Voices of Alaska: Budget solution requires oil tax credit reform

  • By Jonathan Kreiss-Tomkins, Andy Josephson and Ivy Spohnholz
  • Wednesday, May 4, 2016 3:43pm
  • Opinion

The cost to run the entire Alaska Court System — heating the courthouses, paying judges, paying clerical staff, down to the staples and paper clips — is about $100 million a year.

The cost to operate the Alaska Department of Corrections — running prisons, paying correctional officers, paying for prisoner healthcare, down to the staples and paper clips — is $300 million a year.

These are big numbers.

Now consider this: The state of Alaska will pay $775 million this year to the oil industry in cash subsidy payments that are called oil and gas tax credits. (There’s another over $135 million in non-cash subsidies that reduce tax liability, which runs the total bill to over $900 million.)

$775 million in cash subsidies to the oil industry is more than the combined budgets of the Alaska Court System, Department of Corrections, Department of Military & Veterans Affairs, and Department of Fish & Game. Combined.

Put another way, if every Alaskan were to donate $1,000 from their Permanent Fund Dividend check and pool all that money, it would be roughly equal to the $775 million in subsidies the oil industry receives from the State of Alaska.

We’re writing on behalf of a group of Democratic and Independent legislators down in Juneau, working with Governor Walker and our colleagues to try to solve this budget crisis.

One of the stickiest points is whether to reduce the $775 million in subsidies to the oil industry, and if so, by how much.

For a sense of scale: there’s been a lot of debate and concern about raising fisheries taxes, which would amount to about $20 million. The proposal to raise fuel taxes is about $45 million. The proposal to increase tobacco taxes would raise $27 million. Governor Walker’s income tax proposal would raise about $200 million.

All of these tax increases, combined, are smaller than the State of Alaska’s $775 million outlay of oil and gas tax credit subsidies.

Subsidies to the oil industry need to be dramatically reduced, and quickly. It’s nearly mathematically impossible to balance Alaska’s budget without reducing this $775 million outlay.

All of us signing this op-ed support meaningful and decisive subsidy reduction and reform. In fact, Governor Walker has proposed slicing approximately $500 million off the annual oil and gas tax credit subsidies.

Republican leadership in the legislature has opposed these proposals to meaningfully reduce subsidies. It’s one of the main reasons we’re still in Juneau.

We’re writing this op-ed to highlight the importance of this issue. Alaska’s budget can’t be balanced if we don’t reduce these subsidies.

We cannot in good conscience consider proposals to cut state services and education funding or increase taxes, or create an income tax, while at the same time paying $775 million in oil and gas tax credit subsidies.

We especially have a hard time cutting Alaskans’ Permanent Fund Dividends by about $700 million, while at the same time paying out about $775 million in tax credit subsidies.

The budget math is bad and it isn’t fair to Alaskans.

We stand with Governor Walker on the need to meaningfully reduce oil and gas tax credit subsidies to help balance Alaska’s budget. We need a sustainable fiscal plan, and this is an important part of the solution.

Rep. Jonathan Kreiss-Tomkins (D-Sitka), Rep. Andy Josephson (D-Anchorage), and Rep. Ivy Spohnholz (D-Anchorage) are members of the Alaska Independent Democratic Coalition.

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