In anticipation of the upcoming 2020 legislative session, peninsula lawmakers met with members of the Kenai and Soldotna Chambers of Commerce and gave an update on their priorities heading into the new year.
On Wednesday, Reps. Ben Carpenter, R-Nikiski; Gary Knopp, R-Soldotna; and Sen. Peter Micciche, R-Soldotna, sat in front of chamber members and gave their perspective on the state budget, the Alaska Permanent Fund dividend, crime, tax policy and more.
Micciche opened up the floor by speaking on the cuts made to the state’s budget this year. In 2019, the Alaska Legislature reduced state spending by about $200 million from the previous year. Spending from the state’s general fund, Micciche said, had been reduced by about 30% since Fiscal Year 2014. Among the numbers he cited, Micciche mentioned that the number of state employees had been brought down to about 20,000 people, 2,000 fewer than when employment was at its peak of 22,126.
Micciche said that he expects the state’s revenue will remain relatively flat until about 2023 and added that increases in oil production and the future price of oil will “make or break” the state’s balance.
Recognizing a need to address and potentially change the statutory formula for determining the amount of the PFD, Micciche said that all Alaskans — not just the legislators — need to be a part of the process.
When it comes to the economy as a whole, Micciche said that the state is doing well, especially in terms of its low unemployment numbers — unemployment in Alaska was 6.2% as of September, according to the Department of Labor. Micciche also said that in order for the state to remain strong, diversification of the economy needs to be a priority so that industries outside of tourism and oil and gas don’t continue to suffer under a “self-imposed” recession.
Micciche also addressed the Fair Share Act, a ballot initiative that would reform Alaska’s current tax policy when it comes to oil production.
“A 250% to 400% increase in oil taxes. Think about that in your business. Is that something you can afford?” Micciche said of the initiative. “This initiative should not pass. It is putting detailed tax policy onto the ballot, and using bumper sticker statements to try to pass it is not the way to deal with this kind of an issue.”
Micciche argued that, while the initiative would bring in an additional $1 to $2 billion in tax revenue, it would make Alaska uncompetitive with other oil-producing regions.
In regards to public safety, Micciche said that the Legislature accomplished its goal of reducing crime with the passage of the Justin Schneider Loophole Act and HB 49. Those bills, Micciche said, have given judges the tools they need to enforce the law.
“We will be monitoring outcomes and will not hesitate to work against lenient judges who choose not to use those tools,” Micciche said.
Micciche also spoke out against sending Alaska inmates to private prisons outside of the state. Micciche and others in the Legislature pushed back against this proposal after it was originally included in Gov. Mike Dunleavy’s budget for 2019, and he echoed those sentiments Wednesday by saying that private prisons do not save the state money in the long-run.
When it came to local issues, Micciche said that he will holding a public meeting with state and federal officials to address the management of the Swan Lake Fire this summer. The meeting will be held on Nov. 13 at the Kenai Peninsula Borough Assembly Chambers in Soldotna from 9 a.m. to 2 p.m.
“This is not about putting anyone in the hot seat,” Micciche said. “It’s about looking for better solutions.”
Micciche also spoke on the closure of the Silver Tip Maintenance Station near Hope, which was recently shut down by the Department of Transportation. Micciche and other legislators wrote a letter to the DOT commissioner on Sept. 12. He said the response they received was “strange at best.”
Micciche said that the Legislature is ready to appropriate any additional funds needed for “adequate” road maintenance and encouraged peninsula residents to call the commissioner and the governor’s office to voice their opposition to the station’s closure.
During his statement, Carpenter said that he considers the biggest accomplishment of the Legislature this year to be the reduction in state spending.
“It was a challenge. There was a lot of politics being played, and we are a leaner state today than we were last year,” Carpenter said. “That’s a good thing, and I think we still have a ways to go.”
Carpenter also mentioned the passage of HB 49 as another legislative accomplishment, saying that he was proud of the bill, even though it didn’t include everything he would have wanted.
Going into the next legislative session, Carpenter said that the priority for lawmakers should be restoring the trust of the Alaska people in their elected representatives.
