Juneau Budget and Tax Battle is Clash of Political Cultures
If you are wondering why the Legislature is still in Juneau, the shortest answer I can give is this: There is a clash of two opposing political cultures, fighting it out for Alaska’s financial future.
One side wants to prop up big and growing state government with higher oil taxes and with an income tax taken from your paycheck. And they want to tie these taxes to a restructured Permanent Fund – the so-called Percent-of-Market Value plan. This is the position of Governor Bill Walker and the Democrats in charge in the State House.
That side believes that government – not the private sector – should drive the economy. They demand that their entire fiscal package must pass this session, even though it would worsen the recession for working Alaskans.
The other side wants to shrink state government, protect your income against taxes, attract new resource industry investment, cap state spending, and manage Alaska’s largest income-generating asset, the Permanent Fund, in a more conservative way. This is the position of the Republicans in charge of the Senate, and most House Republicans.
This side believes in limited government, and that a healthy economy depends on a vibrant private sector. It is willing to compromise by accepting a POMV plan, so as long as it comes with continuing budget cuts, eliminates the most costly oil tax credits, and imposes NO income tax.
So far, this clash of political cultures has pretty much resulted in a stalemate.
We have seen how the inexperienced House Democrats needed almost all of the voter-established 90-day session to set up their final plan. It took time to lay out their hostage-taking scheme that kills the POMV plan if it doesn’t include their oil tax increase, and $650 million in new income or sales taxes. They are willing to play chicken right up to the 121-day constitutional session limit – maybe even beyond.
Governor Walker has begun making excuses for why Alaska government costs more than twice the national average. His revenue department justifies new taxes with an unrealistically low revenue forecast that ignores the significant upward trend in oil production and revenue in the last year.
The governor is likely to repeat last year’s tactic of calling repeated special sessions to pressure Republicans into surrender. If that fails, he may again threaten a government shutdown on July 1 if he does not get his new tax money. As he did with the Palmer Pioneers and Veterans Home, he will almost certainly exploit the required 30-days’ notice of possible layoffs to fan the fears of state workers and citizens alike.
House and Senate Republicans have declined to meet in joint session to vote whether to confirm the governor’s slate of appointees. When the governor forced a joint session, we adjourned quickly without voting. This ensures he keeps skin in the game up to the end, and encourages him to compromise.
House Democrats may ratchet up their rhetoric. Their “good cops” will cite your civic duty to pony up for expensive public services to pay for “the kind of Alaska we want to live in.” Their “bad cops” will ominously predict a 10-year recession and massive job losses if you don’t pay your “fair share.”
For our part, House and Senate Republicans will continue to stand strong against an income tax, fight for smaller state budgets, and support a conservative solution:
Filling three-fourths of the deficit with a portion of excess Permanent Fund earnings while retaining stable and growing dividends, will extend our reserves for nearly a decade, maintain downward pressure on state spending, and make income or sales taxes unnecessary.
The next few weeks might see high tensions and heated words in Juneau. You may see a 10-day extension past the constitutionally set 121-day legislative session on May 17. The governor may use his constitutional power to call a 30-day special session on any topic of his choosing. You may see compromise plans proposed and scuttled. The governor may threaten vetoes of unrelated bills. Democracy can be a messy business.
It is important, though, to understand the underlying battle is between clearly opposed views of Alaska’s government and finances, and that prospects for your economic future depend on the outcome. If there was ever a time to make your views clearly known to me, the governor, and every other legislator, that time is now.
Editor’s Note: Representative Dan Saddler serves as House Republican Floor Leader, and has represented Chugiak-Eagle River and JBER since 2011. He is also pretty handy on the guitar.