JUNEAU — Alaska legislators agree on the need to address the state’s multibillion-dollar budget deficit. But rifts remain over how best to do that, with divisions forming over taxes, how much to keep cutting spending and whether the state needs to tinker with Alaskans’ beloved yearly oil wealth checks.
A new 90-day legislative session begins today, with many lawmakers citing a sense of urgency amid the continued drawdown of state savings. Last year’s regular and special sessions were snarled by gridlock ahead of a heated election season.
With the ouster of incumbents and legislative retirements, one-quarter of the 60-member Legislature will be new. The House, long held by Republicans, will be led by a coalition comprised largely of Democrats that formed around a desire to tackle the deficit. The Senate will remain in GOP control.
Republican Rep. Lance Pruitt of Anchorage, who heard from angry voters during his narrow re-election win last fall, said compromise will be critical. If you lose one fight, move on to the next, he said.
“What is needed is for everyone to recognize they’re not going to get everything that they want, that the solution here is truly going to be, I guess, Alaska’s great compromise,” Pruitt said.
For many, an idea that once would have been political suicide — using Alaska Permanent Fund earnings to help pay for government — is almost a foregone conclusion in piecing together a plan.
The principal of the fund, Alaska’s oil wealth nest egg, is constitutionally protected, but its earnings can be spent. Legislators have long been reluctant to use them for fear of being accused of raiding the fund.
But Gov. Bill Walker and a number of lawmakers see no real way around it. How any draws would be made is an open debate.
Walker has pitched capping dividends at $1,000 for two years and then changing how they are calculated. Republican Sen. Mike Dunleavy of Wasilla has suggested keeping the existing dividend formula as part of a plan that seeks $1.1 billion in additional spending cuts over four years and envisions some use of fund earnings and other pots of state money.
Others have supported some structured use of earnings, while Democratic Sen. Bill Wielechowski of Anchorage argues Alaska’s oil tax system should be changed before that’s considered. Dividends are drawn from fund earnings.
The Senate majority wants to cut $750 million over three years and put a spending limit into law. Incoming Senate President Pete Kelly, a Fairbanks Republican, said further changes to the state’s health care system are needed, and education, a major budget item, needs to be discussed.
Democratic Rep. Andy Josephson of Anchorage said it would be foolish not to look for savings opportunities but is concerned with the level of cuts the Senate GOP is eyeing. Some places could use more money, such as the University of Alaska system, he said.
Walker last year failed to muster support for most pieces of his fiscal plan, including use of permanent fund earnings, industry tax hikes and a personal income tax. Lawmakers approved changes to Alaska’s oil and gas tax credit system, but Senate Democrats and House coalition members want more.
This year, Walker has proposed freezing state employee pay increases, along with a permanent fund bill and tripling motor fuels taxes. He has said he’s willing to work with lawmakers to fill the remaining gap.
The House coalition is looking at some use of permanent fund earnings, a broad-based tax such as an income or sales tax, reducing the dividend to a “sustainable” level and budget cuts, including further tax credit changes, said incoming House Finance co-chairman Paul Seaton, a Republican from Homer.
