Gov. Mike Dunleavy said he’s optimistic that the state’s leaders will reach a consensus on the budget prior to the close in the session., despite huge differences over the amount and amount of Permanent Fund dividend.
He also said that lawmakers might be able to approve a long-term budget plan that lawmakers have been unable to pass for a long time and could contain a new broad-based tax.
“Don’t be surprised if you see rapid, swift move to create an economic program,” said Dunleavy at the news conference Thursday, flanked by lawmakers.
There was no specific plan to guide legislators and governors would resolve their impasse regarding the amount of Permanent Fund dividend checks, and the inability of some to introduce new taxes after only 20 days during the session. Dunleavy said it might require an extra session.
“Don’t be shocked if you see discussion of a special session to discuss the fiscal strategy,” he said.
The budget of the state for decades has been heavily dependent on the cost of oil. The state has steadily drained its savings over the last years, as the price of oil hasn’t kept up with the growth in spending.
With current prices for oil and with a fully-funded PFD, which is a statutory requirement and ongoing expenditure, the savings of the state could be depleted within a few years. Senator. Bill Wielechowski, D-Anchorage believes that letting that occur would be catastrophic.
“If oil prices drop or the market for stocks falls and we are in a position where we’re not able to fulfill our constitutional obligation to provide a quality education, to guarantee security for the public, and to provide the basic services that people in Alaska are entitled to and expect,” he said.
A fiscal plan could be able to include a permanent adjustment of how much the state allocates to students for public education, as well as the size of the PFD and a broad-based tax, similar to the income or sales tax.
It is believed that the House and Senate are divided on the amount that the state could pay for PFD check, while Dunleavy has been pushing for the full amount of statutory dividends, which is almost $4,000. If there aren’t any reductions in other areas, and considering the current prices for oil, it is likely that the government will have to pay out savings within a period of four years, based on projections made by Neil Steininger, director of the Office of Management and Budget.
The dire financial forecast has spurred what some leaders called unprecedented cooperation and a commitment to negotiating the best compromise.
“When there is a common acceptance that there is a problem that has to be addressed and you have people joining together in a sincere effort to bring our minds together about these issues, with a some time and discussions and work, you will come up with a plan that will work for the majority of those in the segment,” said Rep. Calvin Schrage, an Independent from Anchorage.
Dunleavy who has for a long time been against taxes, has said that his administration is likely to announce a sales tax proposal in the next few days, which will apply to all items and services. Although he did not provide the final details, he suggested it could be a 1 per cent tax that Steininger stated could generate around $466 million annually.
Rep. Ben Carpenter, from the state of Nikiski, presented an sales tax increase of 2% in March. Anchorage Independent Rep. Alyse Galvin has her own income tax bill, which will tax high-income earners at 2%..
However, even though they are hopeful, lawmakers and governors acknowledged that there was no clear way to develop a fiscal plan or even a budget that could be passed. There is a split in the Senate as well as the House are currently split about the amount of the PFD and neither has said it is willing to change its mind.
