Juneau legislators hear from constituents about governor's proposed fiscal plan
- Jasz Garrett
- 5 hours ago
- 7 min read
The plan proposes a statewide sales tax, but those at Mendenhall Valley Public Library town hall largely prefer state income tax
By Jasz Garrett
Juneau Independent
A majority of the 50 attendees at a Juneau legislative delegation town hall at the Mendenhall Valley Public Library on Thursday night supported taxing themselves.
That’s not necessarily new to the all-Democratic delegation, although the urgency and possibility of new taxes being enacted this session is higher than in recent years. A statewide sales tax proposed by Gov. Mike Dunleavy is grabbing much of the public’s attention right now, but policymakers want a longer look at all options by the session’s end in May.
“Ever since I ran, I have advocated for an income tax, and knew that the majority of my voters supported that,” said Rep. Sara Hannan, a fourth-term House member elected in 2018, in an interview after the hour-long event. “But the gentleman asked us to poll the room, and it was overwhelmingly — the hands went up in support of it. It wasn’t unanimous, but overwhelming.”
But she added it’s a skewed demographic of who shows up to town halls.
“It is people who have the luxury of the time to be connected,” Hannan said. “So a struggling mom, who’s on food stamps, isn’t likely to be here.”
Hannan observed there was similar support in the room when she asked who was willing to give up their Permanent Fund Dividend, but it again depends on a person’s viewpoint.
“If you’re living paycheck to paycheck and that dividend makes a difference in you being able to stay in your home, make your rent, there’s a different perspective,” Hannan said, adding that’s why she thinks a state income tax instead of sales tax is a good idea.
She said the most regressive thing the Alaska Legislature has done so far is reduce the PFD.
Last year’s PFD of $1,000 was the lowest in history when adjusted for inflation and leaders of the legislative majority caucuses say a similar dividend is likely this year. In his fiscal plan, the governor is proposing $3,650 under a 40-year-old formula that hasn’t been used since 2016. A $1,000 PFD costs the state less than $700 million, while a $3,650 PFD would cost nearly $2.4 billion.
Kiehl acknowledged the governor’s plan could have disproportionate effects on those with low income in Alaska.
He kicked off the event by outlining the financial situation the Legislature faces, while noting the most important part of the town hall was his constituents’ questions, comments and rants.
Most questions following the delegation’s financial summary focused on the possibility of introducing a state income tax. Kiehl also answered a question about what it would mean for Juneau if the governor’s plan passed, clarifying that it would supersede what voters decided in the recent municipal election, which took sales tax off groceries and home utilities.
“I understand the philosophy of a tax that is as broad as possible, can be as low as possible, but the governor’s proposal would be to override that and to allow no variation,” Kiehl said. “I think that’s a bad choice, especially because it impacts people doing sales tax who struggle most to get by. And we need to look at the total picture of how we raise the revenues to pay for the things we all need state government to do.”
Juneau’s legislators attended a presentation by the Institute of Social and Economic Research detailing Dunleavy’s fiscal plan on Thursday morning before holding the town hall.
Dunleavy’s fiscal plan for the next six years calls for a sales tax of 2% that increases to 4% from April to September, an increase in some oil taxes and fees, eliminating corporte income taxes starting in 2031, and a constitutional amendment to change management of the Alaska Permanent Fund in a way that divide spendable earnings equally between dividends and state government.
Legislative leaders in the House and Senate, with bipartisan majorities, have expressed concerns about numerous aspects of the plan and skepticism a well-thought-out plan can be passed before the session’s deadline of May 20. At the town hall, Rep. Andi Story said the Legislature has difficult decisions to make, and unfortunately, she could see the “can being kicked down the road another year.”
Pam Mueller-Guy, 74, retired last year after decades of public sector work. She told the Independent she attended the town hall to represent the deaf community, stating they work twice as hard as a hearing person to afford to live.
“People with disabilities don’t earn as much as hearing people. That’s why I worked jobs to cover, cover, cover to make equal as hearing person,” she said in an interview.
