Alaska Gov. Mike Dunleavy on Monday vetoed his ninth bill of the year, canceling Alaska lawmakers’ efforts to fund public schools by rewriting a portion of the state’s corporate tax code.
Senate Bill 113, passed by the Alaska House and Senate in May by a combined vote of 42-18, would have required internet companies to pay corporate income taxes based on the location of their sales, not the location of their server farms or offices.
That shift, already enacted by 36 other states, would have required companies like Netflix and Hulu, which do not have any in-state business presence, to pay corporate taxes based on sales to Alaskans. That shift was expected to generate between $25 million and $65 million per year for the state treasury once fully implemented.
In House Bill 57, which increased the state’s per-student public school funding formula, lawmakers included provisions that directed much of that money to vocational and technical instruction, as well as grants intended to help elementary school students improve their reading.
Without SB 113, those programs will not receive additional money.
In 2022, Dunleavy and the Legislature collaborated on the Alaska Reads Act, legislation intended to boost the reading skills of young Alaskans. Initial results have shown some benefits, and funding in SB 113 was intended to expand upon that effort.
But in a message accompanying Monday’s veto, Dunleavy said he will not approve any tax measures unless they are part of a larger plan intended to bring state income and expenses into line over the long term.
Dunleavy said he wants to see a “truly durable fiscal plan” that includes “not only revenues but also clear guardrails: spending limits, statutory and regulatory reviews, and policies that make Alaska the most competitive state in the nation for investment and new business growth.”
Dunleavy called SB 113 “a simple tax bill that does not consider the comprehensive fiscal approach outlined above.”
The Legislature could override Dunleavy’s veto of SB 113, which would require 45 votes when lawmakers reconvene for the regular session in January, but that’s a level of support larger than the bill received when it originally passed.
Sen. Robert Yundt, R-Wasilla, sponsored the amendment that would have diverted SB 113 funding to education. He did not answer a phone call seeking comment on Monday afternoon.
Sen. Bill Wielechowski, D-Anchorage, sponsored SB 113 in the Senate and lambasted the governor’s decision in a written statement.
“SB 113 was a common-sense, bipartisan solution to help close our revenue gap without costing Alaskans or Alaska businesses a penny,” Wielechowski said. “The Governor had the opportunity to stand with Alaska families, students, and communities – but instead, he chose to side with tech corporations that profit from Alaskans and utilize our infrastructure, while paying nothing back to our state.”
Wielechowski said that the bill would have modernized Alaska’s corporate tax structure using reforms already adopted by other states.
“Every Alaskan knows Alaska is facing a revenue crisis, and that our education system needs critical resources. This bill would have been a step towards closing those gaps without taxing Alaskans while asking these corporations to contribute to the state that they use for their business ventures,” Wielechowski said. “The Governor’s veto sends the message that outside corporations come before Alaska’s schools, Alaska’s workforce, and Alaska’s future.”
Asked whether the governor had a comment about the veto’s effects on education funding, his communications director responded by email.
“Governor Dunleavy continues to encourage lawmakers, as he has done for the past several years, to work with him on a durable and comprehensive fiscal plan,” said Jeff Turner, the communications director. “Passing more taxes without spending limits and policies that give existing businesses the confidence they need to expand and new businesses the confidence they need to invest in Alaska will make our state less competitive.”
SB 113 was the last bill awaiting gubernatorial action this year. Of 33 bills passed by the House and Senate this year, Dunleavy vetoed nine, or 27%, the highest proportion since statehood. Legislators overrode two of Dunleavy’s vetoes during a special session in August.