"New Sustainable Alaska Plan" Rolled Out by GovernorDemocrats say fiscal plan unfairly targets working familiesBY MARY KAUFFMAN
December 10, 2015
“This is a major paradigm shift in how the State of Alaska conducts business,” Governor Walker said. “That’s because we cannot continue with business as usual and live solely off of our natural resource revenues. Never before has the state faced a deficit so large that we are draining more than $9 million from savings every day. Fortunately, those who came before us had the wisdom to set aside money for a rainy day. Well, it’s raining now. But the good news is we have a very large umbrella and some other very handy tools to weather this storm. But we all have to pull together to make this work.”
Governor Bill Walker (I) unveiled the New Sustainable Alaska Plan
“If we do nothing, we will empty our savings in the constitutional budget reserve, then we will have to tap into the earnings reserve—which means that in five years Alaskans would no longer get dividends,” said Office of Management and Budget Director Pat Pitney. “This plan ensures that Alaskans will continue to receive dividend checks. More importantly, our children and grandchildren will also be able to benefit from continued dividends, as well.” The New Sustainable Alaska Plan also calls for continued cuts and ongoing spending restraint. The Walker-Mallott administration worked with the Legislature to cut about $1 billion from state spending since taking office on Dec. 1, 2014, and eliminated 600 state jobs. Governor Walker’s fiscal year 2017 budget calls for $100 million in additional cuts from the operating budget and $425 million in cuts from oil exploration credits. The plan will change the oil and gas tax credit system into a low-interest loan program, wherein the rates will be determined by the number of Alaskans the companies hire. To honor existing commitments for credits, the FY17 budget allocates $1.2 billion for a transition fund and loan program. The minimum tax on the oil industry will increase by $100 million. The mining, fishing and tourism industries will also be taxed for projected revenue of about $47 million.. The plan also calls for an income tax of 6 percent of federal tax liability, which is about 1.5 percent of income for the average Alaskan family, for projected revenue of about $200 million. Taxes will also be levied on alcohol, tobacco and motor fuel for projected revenue of $112 million. “Corporate Alaska is stepping up to be part of the solution, just as everyday Alaskans are,” Governor Walker said. “A strong, vibrant Alaskan economy requires that we all share in the responsibility to build our future.” Senate Democrats are concerned with the Governor's fiscal plan saying it unfairly targets working families. While Senators Gardner, Wielechowski, and Olson agree with the governor’s sense of urgency, and the wisdom and necessity of charting a new and sustainable fiscal plan for the state, they are disappointed with the specifics of the plan the Governor announced Wednesday. “Any budget is a balancing act between keeping spending in check, and maintaining needed government services. Budgets also reflect values, and the governor’s plan falls far short of the values embraced by Alaskans,” said Senate Minority Leader Berta Gardner (D-Anchorage). “Further cuts to education especially those impacting pre-K programs that we know improve educational outcomes for kids, and cuts to the already beleaguered university system rob Alaskans of our ability to maximize the potential of future generations. Education is not a disposable value.” Senate Democrats say Alaska’s working families will also be hit hard if this plan moves forward. The governor’s intent to slash the dividend will deal a harsh blow to the average Alaskan’s pocketbook. With the addition of a proposed state income tax, a working family of four making $50,000 can expect to lose a full 10% of their income, whereas a family of four making $10 million dollars loses only 2%. “The oil companies, and the wealthiest Alaskans will be thrilled with this proposal because ¾ of what the government takes will come from hard-working Alaskans, many of whom rely on their permanent fund checks to cover the basics,” said Sen. Bill Wielechowski (D-Anchorage). “The whole plan is skewed to have the least impact on the rich and powerful, while dumping the burden on those who can least afford it. This is a reverse-Robin Hood plan that robs from those who need, and spares the rich.” Quoting a Senate Democrats news release, right now the State of Alaska is one of the largest investors on the North Slope, footing the bill for 60-80% of exploration costs, and 50% of development costs, while getting very little for our efforts. Alaska’s oil tax floor of 4% is among the lowest in the world, and we lack the progressivity that would help us share in the profitability we’ve helped create. A permanent fund cut in half, and based upon the amount of royalty payment for oil and gas, in a structure that makes clear we are not likely to see increases in the development of our resources is a recipe for disaster say Senate Democrats. Senate Democrats say they can’t ask Alaskans to write checks and bear this financial burden until we are confident that the tax system for our resources is working for the maximum benefit of the people. “I think we all agree with the governor that something needs to be done, and done quickly,” said Sen. Donald Olson (D-Golovin). “I’m happy he took the lead on this, but frankly I am concerned with the specifics of this plan. I’m hopeful that we can come together as a legislature to shift the burden from the working folks to those who can afford it, because I just don’t see how we can institute this plan without causing unacceptable hardship to the majority of Alaskans.” Co-chairs of the Senate Finance Committee said the Governor's proposal to reduce the state’s operating budget by $100 million was not sufficient to address the state’s $3.4 billion deficit. They appreciate the comprehensive approach the Governor took in forming the fiscal plan, but remain committed to limiting government before taxing Alaskans. “I see this is as a starting point for the Legislature to build on and craft a fiscal plan that takes a more balanced approach,” said Sen. Anna MacKinnon (R-Eagle River). "We must be mindful of our economy, jobs for Alaskans and keeping our people safe and secure when making these decisions." According to the Alaska Independent Democratic Coalition, “The New Sustainable Alaska Plan” shifts much of the burden of paying for state government from the oil and gas industry onto the backs of hard-working, average Alaskans. They say the Governor’s proposal includes fundamental changes to how vital state services in Alaska are funded including new or increased taxes on income, fishing, mining, tourism, alcohol, tobacco, and motor fuel. The Governor’s proposal also makes drastic cuts to vital early education opportunities in Alaska and would result in significantly reduced Permanent Fund Dividends.
