In a series of hearings this week, members of the Alaska Legislature have heard emotional testimony about the need for more education funding.
As lawmakers consider the idea, it’s becoming increasingly clear within the Capitol that more funding for public schools will come at the expense of the Permanent Fund dividend.
“The state of Alaska is probably facing its largest fiscal problem … in 30 years,” said Sen. Lyman Hoffman, D-Bethel and chair of the Senate Finance Committee, on Tuesday. Hoffman has been a legislator since 1987.
House Bill 69, the leading proposal to boost K-12 schools, is estimated to cost an additional $320 million next year in its present form.
That increase is necessary, lawmakers said Tuesday, because school funding hasn’t kept up with inflation.
Oil revenue is expected to be flat or down next year, due to stable prices and tax reductions owed to oil companies as they drill more on the North Slope.
Thus far this year, no legislators have proposed the kinds of tax increases that would be needed to pay for the education boost.
“Certainly what they’re proposing is not something the state can afford,” said House Minority Leader Mia Costello, R-Anchorage.
Speaking to reporters on Tuesday, Senate President Gary Stevens, R-Kodiak, said Senate leaders aren’t planning any kind of statewide income tax or sales tax.
Hours before, Rep. Andy Josephson, D-Anchorage and chair of the operating budget, told reporters that the 21 members of the House’s majority caucus “haven’t really sat down and gotten really into what we would find acceptable. We’re not interested in severance tax reform, so that’s sort of off the table,” he said.
Without severance tax reform, that means tax changes for oil, mining, logging and fishing are off the table, too.
Gov. Mike Dunleavy has been adamantly opposed to even small tax changes during the first six years of his term, having vetoed bills dealing with nicotine and car rental taxes.
“I think the 21 of us don’t want to just chase and pursue things that simply aren’t going to happen,” Josephson said.
If taxes are off the table, that leaves budget cuts as the likely solution to the pending budgetary tug of war. When compared to the cost of operating state agencies, the Permanent Fund dividend is the biggest target.
Josephson said the stress on the dividend won’t just come from education — it’ll also come from the desire to pay for maintenance on the state’s many buildings and other facilities.
As debates on the budget progress through the spring, it’s possible that some tax measures could gain momentum.
Sen. Robert Yundt, R-Wasilla and a new member of the Senate, on Monday introduced a bill that would restructure the state’s corporate income tax laws, generating as much as $175 million per year for the state treasury, according to estimates attached to prior versions of the proposal.
Members of the Senate majority, speaking Tuesday, said they could be open to Yundt’s bill. It’s not clear how it would fare in the House or with Dunleavy.
“We haven’t addressed revenue for decades. I think it’s high time the Legislature look at raising new revenue if we want to accomplish the many things we want to do. If not, I don’t see a clear path forward for balancing not only this year’s budget, but next year’s budget,” Hoffman said.