Today we have Senators Giesel, Wilkowski, Stedman, Keel and Kawasaki and myself, Stevens.
Last week the governor announced he would introduce an omnibus fiscal plan.
Bill was formally introduced yesterday, giving us a first chance to look at it and try to
understand the full proposals we're facing.
Carefully evaluate both its impacts and its revenue generating components
We will be sending that bill
Additional committee at first I sent it to finance also going to send it two resources as well
So those two communities will look at it
Senator Wollikowski has
Reviewed the various elements of the bill and senator could you walk us through the the major components and what your initial observations might be?
Thank you, mr. President
Yeah, my office did take a look at the bill.
It's a 55 page bill that probably the major component is the sales tax.
It is a 4% sales taxes from April 1 through September 30th, dropping to 2% for the rest of the year.
According to the fiscal note that was provided, that would raise.
up to $815 million by 2032.
Some questions that have come up about, well, what's included?
What's not included, it includes goods and services.
Food is taxed except for those that purchase both WIC
or SNAP benefits.
Gasoline diesel fuel heating oil is also taxed.
Jet fuel is exempt.
Netflix, Amazon sales, Etsy sales services for such things as accountants, plumbers,
lawyers, home repairs.
This would stack on top of any sales tax that local municipalities have.
There are a number of municipalities that have this.
However, under the bill, the governor's proposal,
the state would take charge of collections and then return the local taxes back to communities.
under existing law municipalities can currently exempt things like food, utilities.
Juneau recently passed an initiative where they did exempt certain things.
Under this bill, local exemptions would be prohibited.
The next change would corporate income tax changes.
Governor's proposing to require some outside companies to pay Alaska taxes by changing the apportionment provisions
It's similar to it's Similar to one of the provisions that was vetoed by the governor and that the legislature
Just failed to override a couple of days ago
At its peak that provision would raise 16 million dollars
I should mention the sales tax provision it expires
In, I believe, 2032, the governor also in the corporate income tax changes is setting
to zero the ball corporate-income taxes in FY2032.
costs the state of roughly $540 million per year in 2032.
Oil tax is the governor's proposing
to increase the minimum oil tax from 4% to 6% until 20 32.
At its peak, that would raise $171 million.
However, we're learning that a number of oil companies
go below the minimum oil tax, and so this could have a much lower revenue impact than
is being projected because there is, we've heard from some credible sources that this
could very likely allow some oil companies to pierce that floor and continue to drive
their minimum tax to zero.
He's also proposing a 15 cent per barrel tax on oil that could be used to that would be use to maintain pipeline quarter
This would raise up to
a 30 million dollars by FY 2032
At the peak so there's three years
All right rather four years FY 28 raises eight hundred ninety eight million
dollars
Actually the total fiscal impact nine hundred twenty two million
940 million, 29, 972 in 2030, 741 million in 2021.
But then it drops off pretty significantly to 389 million
in 2030 too.
And the governor, I don't want to speak for him,
but he's projecting that the gas line will be online then,
and there'll be other revenue sources.
I'm not sure that that's what the 10-year forecast shows.
So, to make up for that, we've got structural deficits of roughly $2 billion going forward
to makeup for, and this would raise at its peak, $972 million,
to making up that other billion dollars in deficit,
the governor's proposing to go to a 50-50 constitutional PFD,
where 50% of a 5% PMV draw would be used for government spending,
And then he's got a lot of contingencies and conditional language.
He's another bill that deals with a statutory appropriation limit.
Another bill dealing with sunset review provisions.
There's a complex series of contingency language that he has got for those things.
So that's the rough analysis of what the bill does.
I thank you, Senator Willska, very big issues, one issue that we will get into very carefully and thoroughly and try to evaluate and have public hearings as well.
So, in addition, I think you Senator, we're going through that.
In addition the resource committee has.
been meeting and will continue to meet quite immediately to review the gas line proposal.
Senator Giesel, could you give us a brief update, a review of what's happening there,
and how you anticipate to reveal it in the weeks ahead?
Sure.
