AJOC EDITORIAL: A tax for two Alaskas

Gov. Bill Walker appears to have not learned his lesson when calling a special session.

After the Legislature went all 121 days it was allowed this year without producing a budget or a way to pay for it, Walker called a special session with a loaded agenda that proved a recipe for disaster as the divided House and Senate exerted their respective leverage over the various pieces and it ended after 30 days at the same stalemate.

Now with a government shutdown looming, Walker called another special session with one agenda item: the operating budget. With no leverage over each other and an understanding of the consequences of not passing a budget by June 30, the House and Senate were finally able to agree on something and accomplished their one constitutionally-mandated task.

After the operating budget was agreed upon June 22, Walker added a second item to the session: ending the cashable credit program for North Slope explorers and small producers.

Again, with one item to consider and with both sides understanding the need to end a program with a $1 billion liability to the state budget, the House and Senate eventually agreed to kill the program retroactively to the start of the current fiscal year on July 1.

By this point the per diem counters were running and the public anger was growing over legislators collecting thousands of dollars per day while only a handful were actually involved in the heavy lifting of negotiation.

Acknowledging that anger, Walker declared he would not call a third special session until a capital budget bill was ready to pass. Like the limited call of the second session, with one thing to work on the House and Senate leaders finalized a deal and were able to come to order for a single day and pass it.

With the fourth special session of the year now set to begin Oct. 23, Walker has set himself up for another failure.

The agenda is limited to just two items, neither of which is the use of Permanent Fund earnings to cover the budget deficit that have passed in some form by both the House and Senate in the last two years.

Instead of putting a version of one of those bills on the call, Walker chose instead to introduce an income tax that will effectively end the Permanent Fund Dividend and create two classes of Alaskans: those who get one and those who don’t.

This proposal — unlike his veto to set the PFD at $1,000 in 2016 or the Legislature’s decision to set it at $1,100 this year — is the real fundamental change because Alaskans are no longer treated equally as the program intended.

What Walker is pitching is that the PFD be reduced by half from what it would be under the current statutory formula and the remaining half would be taxed away from those making more than $75,000 per year.

Quite simply, some Alaskan income earners would get a PFD and some would not, which transforms it from an equal distribution into a welfare program.

The governor can cite spending cuts until he turns blue in defense of his tax plan, yet he cannot point to any structural changes in how state government works to make his pitch because none have happened.

When the state’s largest public employee union contract was negotiated over the past year, Walker’s administration didn’t even achieve bare minimums of a wage freeze or a health plan contribution that resembles the private sector.

The Senate Majority, which has stood fast against any income tax, did not outright reject Walker’s proposal but President Pete Kelly did make a reasonable request for a realistic oil production and revenue forecast.

Currently, the production forecast for this fiscal year is just 459,000 barrels per day that no one believes yet hasn’t been officially revised and isn’t required to be until December.

North Slope production is now tracking even with last year when 529,000 barrels per day flowed through the pipeline in the second straight year of growth after annual declines in every year but 2002 since the peak of 1988.

Through the first 25 days of September, production for the month is averaging 508,000 barrels per day compared to 474,000 barrels per day in the same month a year ago. Prices are also rebounding, which combined with production and the success of the financial managers at the Permanent Fund changes the state fiscal picture greatly.

If the goal is to get something done, Walker’s special session call makes no sense. If the goal is to set up an election that will feature class warfare between those who want an income tax and those who don’t it will be a smashing success.

Andrew Jensen can be reached at andrew.jensen@alaskajournal.com.

Updated: 
09/27/2017 - 1:11pm

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