House Majority Coalition's Bogus School Tax is Disappointing
By Dan Bockhorst
May 01, 2017
The Alaska State House passed the “Education Funding Act” (House Bill 115) on April 16 by a unanimous vote of all 22 House Coalition members. However, none of the other 18 members of the House voted for the bill. The measure is now under consideration in the Senate.
The Speaker of the House refers to House Bill 115 as a “tax for schools;” the Co-Chairman of the House Finance Committee characterizes the bill as a “school tax;” and Representative Ortiz calls the bill “an education income tax.” Further, the House Majority Coalition claims in an April 26 press release that “[t]he money collected from the Education Funding Act would be used to fund K-12 education in Alaska.”
The phrases “tax for schools,” “school tax,” or “education income tax” do not appear in the bill. Also missing from House Bill 115 is any requirement to fulfill the claim of the House Majority Coalition that “the money collected from the Education Funding Act would be used to fund K-12 education in Alaska.” Instead, lines 26 – 30 on page 22 of the bill require the tax proceeds to be deposited into the State General Fund; allow (but do not require) the legislature to appropriate the proceeds for education; and, most importantly, expressly declare that the tax proceeds are not dedicated funds. In other words, the legislature would be free to appropriate the tax proceeds for any public purpose. House Bill 115 is a State income tax – plain and simple.
The characterizations of House Bill 115 as a “tax for schools,” a “school tax,” and an “education income tax,” and the assurance that the tax proceeds would be used for education are disingenuous. Alaska’s constitution strictly limits the dedication of State taxes.
The legislature might, in its discretion, appropriate for education all $687 million in annual tax revenues expected from House Bill 115 if it becomes law. However, it is equally possible that all $687 million in new taxes would simply supplant $687 million of the current $1.2 billion in State funding appropriated for education. This would result in no increase in school funding from the so-called “school tax.”
Apart from House Bill 115, the State has levied an actual school tax (of dubious infirmity) for more than a half century. As observed by Alaska Supreme Court Justice Daniel Winfree last year, the State mandates that organized boroughs “raise specified funds for the State’s public schools system; it is a revenue source for the State — and a tax by any other name remains a tax — and the revenues are dedicated to the State’s public schools system even though they never enter the State’s treasury” (see State v. Ketchikan Gateway Borough, Op. No. 7075, page 40 (Alaska January 8, 2016)). The tax to which Justice Winfree referred applies only to Alaska’s 34 municipal school districts – the legislature allows 19 districts to be exempt from the tax simply because residents of those districts choose to remain unorganized. (Ketchikan never had a choice, residents were forced by the State legislature and governor to incorporate as a Borough in 1963).
There is no rational basis for the exemption of the 19 districts (e.g., fiscal capacity). The current system is terribly flawed because it allows some Alaskans to escape taxation for local services while those same Alaskans benefit from the school tax levied by the State on the 34 municipal districts.
Now the House Majority Coalition wants to impose a bogus school tax on all of Alaska. Thus, if House Bill 115 becomes law, Ketchikan residents would then be subject to two “school taxes” – one, the school tax referred to by Justice Winfree which will take more than $4.6 million from the Ketchikan Gateway Borough this year alone and, two, the bogus school tax in House Bill 115.
The Ketchikan Gateway Borough Assembly urged state officials to address the disparate nature of the long-standing existing school tax as part of any State fiscal reform. It is extremely disappointing that the House Majority Coalition has failed to do so.
About: "Retired; former Ketchikan Gateway Borough Manager (9 years); 31 additional years of experience in Alaska local government."
Received April 30, 2017 - Published May 01, 2017
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