Governor Bill Walker, Department of Revenue Commissioner Randall Hoffbeck, and Office of Management & Budget Director Pat Pitney provide an overview of the FY17 budget (Press Conference) - Video photo clip
“We’re going to carefully evaluate the Governor’s budget proposal with the goal of finding solutions that will do the most good and cause the least harm to hard-working Alaskans. In many ways Governor Walker’s proposal misses the mark,” said Alaska Independent Democratic Coalition Leader Representative Chris Tuck (D-Anchorage). “Our troubling fiscal situation was not caused by low-income Alaskans, working families, and small-business owners but today’s budget proposal shifts a large share of the burden of responding to the fiscal situation squarely on their shoulders.” The Alaska Independent Democratic Coalition is a non-binding caucus, which means each member is free to vote their conscience on any piece of legislation. The coalition does not bind members vote in a block for a budget bill as is done in the Republican-led Majority Caucuses. “Governor Walker and his team have done a tremendous job in engaging the residents of Alaska in the ongoing conversation about how to address the fiscal challenges facing us all from the sudden drop in oil prices and the previous Governor’s broken promises of increased oil production,” said House Finance Committee member Rep. David Guttenberg (D-Fairbanks). “Governor Walker’s budget proposal is a responsible approach but it may not be the best approach for Alaskans. That has yet to be determined.” Governor Walker’s budget proposal will be officially introduced when the Second Session of the 29th Alaska Legislature begins on January 19, 2016. At that point the budget will be referred to the Finance Committees in the Alaska House and Senate. “I congratulate the Governor for not ignoring our fiscal situation just because it’s politically risky to do so. I firmly believe that a solution can be reached if lawmakers and all Alaskans put aside politics and come together as Alaskans,” said freshman lawmaker Rep. Dan Ortiz (I-Ketchikan). “To say yes or no to all or some of the Governor’s budget proposal at this time would be premature because we have not had time to thoroughly study the impacts.” The Alaska Independent Democratic Coalition is encouraging the citizens of Alaska to actively participate in the legislative process to develop a budget, and to freely express their thoughts to lawmakers. “This may very well be one of the most significant budgets in Alaska’s history due to the scope of the funding shortfall and some of the options being considered by the administration and lawmakers,” said Minority Whip Rep. Max Gruenberg (D-Anchorage), the most senior member of the Alaska House of Representatives. “The only way the decisions made by the legislature and the Governor will work is if they are supported by a majority of Alaskans. That demands that Alaskans pay attention and participate in the legislative process.” Co-Chairs of the Alaska House Finance Committee also commented on the plan. “The Governor deserves credit for proposing some difficult options for filling our income gap; we appreciate him stepping out and taking this head on. It’s time for us to digest it, get with our experts and our neighbors and start weighing it on the merits,” said Rep. Mark Neuman (R-Su-Valley) and the House Operating Budget Chair. “There’s a lot there: CBR, PFD, user fees, an income tax, etc. It’s my intention to evaluate each one and present them to the public. I personally do not feel there are near enough reductions in our operating budget, but let’s evaluate the proposals, listen to the public and then put together a budget. At the end of the day, it’s their state budget. We all want what’s best for Alaska; it’s just in how we get there,” said Neuman. The New Sustainable Alaska Plan is the result of collaboration with hundreds of Alaskans. The Walker-Mallott administration first went to the public for suggestions and ideas on how to solve the state’s fiscal challenges through an online survey and Sustainable Future dialogues around the state. The administration then took that input to members of the business community and the legislature to further refine plan proposals. “It is very important this plan is fair,” Lt. Governor Byron Mallott said. “That’s why we have had multiple meetings throughout the year with various stakeholders. We wanted to ensure that the pain and the benefits are shared across the state. No one has been held harmless in this process. It’s about fairness. It’s about what’s best for all Alaskans—not just one group over another.” Governor Walker said he looks forward to working closely with members of the Legislature to solve Alaska’s fiscal challenges, and offered the New Sustainable Alaska Plan to start the conversation. “I thank legislators for their input and insight,” Governor Walker said. “Tackling our state’s problems requires a team approach. I know many lawmakers agree that doing nothing is not an option.” “I thank Jim Jansen for generously providing us the space in which to make this announcement,” Governor Walker said.. “Lynden is a company that touches on almost every sector of our state. It provides jobs to thousands of Alaskans and perfectly encapsulates what this plan is about; it keeps the economic engine moving. It’s important to note: Jim told me he does not support every aspect of the plan, but he realizes that doing nothing is not an option. He and many other business leaders love Alaska and care deeply about the future of this great state. I thank Jim and members of the Lynden family for graciously welcoming us.”
Edited by Mary Kauffman, SitNews
On the Web: Fiscal year 2017 budget
Government Actions to Reduce State Spending
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