You know, probably the big thing that Alaskans should know is that our consultants agree
over time and over budget.
So regardless of the price that's quoted at the onset,
you can pretty much bet it's going to be more than that.
But overall, we have some great consultants.
Gaffney Klein has given us a consultant named Nick Fulford.
He has been working for the state for a very long time.
pipeline that was proposed by the companies back in 2010, 2011, and in those years.
And so he's looked at all of this before.
So we had a good meeting yesterday with Glenn Farn, tomorrow we'll be meeting with the
Department of Transportation.
They oversee our roads. Those roads are going to have to carry the materials that will build this pipeline
Are we ready with the roads? How about the bridges?
These are questions. I'll be asking particularly of Department of Transportation
We're also going be hearing
from the regulatory Commission of Alaska
What oversight do they have over the prices that this gas will be?
the pipeline be completed. We believe that quite a bit of that oversight was removed in House Bill
4 back in about 2013, but we're going to dig into that. So lots of, it's a target-rich environment,
let's say, for examination. Thank you, Mr. President.
Thank You.
Finally, I'd like to turn to Senator Kawasaki, who is the co-chair of the Joint
Armed Services Committee to talk about the hearings coming up in early February. Senator
Sure, so the folks who might not know the Joint Armed Service Committee is a permanent
joint committee of the legislature.
My partner and co-chair in the House is Representative Andrew Gray.
Together the committee, which involves several of us here on this panel, sort of looks at
what's going on within our armed services since we're such a military dependent state.
One of the big questions, of course, we've gotten since the announcement of
the 11th Airborne being potentially seconded and used in Minneapolis has drawn some questions for us.
We have, in turn, as a committee, sent letters to both General Cogbill.
the commander of the 11th Airborne Division,
as well as our own congressional delegation
to try and find a little bit more information.
It started because, quite frankly,
families across the state, whether they're at J-Bear
or at Fort Wainwright in Fairbanks,
want to know what's going on,
and they want enough they'll suddenly have
their spouses be deployed in amount of time.
I can tell you this has reached all the way over
to Greenland, in fact,
from media services, from Media Folks down there
about whether the 11th Airborne is gonna be dispatched
to the Arctic as we're sort of the arctic leaders here
and of course the 1th airborne lethal fighting force.
Typically, we dispatch the 11th airborne to places where there is an enemy and not a friendly NATO ally.
So I don't know how that works, but certainly we'd love to clarify.
So we've scheduled a meeting with General Cogbill and invited him to attend a hearing
on February 11, I believe it is. We'll also try to hear just sort of what the entire,
you know, what happens with these 1,500 soldiers potentially being deployed.
how it impacts just local, the local economy,
the sort of what goes on in communities.
So that's what the Joint Armed Services Committee's
dedicated to doing.
Thank you, Senator Kawasaki.
Bringing you up to date on that February 11th
will be the hearing, important to hear that.
So thanks all, and I will open up for questions
if you have any out there.
Becky Boor with the Associated Press.
One of the conditional pieces you mentioned, Senator Walakowski, is the constitutional amendment on the dividend and the size of
the dividends has been the big question mark here for a decade now.
Is there agreement among the caucuses that
50-50 constitutional dividend is a starting point for conversations, and if not, is there
agreement even among the Senate majority on what the starting for a dividend would be
from which you would build a fiscal plan?
Very good question.
Thank you.
Senator Wolkowski.
Well, thank you for that question there.
So as you know, to put forward a constitutional amendment to the people, it's to go to
And as I sit here, I'm not even sure there's 50% approval from 50 plus plus 1%
approval for anything on the PFD. You've got some people who support much higher
PFT, you've some who supported no PFD. So I don't think there is support for
anything of that nature constitutionally on dividend. I just don t think the
support is there. That could be wrong. Somebody correct me if I am wrong
And we are talking about $2 billion,
so it would be divided between.
Yeah, so just roughly, you know,
if you look at the prior five years,
and so we're, I think, $88 billion.
But if assume the priority five
years is an $80 billion average,
you'd take 5% of that, which would
be $4 billion and then you take 50%
and have it go to the people,
50%, have a go-to government spending.