Mueller-Guy said the batteries for her hearing aids are not covered by insurance, and she had trouble finding one-bedroom housing in Juneau, so she pays for two bedrooms. She said the state adding more taxes would be unfair and, in particular, expressed concern about her retirement income being taxed since the town hall discussion centered around state income tax. During the town hall, she asked the delegation to consider how taxes would hit people with fewer resources.
As a former state director of the Division of Insurance, John George said he attended the town hall because he understands the legislative process and finds it interesting. He supported a state income tax as a solution over the multiple minor add-ons currently proposed in the governor’s fiscal plan.
“I think that’s a better solution than some of these others,” George said. “I’ve been here a long time. I remember when we had a state income tax, and it was a percentage of your federal tax, so it was really easy. If you were paying $5,000 in federal tax, 16% of $5,000 is what you paid state tax. And then they eliminated it.”
Kiehl said Alaska needs taxes to support a PFD, which, along with state services, has been cut in recent years to make ends meet. He is a member of the Senate Finance Committee.
“The simple fact is budgets are policy,” Kiehl said. “What you spend on reflects your values and it’s how the work gets done. Whatever it is you want the government to do or quit doing, it needs money allocated to it or taken away.”
The State of Alaska has a structural budget deficit in that ongoing revenues do not match recurring expenses, according to Kiehl. He said the current fiscal year’s recurring operating, capital and PFD budgets total about $6 billion.
Dunleavy’s proposed budget unveiled in December contains a $1.5 billion deficit for the fiscal year that begins July 1 and hundreds of millions more are likely to be needed to cover a shortfall in the current year’s budget.
The state’s “last” spendable savings account is the Constitutional Budget Reserve, which contains about $2.9 billion. The principal of the $89 billion Alaska Permanent Fund is protected by the Alaska Constitution.
Kiehl said once legislators include changes they know are coming, as well as unmet needs from the current fiscal year, like massive disaster responses, it’s “probably closer to 1.9 billion dollars” that would need to be drawn from the CBR.
He said the problem is masked a bit by the great investment returns of the Permanent Fund — the spendable earnings of which are now the top source of general fund revenue for the state — but the state can no longer rely on this to pay the bills due to a decline in oil prices.
“Oil used to pay 80%, maybe more than 80% of the state’s bills, now we’re looking at 23, 24%,” Kiehl said.
He said that it is not only because of the recent decline in oil prices, but also the decline in production and the cut to oil taxes in 2014 following the passage of Senate Bill 21.
“When you put those things together, we’re in a financial pickle. That makes it tough, really tough, to meet our recurring expenses,” Kiehl said.
In an interview after, he highlighted how Alaska is the only state without any broad-based state tax.
“Everybody else has sales, income or property, at least,” Kiehl said. “We can tailor those options so they have the least impact on the economy. You don’t get to none, right? And we should be wide open about that, but you also have an impact if you’re just cutting state services and state jobs, so we need to tailor that and make smart choices so that we can have the revenue we need to do the work for Alaskans – public safety, infrastructure, schools, the things the Constitution requires, but with the most limited impact on private sector investment jobs and households.”
A temporary increase in some oil taxes and fees is included in House Bill 284, which the governor introduced as part of his fiscal plan on Wednesday. However, the bill also ends corporate income taxes in 2031, at a projected annual cost to the state of $540 million.
Hannan said the proposed fiscal plan aims to bridge the state for the next several years until there is increased oil revenue from the Willow Project, Pikka, and other developments on the North Slope. But she isn’t supportive of all its components.
“I can support the digital tax on digitized corporations, Netflix, but doing away with it in seven years — I want to build a 50-year plan of you have low taxes that keep us there,” Hannan said. “I don’t want to go back to a time where we’re dependent on volatile commodity prices of oil and gas.”
Hannan noted the House Finance Committee, which she is a member of, will accept public testimony on HB 284 this upcoming Thursday from 5:30 to 7:30 p.m.
• Contact Jasz Garrett at jasz@juneauindependent.com or (907) 723-9356.
