Missing from the Begich plan: an income tax

Sen. Tom Begich has proposed what he is calling a “real budget plan.”

While it is not the Dunleavy disaster, it is also not realistic.

The Anchorage senator would have us believe that all we need do in Alaska is raise oil taxes and collect a small head tax and raise fuel taxes. It’s more complicated than that.

An income needs to be part of the mix. I also think that his depiction of easy money from raising oil taxes and the $8 per barrel credit is oversimplified.

Elected officials hate talking about income taxes, as not everyone will like it.

Begich and other Democrats would do well to look at what former Gov. Bill Walker tried to do with a balanced fiscal plan, which included an income tax, as well as a cap on dividends and other measures.

The Permanent Fund dividend does not belong in the Alaska Constitution and the level of payments to Alaskans should be left to the discretion of future legislators and governors.

Those who want the dividend in the Constitution want to restrict future generations with a message that those who are living today know what will be best for our descendants. It’s obvious that we don’t know what the future holds and that our track record is not a good one.

Balancing revenue and services is an ongoing responsibility and challenge for each generation.

The “real budget plan” is a starting point, but it is not enough.

Here is Begich’s plan:

We are hearing a lot from Governor Dunleavy about living within our means and what we as Alaskans can no longer afford. His administration says we can't afford a great education system, a ferry system, a functioning healthcare system, and services for our seniors. I think the administration is wrong and here is my plan to enact a budget that allows our state to thrive. I encourage you to let me know what you think. Also, share this newsletter with those who say Alaska can no longer afford the essential services that make our state what it is today.

For a stable budget which meets our Constitutional obligations, Governor Dunleavy has identified a $1.6 billion budget gap to be filled through massive cuts to core services and shifting the burden to local communities. I propose an alternate path that combines a potential $100 million in targeted and thoughtful cuts, $100 - $200 million in various revenue measures, $600 million to $1.2 billion in reduction in oil and gas tax credits, POMV/PFD approach that would result in roughly another $600 - $700 million in expenditures, and a simple change to our retirement program that could save $100 million. That’s $1.5 - $2.3 billion. This plan outlined below would provide required services to education, University of Alaska, seniors, a functional healthcare system, the Alaska Marine Highway System, and the other essential services without passing the burden onto local communities as Governor Dunleavy has.

Efficiencies and Cuts: We should always seek efficiencies and cuts where they are available without impairing our ability to provide constitutionally mandated services. The co-chair of House Finance, Tammie Wilson, agreed that a massive cut to the budget is unsustainable. “On the best day, I think we were around one (hundred million) or two (hundred million), maybe $350 million,” she said. I would agree that it is likely possible to find perhaps $100 million in efficiencies in certain program mergers and process changes for how we distribute funds, but it should not harm our ability to deliver those constitutional services.

Oil and Gas Taxes: The Governor’s OMB Director has said Alaska must, “live within our means.” To her, that meant only spend the current revenue we produce, while taking from local communities. To me living within our means is maximizing the revenue we earn from our most important resource – oil and gas. Today, we provide an $8 tax credit to oil companies per barrel that moves down the pipeline. That means that we are forgoing over $1.2 billion in tax revenue annually Alaska could be realizing today. Last year ConocoPhillips made over $26 per barrel in profit from Alaska oil. That is double the amount they made in the lower 48 or around the world (under $13 per barrel in the Lower 48 and near $11 per barrel in the rest of the world). These per barrel credits were designed to incentivize production in Alaska but never have. Because the oil and gas industry are essential partners in our state’s economy, they too should shoulder some of the burden to balance our state’s budget.

Head Tax and Motor Fuel Taxes: Some potential revenue measures are likely to emerge. Senator Click Bishop introduced an education “head tax,” which is a simple, one-time wage tax imposition that should generate millions of dollars. Another is an increase to the motor fuels tax (which has not increased in decades and is the lowest in the nation). While together these measures do not fill the budget gap, it is an essential part of the puzzle and, might generate enough traction to be passed by the Legislature. Together, they would raise between $100 and $200 million.

Change Public Employee Retirement System Amortization Schedule : With a simple change to how the Department of Administration characterizes the amortization period of the unfunded liability of PERS, the State could save about $100 million per year with no changes to retiree payments.

Constitutionalize the Dividend and POMV Draw: We should enshrine the Permanent Fund Dividend into the Constitution alongside the percent of market value (POMV) approach the legislature passed in 2018. The Permanent Fund is our largest single source of revenue, and (it's a renewable resource!). The Dividend is our incentive to protect that Permanent Fund. My plan may mean a slightly smaller Dividend, but it will be one that is sustainable and has the potential for growth. Based on the proposal I put forward this year, and in years past, the fund would generate about a $1,900 Dividend this year.

Or, Dunleavy’s Approach: Gut public education, dismantle healthcare services for the most vulnerable, take tax revenues from local governments, strip crucial public safety funding for hundreds of communities, privatize public institutions like API and the Marine Highway with no legislative oversight (and so much more), while holding the oil and gas industry harmless. His broken campaign promises along with no ability to defend his proposals shows his lack of leadership and ability to govern this state to its full potential. We need a responsible, and sustainable budget plan that provides hope, opportunities to succeed, and safe communities for all Alaska.