Building a sustainable future
By Rep. Paul Seaton
February 14, 2017
On Friday the House Finance committee introduced HB 115 State Revenue Restructuring Act, which aims to fill the deficit in a way that is fair and balanced to Alaskans. This bill addresses three of the four pillars of the House Majority Coalition Plan to build a sustainable future for our state; a structured draw from the permanent fund earnings reserve, new revenue from a broad-based tax, and a sustainable dividend amount. The fourth pillar constrains state spending by making smart budget cuts and reducing the state’s oil and gas tax credit subsidies.
For the past 30 years the state has been tied to highly volatile oil revenues, but oil can no longer sustain 90% of our budget. By relying so heavily on an unpredictable revenue source, Alaska has been subjected to fluctuating periods of growth and contraction. That kind of variability is not just bad for the state budget, it is bad for the economy.
Cuts alone are not the answer. We are already seeing the effect of cuts on public safety and the courts, and in the time it takes to get roads plowed. Continued large cuts would guarantee we would never have the budget to maintain our education system, infrastructure or maintenance to keep it from crumbling. That is not the Alaska most people want to live in.
Our new revenue structure needs to be stable, sustainable into the future, and be balanced in the way it affects Alaskans. The 4.75% percent of market value (POMV) earnings reserve draw proposed in the bill is a stable source of annual revenue and a more stable way to pay out the dividend, but it is not enough to fill the state’s $2.7 billion deficit. A much larger draw on the earnings would not be sustainable; it would drain the permanent fund over time and reduce its value for future generations of Alaskans. Any increase in the use of earnings also means it would be hard to maintain the future size of the dividend. HB 115 will grow the dividend. Dividends will start higher than last year, at $1,100.
Adding revenue from an income tax based on 15% of the federal tax you pay is a balanced way to supplement the draw from the earnings reserve account. Since the restructured PFD amount is equal to the income tax revenue, restructuring the PFD will impact those in the lower income bracket to a greater extent. This is referred to as regressive. State income tax is considered progressive because the higher a person’s income, the higher the taxes they pay. The income tax will also capture money from the 20% of Alaska’s workforce that is from out of state. By making changes to both the PFD payout and by implementing a moderate state income tax, HB 115 creates a balanced way for all Alaskan’s to contribute. Filling a $2.7 billion deficit is not easy, but if we work together and all Alaskans contribute, we can have the Alaska we want to live in.
You can find out more about HB 115 on my webpage. The House Finance Committee will be holding hearings on the bill for most of this week (see schedule and public testimony time below).
Rep. Paul Seaton
Alaska State Legislature, House District 31 (Kenai, Homer)
Phone: (907) 465-2689
Fax: (907) 465-3472
Note: Email your public testimony on the HB 115 State Revenue Restructuring Act to all committee members at: HouseFinance@akleg.gov
Received February 13, 2017
- Published February 14, 2017
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