Computer finds income tax could help budget if oil price is low

David Teal, Division of Legislative Finance director, speaking in February. His office developed a computer model that found an income tax could provide a cushion if oil prices are lower than forecast. (Photo by Skip Gray/360 North)

The extra money from a state income tax would help Alaska’s state government withstand low oil prices or poor investment returns, according to a computer model developed by nonpartisan budget experts.

But House members say there’s only so much they can learn from the model.

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Lawmakers must ultimately make a call about what is right for the state, Republican Rep. Paul Seaton said.

“You can only help us so much, because the rest is policy calls, whether we want to have cuts and job cuts,” Seaton said.

The model found the budget would be balanced in nine years if the state had an income tax and oil prices are lower than state officials expect.

At those same oil prices, a Senate plan that doesn’t include income taxes would lead to the state spending $485 million more than it raises in nine years.

The projection, made at Seaton’s request, is based on oil prices about 10 percent lower than what state officials forecast.

North Pole Republican Rep. Tammie Wilson noted the model doesn’t take into account future spending cuts the Senate majority said it would like to see. Wilson said the Legislature has passed bills that could reduce spending. She said it’s too soon to say cuts will fall on specific services.

“There are bills that we all passed here that had to do with Medicaid, that had to do with the crime bill – there’s some education reform that’s going on from the new commissioner that we’re supposed to see things (reductions from), so I don’t think we can say it’s going to come from a specific area,” Wilson said.

The House and Senate have passed different plans to draw money from Permanent Fund earnings and limit Permanent Fund dividends, but they haven’t made any public progress in resolving their differences.

David Teal directs the nonpartisan Division of Legislative Finance, which developed the model. He pointed out one of the benefits of passing a Permanent Fund plan: the state would no longer be draining the Constitutional Budget Reserve.

Teal said this piggy bank could empty in the next two years, forcing the state to borrow money to pay its bills.

Some Alaskans want to see progress, one way or another,Teal said.

“Some may say, ‘I just want stable or growing reserves.’ Another way to say that is, ‘I want a balanced budget, and I don’t particularly care how we get there,’” Teal said.

The House Finance Committee plans to contrast the House and Senate plans throughout this week.

The Senate Finance Committee canceled its meetings Monday and Tuesday.

Andrew Kitchenman is the state government and politics reporter for Alaska Public Media and KTOO in Juneau. Reach him at

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