Looming $600M deficit casts shadow over PFD, state budget calculations for legislators

In a Senate majority press conference, Sen. Stevens (R-Kodiak) and other lawmakers provided an array of updates on the state budget.
Published: Mar. 28, 2023 at 8:45 PM AKDT
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ANCHORAGE, Alaska (KTUU) - The Senate majority caucus hosted a press conference on Tuesday to discuss how Alaska lawmakers are scrambling to find new sources of revenue. The press conference comes a week after Gov. Mike Dunleavy announced a bleak revenue forecast, and as the legislative session moves closer to the last day of the regular session in May.

A looming deficit crisis of up to $600 million has left legislators with the task of finding new ways to fund the Permanent Fund dividend and balance the state budget without draining the reserve.

One solution proposed by Sen. Bill Wielechowski (D-Anchorage) is SB 114, a bill that would raise taxes on the oil industry. According to a press release issued on March 24, it “would level the playing field by having all oil producers pay the same corporate income tax rate as corporations at 9.4%. This would only apply after the first $4 million in annual net income.”

The bill would also bring down Alaska’s per-barrel oil tax credit system from $8 to $5, in addition to placing a cap on the credit amount to put it on par with capital expenditures.

Another revenue-generating option is the governor’s carbon management legislation, a suite of bills that would monetize fossil fuel emissions — taking a longer-term approach to the problem, similar to future profits the state could eventually expect from ConocoPhillips’ Willow Oil Project.

Both proposals were discussed at a Senate Majority press conference, highlighting the urgency of remedying Alaska’s financial health to defray the negative impacts from annual volatility injected by slumping oil prices.

Sen. Bert Stedman (R-Sitka), a member of the Senate Finance Committee, expressed concern about the projected deficit.

“It appears that we’re going to be somewhere between five and six hundred million underwater,” Stedman forecasted.

Sen. Cathy Giessel (R-Anchorage) echoed this sentiment.

“We’ve reached the cliff, I believe, I believe the Senate Majority recognizes that the cliff is here now,” Giessel said. “So we have to start getting really serious about solving this.”

Sen. Wielechowski added that if the government is going to fund its operations and provide at least a 50-50 PFD, new sources of revenue or significant cuts would be necessary.

The need for new revenue sources has become a pressing issue for Alaska lawmakers, with the PFD, balancing the state budget and the impending deficit all major challenges. Lawmakers are now tasked with finding creative solutions to keep the state finances afloat and avoid draining the reserve.

While the topic of lawmaker pay has been a recent issue of discussion, Senate President Sen. Gary Stevens (R-Kodiak) termed it as “a past issue right at this point.”