Dear Friends and Neighbors,
It’s been the longest, and possibly most interesting session, in Alaska’s history. I am thankful that we have an operating budget in place that avoids a government shutdown, more on this below. Thank you to the constituents who reached out to legislators to let them know how important it is for state agencies such as the Departments of Fish and Game, Transportation, Health and Social Services, and Education to continue to serve the Alaskans who depend upon them. This possible shutdown highlights the need for additional revenues to keep the state functioning at an adequate level in order to provide for the wellbeing of our citizens.
House Bill 57: Operating Budget
The House passed the Fiscal Year 2018 budget with few days remaining before a July 1st government shutdown. The highlights of the budget include: fully funding K-12 education at the same rate as the last fiscal year, $8-million in cuts to University of Alaska (the Senate proposed a $22 million cut), restoring Pre-K funding and a larger PFD than the Senate proposed. All this while still cutting the budget by close to $100 million from last year. These and other compromises averted a government shutdown that would have a devastating economic effect on our state.
While I am relieved my colleagues came together to pass a reasonable budget and avoid an unprecedented shutdown of state government, this is NOT a fiscal plan. The proposed cuts to vital services will repeat each year until we can pass a fair, long-term plan to eliminate our deficit.
A cuts-only “fiscal plan” is not a plan at all. A comprehensive fiscal plan this year means we can have a responsible, sustainable budget next year that doesn’t drain our important savings accounts in an irresponsible way. Sustainable revenue – not just relying on savings – means we can bring more business to the private sector throughout Alaska. Fiscal stability is already long overdue and we cannot afford to wait any longer. I’m hopeful that we can complete some of these actions and work toward a balanced budget before we head into the next regular session this January.
House Bill 111: Oil Tax Credits
You may have seen the recent media pitch telling you how the Senate is prepared to cut $150 million annually in cashable credits to the oil industry. While this is a nice soundbite for people to pick up on, but it is hardly representative of what the Senate’s plan would do: which is create a new $145 million annual subsidy that the state would pay to the oil industry in place of cash credits.
The House made a proposal to the Senate to eliminate cashable credits, which both House and Senate agree upon. However the Senate will not sign onto this without additional subsidies being provided. This makes the elimination of cashable credits a wash and will save the state very little to no money in the long run.
The Senate’s plan would save $150 million a year, or $1.5 billion over the next ten years, by “ending” cash payment subsidies to the oil industry. However, in exchange for “ending” roughly $150 million a year in cash payments to oil companies, they have called on the House Majority Coalition to sign on to a bill that reduces Alaska’s oil tax revenue. These “deductions”, estimated by the Department of Revenue to be $145 million a year, or $1.45 billion over the next ten years, mean the state is still paying out at a rate that is almost equivalent to what we are currently paying.
My colleagues in our House Bi-partisan Majority Coalition passed an actual oil reform bill with a fair tax rate on profits. That bill would have updated the low current production tax that, at today’s prices, nets a 0% tax on some North Slope fields and a 4% tax on the rest. The House plan included fair, affordable exploration and production incentives for industry.
Alaska needs to get serious about our $2.5-$3 billion deficit. Fixing it doesn’t start with rebranding oil tax payments and continuing the same low tax rate on oil producers. In the spirit of compromise we can accept a simple reform of the cash credits and will push for a working group to work with our consultants to develop a new tax and incentive program.
Senate Bill 23: Capital Budget
The Operating Budget received most of the press over the past few months because delays in reaching a compromise almost caused our various departments to shut down. However, there are two other budgets: the Mental Health Budget and the Capital Budget. The Mental Health Budget was approved by the House and Senate and signed by the Governor on July 1st. The Capital budget has not been agreed upon as of yet.
After settling on the Operating Budget, both houses have been focused on oil tax credits. I suspect the legislature will reconvene later this summer in order to have a working Capital Budget ready before the end of the federal fiscal year on September 30th.
Capital Budgets in past years have been about equal to, or even larger than, the Operating Budget. Due to lack of available funds, I imagine this budget will be significantly smaller and will focus on maximizing federal match funds. The House understands that the Capital Budget is important and we are not in a position to lose valuable federal funding because the state doesn’t want to pony up its share. My greatest hope is that an agreeable compromise can be reached in the limited time we have so that we do not miss out on any more opportunities.
I am thankful to be back in Kodiak for the interim! Please contact me and tell me how you feel. Whether your thoughts are on the budget, new revenue, fisheries or transportation issues, or something that is important to you and your family, I’m here for you and will always endeavor to work on your behalf.
Additionally, I hope you had a safe and fun 4th of July!
Alaska needs to get serious about our $2.5-$3 billion deficit. Sincerely,
State House Representative for District 32
Proudly Serving Kodiak, Cordova, Yakutat, and Seldovia