That would constitutionally enshrined.
We do a 5%, PO and V right now.
And then we debate pretty heartily over how, you know, what the dividend should be.
And, and, it's based on, on the other government services.
We've got constitutional obligations to fund education.
You've have constitutional obligation to, fund your court system,
to manage our wildlife resources and our natural resources.
And so all these things cost money and oil used to find 90% of our budget.
Now funds 23% our budgets.
significant source of revenue.
So this is the challenge that we face,
there's just no other source or revenue,
so I'll give the governor credit
for putting forth a plan.
I disagree with a lot of aspects of it,
but I applaud him for put something forward,
and let's have a debate over it.
I'm glad that he's recognized that
we can't go forward the way that
we're going forward that
we've got to figure out other ways to fund our government.
I disagree with how he's proposing it and I do it a lot differently, but I give him credit for putting it forward.
Thank you, Senator Wojcowski.
Yes, Mr. Landfield.
Hi, Joseph Land field. I just, I guess philosophically, and
I suppose it depends on how much you think the dividend should be.
I know amongst all of you there's different ideas,
but isn't this really just a plan to raise taxes,
revenues through oil taxes and sales taxes to go back and
Pay a dividend because with no dividend there's a surplus of around 800 million and if you're talking about lower income people
How much are they going to pay in to tax sales taxes as a percent of their income if they're going
To get a couple thousand, you know dollars back every year. I guess philosophically, isn't that what's really happening here?
Can't well that is off certainly a comment that we we've often heard I remember
senator
Birch always saying, I will never vote for like an income tax in order to have a high
dividend.
That was his position.
The one that resonates pretty soundly in my district, Senator Carla.
I'll just say because, you know, mechanically and mathematically, we've been in the structural
budget deficit for a decade or more and part of that had to do with oil taxes.
So you think about what oil price is going to be at now with the fall revenue forecast,
it under under Palin and you remember because you were here and I was here
and some of these folks were
here at sixty dollar a barrel oil we were getting six point six billion
dollars in revenue at the time we we're able to pay back our
constitutional budget reserve we are able
to put money on the streets for capital projects
individually and districts and just maintain the schools that we had
existing. We are barely keeping up with our own
to meet the match with federal highways. We're barely able to keep up with the schools across
the state. There's two billion dollars in, at least two million dollars, in facilities that
have deferred maintenance, schools, universities, public buildings. These are things that need to
be addressed. When we had the cash flow coming in we were able take care of some of those things,
And don't forget that in the bill he also proposes going to zero corporate income tax.
So tax the people but not the corporations.
Isn't the size of the dividend was a lot smaller back then even when they added the 1200 and 2008.
The dividend is way smaller than it is now.
The fund has grown.
Well, I remember the year that we raised oil taxes.
We were getting what many would say as a fair share, maximum value for our resource.
And not only were we taking in billions of dollars, we actually did a supplemental PFD
one year where it was over $3,000 and that was a little, some people didn't support that,
But I think, you know, the dividend is something, I
think at least in my district, is critically important.
It's critically
important to people in rural Alaska as someone who represents
low income working families.
It is very important that people
in the district they don't want to see it go away.
They would rather see the,
you
know tech billionaires,
Netflix outside companies who are making huge profits in Alaska
and paying zero,
they would
rather
see them pick up a share.
They would rather see the oil industry, quite frankly, pick up a share rather than giving
away our resources.
You've got a lot of competition for government money when it comes in in the state of Alaska.
And people hire lobbyists and they, the well connected get an inordinate share of the revenue
that comes into this state.
And the purpose of The Dividend was so that every single ask and every man, woman, and
child will get a tiny little piece of our resource wealth.
That's the purposes of A D
Here's the challenge that we face.
This is not just raising taxes to pay a bigger dividend.
If you have a stock market crash,
we're not going to be able to afford
to fund government going forward.
If oil prices crash we are not gonna be
able afford paying for our government
going for it to find our schools,
to found our basic infrastructure needs.
