As the state faces an estimated half-billion-dollar deficit between this year and the next, Alaska Senate leaders are reviving options for raising revenue.
One controversial bill would reduce a state North Slope oil production tax credit by $3 per barrel. It would also prevent oil producers from claiming more in production tax credits than they spend on capital investment in a given year.
Oil tax credit reform has long been a priority for Sen. Bill Wielechowski, D-Anchorage, who pitched the bills during a news conference on Tuesday. The tax changes could raise hundreds of millions of dollars per year, Department of Revenue officials told the Senate Finance Committee in 2023.
"We want to get this on the table and start to have a debate about how we're going to close this $536 million deficit," he said.
Wielechowski argued they’d likely have little impact on the state’s economy, referencing a 2023 presentation from the consulting firm GaffneyCline that found a similar bill would "likely not lead to material reduction of existing production." Oil and gas companies, including ConocoPhillips, ExxonMobil and Hilcorp, however, told the Senate panel at the time that the tax changes would make the state a less attractive place to invest.
That tax credit proposal was one of several measures proposed by Dunleavy’s then-Department of Revenue commissioner, Lucinda Mahoney, to a working group of legislators in 2021. Mahoney introduced it as one of the options "the governor would support.”
But on Wednesday, Dunleavy’s communications director, Jeff Turner, said in an email that the former commissioner “misspoke.”
“The governor’s position on taxes has always been consistent. He is not favorably disposed to taxes,” Turner said, adding in a subsequent email that it’s the governor’s policy not to comment on specific bills until they reach his desk.
Some minority Republicans in the Senate also came out against the bill, including Sen. Shelley Hughes, R-Palmer.
"I think we should be increasing our tax base rather than increasing taxes, and that will grow our economy," Hughes said. "With the man in the White House right now and the opportunity for new projects, I think it's sending a very bad message."
The state’s dire fiscal picture has complicated efforts to boost state funding for public schools, a top priority for leaders of the House and Senate.
In the House, leaders are lukewarm on the proposal. House Finance Committee Co-chair Andy Josephson, D-Anchorage, said changing the state's oil tax structure isn’t a priority for the largely Democratic multiparty caucus that controls the House.
"I would say they should send it over to us, and we'll take a look at it, but it's not what we're focused on," he said.
Josephson said House leaders would “likely” be more receptive to another revenue bill that would assess corporate income taxes on S-corporations in the oil and gas industry. That would close what backers call a “loophole” allowing privately-held Hilcorp to avoid the corporate taxes paid by C-corporations like ExxonMobil and ConocoPhillips.
That’s another proposal that the revenue commissioner said the governor supported back in 2021 — but just as with the oil tax credits, the governor’s spokesman now says the commissioner misspoke.
The other revenue bill proposed Wednesday, Senate Bill 113, would subject corporations that do business in Alaska via the internet to the state’s corporate taxes. Sen. Bill Wielechowski, D- Anchorage, says prior estimates pegged the revenue boost between $20 and $65 million a year. Lawmakers from both bodies said they would examine the bill.
