Gov. Bill Walker released his administration’s budget proposal for the state’s fiscal year starting July 1, 2018, and there is certainly a lot for the Legislature to chew on when it convenes in January.
Gov. Walker’s plan includes a number of items that have received mixed reviews in recent legislative sessions, including a refined version of his payroll tax, bonds to pay oil and gas tax credits owed to producers and explorers, and use of Alaska Permanent Fund earnings to pay for state services. The proposal also includes measures to address the state budget biennially rather than annually, and to penalize lawmakers if they don’t pass a budget by the 90th day of the session.
While that last idea may sound good — particularly to voters in an election year — we see it more as posturing rather than sound public policy. We’re as frustrated as anyone by the Legislature spending so much time in extended and special sessions, but such a measure has the potential to cause more harm than good when it comes to passing well vetted legislation, or to be used as a wedge in budget negotiations.
The most significant piece of the budget continues to be the use of Permanent Fund earnings to pay for state services. Both the Senate and House passed versions of a plan to do so in the past year, but could not find a compromise that would put the measure into law. Gov. Walker’s proposal would allocate about $1.9 billion for state spending, and provide for a dividend of $1,216 per person.
We feel like a broken record on this subject. During last year’s regular session, Sen. Peter Micciche, a Republican from Soldotna, said he would call the session a success if such a plan were to pass. Rep. Chris Tuck, the House Majority Leader and an Anchorage Democrat, responded that use of Permanent Fund earnings would be the “easy route” in addressing the state’s multi-billion dollar deficit.
At the time, we asked if passing a plan to use Permanent Fund earnings was easy, why hadn’t it been done?
Almost a year — and an extended regular session and four special sessions — later, the question still stands.
The answer lies, at least partly, in Gov. Walker’s proposed 1.5 percent payroll tax. During the last regular session, the House majority insisted any plan to use Permanent Fund earnings be linked to an income tax — something the Senate majority refused. Gov. Walker proposed a “head tax” on wages to be considered during this past fall’s special session, which lawmakers, particularly in the Senate majority, declined to take up.
The administration’s newest proposal for a broad-based tax is proposed to help pay for deferred maintenance and community infrastructure projects. In drafting this version, Gov. Walker said the administration listened to concerns that implementing a new tax would grow government and be in place indefinitely; the new proposal would end after three years.
If lawmakers who favor implementing a broad-based tax continue to insist that it be tied to their support for using Permanent Fund earnings, we expect the gridlock over addressing the state’s budget deficit will continue. The effects of that gridlock are taking a toll — as we mentioned, part of Gov. Walker’s budget includes borrowing money to pay oil tax credits to companies that scaled back operations when those payments were deferred.
If lawmakers truly want to break the gridlock, they will address a plan to use Permanent Fund earnings first — without tying it to other revenue measures.
If not, expect to see a session that, once again, drags into June and beyond — whether lawmakers are being penalized for it or not.