Alaskans will face some mighty tough choices in the coming years following this collapse of oil prices.
While there is great political clamor over reducing the cost of state government, politicians won't be able to render enough fat from state operating expenses to do more than keep the lights on for a few more months. The bulk of annual operating expenses funds schools and provides essential public services.
Gov. Walker was wise to eliminate from the capital budget mega-projects that only could be funded if the pipeline was full of oil, a gas line was constructed, energy prices were high and Alaskans continue to let big dreams fog common sense. But reducing the capital budget still doesn't close Alaska's fiscal gap.
While oil prices will certainly rebound from current levels sometime in the future, Alaska's billions of dollars of savings may be gone by the time that happens, and, meanwhile, oil production continues to decline, digging us an even deeper hole. So, what should we do to address our current fiscal crisis?
While cutting state spending needs to be part of the equation, broadening our revenue base beyond oil is a necessity for long range stability. A variety of options is available, but most will be pretty hard for the public to swallow, which means the politicians will be loath to even raise the issue.
The list of unpopular ideas could be much longer but these have the biggest potential for raising significant revenues: Statewide sales tax. Personal income tax. Tapping the Permanent Fund. Raising taxes on extractive industries such as mining, timber and seafood. How about tourism?
Throwing a bit of reality into the mix, the Permanent Fund is such a sacred cow that the question is highly unlikely to be advanced by politicians who want to be re-elected, and nearly all do. Using the earnings reserve fund does have some merit, though, and should be put on the table.
Some have raised the concept of a seasonal statewide sales tax, an extremely regressive move that also would hurt communities that currently have sales taxes of up to 7 percent and remove a tool for other municipalities seeking to support local services. A much better option is a graduated personal income tax that would force non-resident workers to support some of the public services they enjoy while in Alaska, something a statewide sales tax would not accomplish.
The Legislature made a huge mistake when it repealed the personal income tax during the dizzying days of significant surplus revenues. Flush with cash even after blowing billions on huge capital budgets, the politicians no longer had the long-range vision that led to creation of the Permanent Fund.
In addition to creating a new revenue stream, another advantage of reinstitution of an income tax might be to provide Alaskans with a real stake in the functioning of state government. As it now stands, Alaska is the only state that has no statewide sales or income tax, and most residents receive net benefits from the government when PFDs are included.
Raising taxes on industry involves a delicate balance of raising revenues without creating disincentives for doing business in Alaska, hurting small, Alaska-owned and -operated businesses, and making Alaska products uncompetitive in the global marketplace. As we witnessed during the difficult debate and vote on oil taxes, these decisions should include thoughtful consideration of all outcomes, including a collapse of oil prices.
While the seafood and tourism industries don't pay the same rates as oil producers, each supports tens of thousands of jobs and small businesses, and the mining industry supports high paying jobs and some operations contribute significant property taxes to local boroughs. A less than thoughtful approach to taxing these industries might create some collateral damage rippling through our economy.
These issues will require a great deal of public discussion, thorough and balanced analysis by experts, and a governor and Legislature willing to make some difficult long-term choices that might have personally negative political consequences.
I have closely watched and participated in Alaska politics for more than 40 years, and I'm not optimistic the latter will materialize but I certainly hope the politicians will participate in an honest exploration of broadening Alaska's revenue base, provide the public with thoughtful and reliable information about the pros and cons of each revenue stream, and show some statesmanship.
Here's hoping the public will make enough noise about increasing revenues to catch the rapt attention of the governor and Legislature.
Rodger Painter can trace his family's Alaska roots back to the late 1700s when an Aleut woman married a Russian trader. He has been a small businessman for the past 35 years.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.
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