a stable basis for funding our state services into the future, and protects public education, public healthcare, ferry service, public safety, and resource management. The budget reduction plan supported by the Alaska Senate Majority relies too heavily on hope: both the hope for an increase in volatile oil prices and on the hope for above average performance from unpredictable financial investments. Our current dependence on oil revenue is unsustainable and is threatening to reduce our available savings to critical levels.
Alaska’s current fiscal crisis is a direct result of some lawmakers who are not willing to make the difficult, yet necessary decisions to protect our economy and our future. Including this years’ budget, over the last four years we have spent $16 billion of our savings. We now have approximately $10 billion in our savings accounts. This is tragic and unfortunate because with a fiscal plan, the spent savings could have been earning revenue for Alaskans. The reduction in our savings could have been avoided if the past House and Senate leadership, and current Senate leadership, were committed to identifying the revenues necessary to support critical and essential state services for Alaskans instead of playing politics with Alaska’s future.
With the reduction in oil prices that we continue to see, we are earning just $1.2 billion in oil royalties and taxes. It is unreasonable to expect that state general fund spending for the operating budget can go from $7.8 billion in FY 2013 to $4.3 billion in FY 2017 to $1.2 billion in FY 2018 without dramatic negative effects on state services like education, public safety, transportation, and healthcare. The compromise $4.1 billion Unrestricted General Fund (UGF) budget passed Thursday night by the House and Senate is a responsible budget that protects Alaskans and the services the state provides. However, without a comprehensive fiscal plan we will continue on this same dangerous course until we have no savings left to fill the gap, which by some predictions could happen in as little as three years.
The Senate Majority has not offered any suggestions for how we pay for basic state services while we are taking in so little oil revenue. Any fiscal plan for our future needs to include a reasonable restructuring of the Alaska Permanent Fund earnings, oil tax credit reform, and broad based revenue. The Senate Majority continues to focus on cuts and the restructuring of permanent fund earnings. A fair and sustainable fiscal plan requires all Alaskans and industries in our state to step up and be part of the solution. The burden of raising new revenue must be shared fairly among all, and we should also collect revenue from out-of-state workers and businesses profiting from our natural resources. We should not place an undue burden on the poorest Alaskans by only capping the dividend in order to pay for our state budget.
I applaud the Governor’s decision to add oil tax credit reform to the agenda for the ongoing Second Special Session. The current system is unsustainable and poses a massive liability to the state. We must end the practice of paying oil companies cash for tax credits and put in place a system that both encourages new development and production and ensure the State of Alaska receives some production tax revenue at low prices. I believe fixing our oil tax credit system is a key component of any successful long-term fiscal plan.
In the coming days and weeks, we can find compromise on the various parts of a comprehensive fiscal plan but only if the members of the House and Senate work together and put aside politics in favor of solutions.