PHOENIX - Alaska Gov. Bill Walker's proposed budget would retool the state's oil and gas tax credit system, cut hundreds of millions of spending, and impose an income tax to combat the triple-A rated state's deficit.
The administration's proposed budget, introduced last week, is aimed at curbing the fiscal problems caused by persistently low oil prices inhibiting Alaska's revenue. Dubbed "The New Sustainable Alaska Plan," it combines spending cuts and revenue driving efforts with policy shifts on wealth management.
"This is a major paradigm shift in how the State of Alaska conducts business," Walker said. "That's because we cannot continue with business as usual and live solely off of our natural resource revenues.
"Never before has the state faced a deficit so large that we are draining more than $9 million from savings every day," he said. "Fortunately, those who came before us had the wisdom to set aside money for a rainy day. Well, it's raining now. But the good news is we have a very large umbrella and some other very handy tools to weather this storm. But we all have to pull together to make this work."
The center of the proposal is proposed legislation called the Alaska Permanent Fund Protection Act. The Permanent Fund, an investment pool seeded by oil royalties, was founded by state constitutional amendment in 1976 and is today worth more than $50 billion.
"Although the technical details are still being deliberated, the intent is for the APFPA to address s $2.4 billion of the $3.4 billion gap from earnings on the Permanent Fund," the budget documents state. "This would be made possible by transferring additional state financial resources to the Permanent Fund, depositing additional oil and gas revenue in the Permanent Fund, and paying a dividend from Alaska's oil and gas resource development. The remaining $1 billion gap can be addressed through a combination spending reductions and new revenues."
The budget plan aims to change the oil and gas tax credit system into a low-interest loan program, wherein the rates would be determined by the number of Alaskans the companies hire. To honor existing commitments for credits, the FY17 budget allocates $1.2 billion for a transition fund and loan program. The minimum tax on the oil industry would increase by $100 million. The mining, fishing and tourism industries would also be taxed for projected revenue of about $47 million. The plan also calls for a new income tax of 6% of federal tax liability, which the administration said is about 1.5% of income for the average Alaskan family, for projected revenue of about $200 million. Taxes would also be levied on alcohol, tobacco and motor fuel for projected revenue of $112 million.
Walker said he offered the plan "to start the conversation.".
"Tackling our state's problems requires a team approach," the governor said. "I know many lawmakers agree that doing nothing is not an option."