“If there’s a law, we need to follow it. There’s no excuse for not following the law. Just because we’re there and we write the laws doesn’t mean that we shouldn’t follow them,” Carpenter said.
Carpenter also called on Alaskans to continue providing input and asking questions as the Legislature begins to deal with next year’s budget.
While discussing the need for more dialogue, Carpenter shared his experience of being surprised at the way the finance committee handled budget items, saying that he was told they could only discuss the budget item that was in front of them at any given time.
“How do you prioritize spending if you can’t compare one spending item to another?” Carpenter asked.
To end his statement, Carpenter spoke of the importance of passing a constitutional spending limit and to prepare for what he considers “inevitable” spending reductions on the federal level.
“If you thought the budget crisis we have now with the shortage in oil revenue was bad, wait until our federal dollars dry up,” Carpenter said.
Knopp began his statements with a brief recap of the events of the previous legislative session, touching on the fact that the House took 30 days to organize and determine leadership, and it was another 30 days before they received a budget from the governor’s office.
Knopp said that overall he was happy with the budget that was passed and believes that the upcoming session will be similar to the last in terms of the topics discussed. One big difference, Knopp said, is that House members are already organized into their caucuses, so they will “hit the ground running” on Jan. 21.
Knopp agreed with Micciche on the discussion of private prisons and said that as part of this year’s crime legislation, additional funding was made available in case an additional correctional facility needed to be opened.
Knopp said that he also does not support the Fair Share Act and added that the House is unlikely to take up any legislation around the issue.
“I know that taxes of any form are kind of off the table for us (in the House),” Knopp said.
After the lawmakers’ statements, a few audience members asked questions.
The first question was if they would support any additional taxes on the oil industry aside from what is proposed in the Fair Share Act.
Micciche said that he does not support raising taxes but does support an open discussion on the issue.
“It seems so simple. We can solve all of our budget problems by simply raising the taxes on one industry, right? But none of the long-term impacts on the industry have been evaluated. The industry that is still paying for approximately 80% of what we do in our state,” he said.
Carpenter echoed those sentiments.
“The short answer to your question is no, I don’t support raising taxes on the oil industry,” Carpenter said. “Why would we not talk about it? I’m not in favor of raising taxes, but I’m also not in favor of continuing to arbitrarily tax people by taking half their dividend. If we need to tax, then let’s do it. Let’s do it through the mechanism that exists … not through ‘how much are we taking from your PFD this year.’”
Knopp said that he is also against raising taxes, but said that the current tax policy is difficult to understand and admitted he doesn’t fully understand it himself.
Knopp also pushed back on Carpenter’s implication that the Legislature was breaking the law by not allocating a “full” PFD according to the traditional statutory formula.
Knopp said that SB 26, which was passed two years ago and adopted a “percent of market value” formula for determining the PFD, superseded the original statue.
“When we passed (SB 26) we knew we couldn’t do both … You’re going to end up breaking one law or the other,” Knopp said.
Micciche interjected and argued that the two statutory formulas do not contradict one another.
“It defines the total amount that can be drawn: 5.25% over three years down to 5%. It was assumed the statutory formula would come out of that for those that support a full dividend, and it was assumed it doesn’t come out of that for those that support a reduced dividend, but they do not contradict one another. They are both at play.”
Carpenter responded by saying that the debate over the statutory formula was one for another time, even though it needed to be had.
“Simply put, if we’ve got two conflicting laws, we are legislators for a reason, so we change the laws that need to be changed. We don’t just ignore it. We don’t just keep it on the books because it’s easier, or because we don’t want to talk about it,” Carpenter said.
To end the luncheon, the legislators were asked how businesses can be encouraged to support local nonprofits that may not rely on state or federal dollars for funding.
All three legislators said that maintaining a “stable” and “competitive” tax policy will give companies the additional revenue that can then be donated to organizations in the community.
“Creatively, it’s all on us. I don’t support raising taxes that would reduce or eliminate the revenue that could be used for donations,” Carpenter said.
Reporter Brian Mazurek is related to Rep. Ben Carpenter.
