Politics

Walker administration lays groundwork for legislative battle over Permanent Fund and taxes

The Walker administration on Thursday began setting the stage for the next big battle over Alaska's giant fiscal crisis. The state's tax director told business leaders a solution involving taxes and the Alaska Permanent Fund would prevent a "hair-on-fire" emergency that could happen in a year.

Ken Alper's urgent speech to the Resource Development Council — coming with less than two years of readily accessible state savings left, if broad steps are't taken — offered no specifics on the plan Gov. Bill Walker will begin presenting Dec. 15. That's when the administration will release a budget for the next fiscal year that begins in July.

The governor will propose additional cuts to the budget, which has already been slashed to 2006 levels when accounting for inflation and population growth, Alper said. That would also make next year's budget well below the average for the last four decades, again accounting for inflation and population growth, Alper said.

The proposed budget will be predicated on legislative approval to restructure the $55 billion Permanent Fund so it provides some state income while continuing annual dividend checks to Alaskans, he told reporters. That restructuring proposal should be unveiled with the governor's proposed budget, Alper said.

The administration may also ask for other changes, such as new taxes and changes to tax credits that benefit oil companies. Those proposals would be released later, in association with the upcoming legislative session that begins Jan. 17.

Alper spoke to dozens of business leaders and officials attending a breakfast in Anchorage organized by the Resource Development Council for Alaska, a group that lobbies the Legislature to support mining, tourism, oil and other industries.

In his speech, Alper highlighted efforts by the governor last year that would have sharply reduced the roughly $3 billion fiscal gap, including a Permanent Fund overhaul to spin-off money for government and keep dividend checks close to $1,000.

The Senate approved a restructuring plan in June setting dividends at $1,000 and providing $1.8 billion from the Permanent Fund to pay for government services, but the Republican-led House rejected it. Election losses this year among members of the majority has led to a new bipartisan coalition of leaders in the House, which has vowed to reduce the deficit.

Alper said a restructuring is important because it will set rules to control how much can be removed from the fund each year, putting "government on an allowance." Not having the rules could lead to a "slippery slope" and panicky grabs at the fund's earnings that one day leaves the state completely broke.

He said $700 million generated from new taxes — an amount Walker proposed raising with a sales and income tax that failed in the Legislature this summer — would cost each Alaskan about $1,000 in new taxes. The extra state taxes, on top of about $500 already paid per-capita for taxes like those on alcohol and fuel, would push Alaska's individual tax burden from the lowest to 49th in the country, ahead only of New Hampshire.

That would not be the "job-killing, economy-destroying" situation some people fear, he said.

Such a Permanent Fund change and the additional tax income would bring in $2.5 billion, helping Alaska maintain a cushion in accessible savings for several years until oil prices rebound, or large new oil discoveries can come online, he said.

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