Gov. Mike Dunleavy said he’s optimistic that state leaders can come to an agreement on the budget before the end of the legislative session despite deep divides over the size of the Permanent Fund dividend.
And he said legislators may even be able to pass a long-term fiscal plan that has eluded lawmakers for years and that could include a new, broad-based tax.
“Don’t be surprised if there’s some quick, fast movement to be able to put together a fiscal plan,” said Dunleavy at a news conference on Thursday flanked by legislative leaders.
Still, there was no clear framework for how legislators and the governor would overcome their impasse over the size of Permanent Fund dividend checks, and the reluctance among some to implement new taxes with just 20 days left in the legislative session. Dunleavy admitted it might take a special session.
“Don’t be surprised if you hear discussion of a special session just simply to focus on a fiscal plan,” he said.
The state budget for decades has been heavily reliant on the price of oil, and the state has been steadily draining its savings over the past years as oil prices haven’t kept pace with increased spending.
At current oil prices and with a full, statutory PFD and current spending, the state’s savings would be drained in a few years. Sen. Bill Wielechowski, D-Anchorage, said letting that happen would be disastrous.
“If oil drops or the stock market drops, then we will be in a situation where we’re unable to meet our constitutional obligations to provide an adequate education, to provide for public safety, to provide for the fundamental services that the people of Alaska expect and deserve,” he said.
A fiscal plan would include permanent adjustments to the amount the state spends per student in public schools, the size of the PFD and a new broad-based tax like a sales or income tax.
The House and Senate have been divided over how much the state can afford to spend on PFD checks, while Dunleavy has pushed for a full statutory dividend of nearly $4,000. Without reductions in other areas and with the current price of oil, the state would run out of savings in about four years, according to projections from Neil Steininger, director of the Office of Management and Budget.
The dire fiscal outlook has prompted what leaders called unprecedented cooperation and commitment to coming up with a compromise.
“When you have a united acknowledgement that you have a problem that must be solved, and you have folks coming together in a good faith effort to put our minds together on those issues, with a little bit of time and discussion and effort, you can get to a framework that works for a majority of members in that group,” said Rep. Calvin Schrage, an Independent from Anchorage.
Dunleavy, who has long been resistant to taxes, said his administration will likely release a sales tax plan in the next few days that will cover most goods and services. While he didn’t offer final details, he suggested it would be a 1% tax, which Steininger said could raise about $466 million per year.
Rep. Ben Carpenter, R-Nikiski, introduced a 2% sales tax proposal in March, and Anchorage Independent Rep. Alyse Galvin has her own income tax bill that would tax high earners at 2%.
Still, while optimistic, legislative leaders and the governor acknowledged there was no clear road map for a fiscal plan or even passing the budget. The Senate and House are currently divided over the size of the PFD and neither side has indicated that it is willing to budge.