Analysis: ‘0 percent’ chance Legislature addresses deficit this year

On taxes, the gap between the coalition majority that runs the Alaska House of Representatives and the predominantly Republican Senate Majority can literally be measured in miles.

While the Alaska House debates changes to criminal justice, most state senators are decamping to their home districts rather than consider the other issue on the special session agenda: a state payroll tax.

“When there’s something to do, we’ll come back together,” Senate President Pete Kelly told the Empire on Monday.

The senators’ departure will save some money — they likely won’t claim per diem while away from the capitol — but it also illustrates how far the Legislature is from fixing the state’s multibillion-dollar deficit.

In April, the Alaska House approved an income tax bill. One month later, the Senate killed it in a 15-4 vote.

In this special session, Gov. Bill Walker has proposed House Bill 4001, a 1.5 percent payroll tax that would generate about $300 million to $325 million per year, according to estimates provided by the Alaska Department of Revenue.

Though that proposal is different from the one rejected by the Senate earlier this year, there’s no outward sign that the Senate Majority would vote any differently now than it did in May. Its members steadfastly believe that increased oil revenue, coupled with budget cuts and spending from the Permanent Fund, can erase the deficit.

Members of the House Majority agree that spending from the Permanent Fund is needed, but they believe that the budget has been cut enough — over 31 percent since 2015, according to figures from the nonpartisan Legislative Finance Division — and taxes are needed to fill the gap.

“It’s Alaska’s No. 1 problem, and we need a solution,” said Rep. Paul Seaton, R-Homer and co-chairman of the House Finance Committee of the state’s budget crunch.

The state is expected to have a deficit of about $2.5 billion by July 1, the start of the next fiscal year. Since the term of Gov. Sean Parnell, the state has used its Constitutional Budget reserve to cover the deficit. That reserve will not have enough money to cover the deficit in the next fiscal year.

Seaton’s committee will consider the payroll tax proposed by Gov. Bill Walker this week, but unless the Senate is on board, Alaskans shouldn’t expect that examination to mean much.

Because the House proposed an income tax, only to see the Senate reject it without a counter-offer, House leaders want the Senate to propose something.

“We’re waiting — at least, I’m waiting — for the Senate to come forward with an alternative,” Seaton said.

That’s not likely to happen during this special session.

On Wednesday, the House Finance Committee will hear an updated oil revenue forecast. While that forecast had not been released by the end of the day Tuesday, it is expected to show the state making more money from oil than expected.

That will bolster the arguments of legislators who believe that if the state simply waits, rising oil prices will ease (if not completely erase) the state’s deficit.

“I think we’re going to hear some numbers that’s going to show (a tax) is not needed or not necessary,” said Sen. Kevin Meyer, R-Anchorage.

Before the start of the session, Meyer told the Alaska Dispatch News that he’d give Walker’s tax idea a “50-50 chance” at passing during the special session.

Talking to the Empire on Tuesday, Meyer said it’s “not really accurate” to think that anymore.

He said there’s a “100 percent” chance the House would support a tax, but when it comes to the Senate, there’s a “0 percent” chance.


• Contact reporter James Brooks at james.k.brooks@juneauempire.com or call 523-2258.


More in News

A collage of photos of Nikiski North Star Elementary students taking swimming lessons at the Nikiski Pool. (Photo collages provided by Nikiski North Star Elementary)
Community effort puts 200 Nikiski North Star students through swimming lessons

The lessons covered “everything,” from basic flotation to constructing rough-but-functional life jackets out of clothing

From left, Rep. Andi Story, D-Juneau, hugs Rep. Stanley Wright, R-Anchorage, after House passage of sweeping education legislation while Rep. Maxine Dibert, D-Fairbanks, watches on Thursday, Feb. 22, 2024, in Juneau, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
House passes BSA increase, with other education provisions

The bill now goes back to the Senate, where lawmakers must approve the bill as-is before it can head to the governor’s desk

Rep. Justin Ruffridge speaks about
House considers, rejects multiple school funding amendments during Wednesday floor debate

Over several hours, lawmakers considered six different increases in the Base Student Allocation to public schools

U.S. Sen. Dan Sullivan addresses members of the Alaska Legislature in the House chambers on Wednesday, Feb. 21, 2024, in Juneau, Alaska. (Mark Sabbatini/Juneau Empire)
Dismissing critics, Sullivan touts LNG project

During his annual address to the Alaska Legislature on Wednesday, the U.S. senator said state leaders should be doing everything they can to make the project successful

From left, Sen. Jesse Bjorkman, R-Nikiski, east side setnetter Ken Coleman and Konrad Jackson present information about a bill establishing a voluntary buyback program for east side setnet fishery permits during a Senate Finance Committee meeting on Monday, Feb. 19, 2024, in Juneau, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Senate committee hears setnet buyback bill

The East Side of Cook Inlet Set Net Fleet Reduction Act is sponsored by Nikiski Sen. Jesse Bjorkman

Rep. Justin Ruffridge, R-Soldotna, speaks in support of debating an omnibus education bill in the Alaska House Chambers on Monday, Feb. 19, 2024 in Juneau, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Tie vote kills early House debate on education funding

Lawmakers went into an hourslong recess that ended with adjournment until Tuesday morning

Mock-up illustration of in-development Kahtnu Area Transit Bus (Image courtesy Kenaitze Indian Tribe)
Kenaitze purchase Kenai’s former Kendall Ford building for transportation hub

Hetl Qenq’a will also serve as a hub for the upcoming Kahtnu Area Transit, a fixed route public bus service

Peninsula Clarion government and education reporter Ashlyn O’Hara stands in the hallways of the Alaska State Capitol in Juneau on Monday. (Ashlyn O’Hara/Peninsula Clarion)
Clarion reporter working in Juneau for legislative exchange

Reporter Ashlyn O’Hara will be covering statewide issues with a local lens

Most Read