Historic Action Taken by the House Majority:
Dear Friends and Neighbors,
Over the weekend the House Majority made true on the commitment we made on November 9th when we came together to form a new coalition. We came together as Democrats, Republicans, and Independents to put our state back on track for a prosperous future by passing a fiscal plan. At the beginning of the session we said our plan had four pillars: reform of our overly generous oil and gas subsidies, strategic budget cuts, protection of the PFD and restructuring, and new revenue from a broad based tax. We took the enormity of the situation and with a laser focus worked diligently to get every measure passed. This is a lengthy enews and I hope you’ll have time to read all of it and will get in touch with questions. I love hearing from you!
REFORM OF OIL AND GAS SUBSIDIES
We have proposed oil and gas reform through HB111. This bill is sponsored by the House Resources Committee and it has been my job this session, along with Co-Chair Andy Josephson and our incredible team of staff, to shepherd this bill through the legislature. We had 17 hearings alone in the House Resources Committee that included over four hours of public testimony. When the bill came to the floor half of the members spoke in debate. This is a contentious issue and some believe Senate Bill 21 is working. I strongly disagree. For example, currently we owe almost a billion dollars in subsidies. How can that be affordable when the Senate Majority is proposing to cut hundreds of teachers? 93% of respondents in the budget poll I sent out to neighbors said reform of these subsidies had to be part of a fiscal plan. I agree that everyone has to give and that in this low price environment the state can no longer afford to offer generous subsidies not offered anywhere else in the world. That’s right; Alaska is the only place to offer these generous cash subsidies. It’s a false narrative that if we make modest changes we will no longer be competitive. We have to cut them now because teachers and Troopers have to be our priority.
We have made strategic budget cuts so public education and public welfare are protected and supported. In contrast, the Senate Majority has proposed devastating cuts to education, the University, health, and the Pioneer Homes that serve Seniors and Veterans. The cuts in Anchorage would result in hundreds of lost teacher positions. I’ve been teaching for almost twenty years and know what will happen in our schools with these cuts. Class sizes will be too big to manage successfully, kids will slip through the cracks, and our kids will bear the brunt of the budget problem. That’s not right. Another cut proposed by the Senate Majority would close two Pioneer Homes, the Palmer location for Seniors and Veterans, and the Juneau location for Seniors. We will oppose the disastrous cuts to education, the Pioneer Home, and public health. The easy cuts are gone. Drastic cuts now will cause real harm to the people who rely on the services and will drive our state into a deeper recession.
PROTECTION OF PERMANENT FUND DIVIDEND &
Our bill to protect the Permanent Fund Dividend and restructure the fund, Senate Bill 26, also passed in the last week. Our bill ensures a minimum of a $1250 Permanent Fund check. I think we did the right thing in that we added “Conditional Effect” language that states that the bill will only be implemented if two things also happen: 1)Oil and gas subsidy reform passes and 2)a broad based tax passes. We’ve said the fiscal plan has to be fair to all Alaskans and this is one way to ensure that.
It’s important to link these three items together because a Permanent Fund only plan is a failure. Here’s why: The Permanent Fund only plan is a high risk plan that includes hundreds of millions of dollars in additional budget cuts for the next ten years, it relies on an increase in oil prices, and relies on an increase in production.
We can hope that production increases and we can hope that prices go up, but it’s no way to run a state. Folks are saying there have been announcements of new discoveries on the North Slope. Well, it will take 7-10 years, if not longer for that to turn into production. That also ignores climate change and the need to diversify to renewables and cleaner burning fuels. We need solutions today!
A PFD only plan would hit moderate to low income families the hardest and in the end, they would end up paying a much higher percentage of their income to support state government while the wealthiest Alaskans pay very little. A report commissioned by Rasmuson Foundation details this disparity. Page 8 discusses how the PFD only plan amounts to a 10% income reduction on the lowest income Alaskans while only amounting to a 1.3% reduction to the top 20% of wage earners.
If we learn from what happened when the recession hit the lower 48 people saw a significant drop in their retirement accounts and a dramatic drop in the value of their home. Here in Alaska, because many retirement fund dollars are invested outside, we are still recovering from the drop in value. We’ve been lucky though in that the drop in home values hasn’t happened just yet. But last year 9,000 people left Alaska. If that outward migration trend continues and home values drop in prices it will be years, if not decades, until things recover. I believe we can do better.
EDUCATION FUNDING ACT
Finally, The Education Funding Act passed by the House institutes a school tax that will ensure that individuals that earn a living in Alaska, but live outside, will now contribute to state services. There have been a few changes from what was originally proposed, namely the school tax will not be based on 15% of your federal tax. Instead, the school tax will create brackets based on adjusted gross income.
First, what is adjusted gross income? If you’ve just done your federal taxes then you’ve seen your Adjusted Gross Income (AGI) before. It’s the total gross income minus specific deductions. In Alaska, we will have our own AGI that includes two deductions - your annual PFD check and a $4,000/per person deduction. We’ve also created a mechanism for your PFD check to be applied to any school tax that is owed to the state.
Let’s look at a couple examples. First, a single person with no children. Then, a married couple with two children. If you’d like to see many more examples of different incomes and different family sizes, including married with no children, married with two children, married with four children, and single with two children, please click here.
Single with No Children
So, this means a single person with no children earning $60,000 would pay $170 for the school tax. The same single person with no children earning $150,000 would pay $4,219. Line F shows the mechanism for applying your PFD check towards your school tax.
Married Couple with Two Children
So, this means a married couple with two children earning $60,000 would pay no school tax and would still receive $1,561 as a refund in state tax. The same married couple with two children earning $150,000 would pay $1,137. Line F shows applying two PFD checks towards the school tax owed.
CONSTITUENT MEETING AND HMONG VETERANS MEETING
On March 25th, Senator Begich and I hosted our first mid-session constituent meeting together. It was a little later than normal, but worked well this year because we had a better idea of where the major pieces of legislation are and how neighbors can engage in the process. We had a great crowd of over 70 people, especially pleasing because it was a gorgeous, sunny day outside. I know you love to get out and enjoy the beauty around us so I greatly appreciate the time folks spent with us. Your feedback is so important!
I also hosted a meeting with Hmong Veterans in our area. We are working together to earn them the recognition they deserve for their service to our country. Many do not know that Hmong soldiers fought alongside US soldiers during the Vietnam War to help us in unfamiliar terrain and to protect trails needed for transport and access for soldiers. They were promised Veteran recognition, but here we are some 40 years after the war ended, and these Soldiers have never received their proper recognition. We are working on House Bill 125 as one way to change that by honoring their service with a Veteran designation on their driver’s license.
A huge thank you to Mayor Berkowitz for taking the time to join us!
3rd ANNUAL FOOD SECURITY AWARENESS WEEK
Along with the constituent meeting, around 100 people from Anchorage, Fairbanks, Juneau, and Sitka came together for the 3rd annual Food Security Awareness week. We’ve been pushing policies to improve food security in Alaska and create new opportunities for farmers in Alaska. Alaskans spend over a billion dollars every year on food items, but just 5% of that is on food grown in state. We can support small businesses and keep those dollars in our economy by buying Alaska Grown. We need to diversify our economy and agriculture provides opportunity for that.
We’ve gone past the 90 day mark, but with so much progress on a comprehensive, sustainable fiscal plan we need to keep going and get this right. I committed to all of you to do the right thing for our state and will work as hard as possible to get our work done as soon as possible.