JUNE 12, 2017
Special Session Live Update
Dear Friends, Neighbors, and fellow Fairbanksans:
Notes from the 4th floor:
It’s June 12th and we have only a few days left in our first (and hopefully last) special session.
There’s lots of activity this week and hopefully we’ll resolve our differences and pass a budget, and hopefully a fully funded one.
The way I look at it there’s really 4 major concepts at play and this was made apparent when the Governor offered his compromise to both the House and Senate leadership to try to get us to come together and avert a government shutdown:
1. Oil Tax Bill HB 111. This is the piece of legislation that determines how much the state receives in oil tax revenue and also how much the oil companies can expect in credits and incentives. The House passed a version, sent it to the Senate where it was substantially changed and so now we’re in conference to settle our differences. The Governor’s compromise put back the “ring fencing” that the House Bill had but the Senate Bill removed. It’s a very complicated bill and has lots of moving parts. I think both sides agree we need to get rid of “cashable credits”, those credits that the state would have to give the oil companies cash payments if they were to lose money at certain fields under certain conditions.
2. Operating Budget Bill HB 57. The Senate version had enacted several cuts, namely a 5% cut to education and the University that many of us in the House don’t want to accept.
3. POMV (Percent of Market Value), SB 26: This is basically the Permanent Fund restructuring bill that would change the formula that calculates the PFD check amount. This would put approximately $1.9B into the General Fund for the budget. The House version had a PFD amount of $1250 minimum and the Senate had the minimum at $1000.
4. Revenue: This is one of the main sticking points. The House wants a balanced budget which means a plan for additional revenue. HB115 is a broad-based income tax that would raise approximately $700M with a progressive rate starting at 2.5% and go as high as 7% for high earners. This bill was rejected by the Senate and a different bill was proposed by the Governor in his compromise offer.
SB12 was introduced by Senator Bishop earlier this year although it hasn’t had any hearings. It was modeled after the head-tax Alaska levied on all workers up until 1980. Back then the tax was a flat $100/person that went towards education funding. SB12 is similar but doesn’t use a flat number for everyone but is bracketed based on income and uses 5 basic income groups. The lowest group is from 0-$20K earnings and pays $50/year. The highest is over $500K and pays $500/yr. The other 3 fall in between and pay $100 ($20K-$50K), $200($50K-$100K) and $300($100K-$500K). The tax as listed would yield approximately $70M in revenue. This tax would be applied to payroll directly, collected by the Department of Labor, not the Department of Revenue.
Another possible variation could be a flat tax on all income levels. In other words if a revenue number of $500M was desired we could tax every earner 2.4% regardless of income level.
These are the main items of discussion in Juneau right now. There are many possible variations on all these items and different groups have different preferences on how these items result. As mentioned the House would like to see a balanced budget and one that doesn’t require future budget cutting year after year and continued showdowns and battles that affect many Alaskan workers and citizens. I don’t want to hand out pink slips to public employees as a matter of “business as usual”. This is no way to run a state, school system, University etc. We need to stabilize our economy and get on the road to recovery. In case I haven’t explicitly stated it before, I am very much opposed to a government shutdown and am doing all I can to avoid that outcome.
Adam Wool with his family in Juneau
Representative Adam Wool