So we have to diversify the sources of revenue that
we had, you know, for years, oil's one in 90%,
and that's 23%.
You know, I've been an advocate of getting more, a greater share from oil, going back
to what we historically have gotten.
If we were getting what they're getting in Texas and North Dakota in terms of royalty
and tax share, we'd double our oil revenue.
And so I don't think, the balance is way out of whack.
I think that needs to be fixed.
paying a dividend to the people of Alaska as a way of giving some of our oil wealth to them.
Thank you, Senator Ocasio.
Hold on, Mark, we'll get to you in a minute.
Go ahead, just a day of seven.
You know, the other section that wasn't addressed, and that's the consolidation of
the earnings reserve and the principal of the permanent fund.
And any event that this bill doesn't go forward, that issue doesn t go away,
it will just move on to next legislature.
And the next governor because clearly to defend the permanent fund from rate getting rated
We need to consolidate the earnings reserve
and the corpus and cap and if we agree on five percent or four and a half or whatever number that is
To lock it down. It's a different discussion to dividend
but the
permanent Fund is running
wide open for being looted, the earnings reserve, with a simple 21 and 11 vote.
And we can control that now, but in the future, as mentioned, depending on what goes on, it
could be very perilous for the permanent fund, so.
So that issue doesn't go away, doesn t look like the time is ripe this year to fix it.
James Brooks, I stopped Mark, he had a question.
I wanted to follow up just briefly on that.
Please go ahead, James.
James Brookes from the Alaska Beacon,
tenders said men to build off
what your very last sentence right there.
Do you think that the governor's proposal,
his amendment now overshadows and likely kills
the standalone amendment,
which did seem to have a little bit of momentum at least.
Just speaking for myself.
I think it's unlikely that that will go forward the amendment this year with all the issues
we have on the table and the interest of the embedding the dividend into the constitution
and rate of dividend, there's just too many moving parts, it just not right, right yet
this here unfortunately.
Well it'll come back the next January I'm sure and we need to educate the populace some
show that without consolidation of the permanent fund, the earnings
reserve is just subject to a 50% threshold vote in the legislature
in a signature by the governor, we can take the entire earnings
reserve away, and then would really be in apical.
You said or said, maybe I hadn't, Mark, sorry to stop you.
I have a spreadsheet question, essentially, for anybody who's done the math or can just
take a good educated guess.
Does the governor's plan, as proposed, does it essentially balance the books during the
years, it takes effect, starting in FY28?
And so go year to year on that, and also, what happens to the balance of the CBR and
So yes, please Senator Likowski just well just looking at the governor the Governor's fiscal note that he's provided in
FY 28 29 and 30 he is projecting anywhere from 922 million dollars to 972 million
a total fiscal impact.
Now if you assume you've got a $2 billion deficit,
he's got to find a billion dollars.
If you go to a 50-50, you're probably closed that gap
for those three years.
I think the governor comes pretty close
to balancing the budget in three-years.
I don't think he balances the Budget after that.
In fact, I thing he craters the
Budget in FY32.
Probably you are looking at a
billion and a half to maybe even a
$12 billion dollar deficit at that point.
I agree with that back of the envelope, that's very close.
And the difficulty we have is that there seems to be a built in notion that
there's about to a lot of revenue from a great big gas line.
And it has two problems.
One is we've been hearing that for decades.
And there isn't any yet, and the other is that without some substantial changes to our structure and some of the tax laws, there's not going to be revenue or a big gas line.
So, more work to get this to balance.
I think Senator Keel, Senator Seven.
Just to add on a little bit of concern from Senator Willakowski, talking about the proposal and looking forward.
But we haven't even agreed on the base number yet.
We have a budget this year that has no maintenance.
from the governor in K-12 education, none for the courts were really short on government
buildings around the state, and there are several other items.
And we'll start looking at those coming up the next two weeks in Senate finance.
So we've got, if we're going to lock down spending on a, you know, 1% per year or whatever
he works out in this particular piece of legislation, first you've gotta agree on your starting
point.
And I'll tell you, from my perspective, zero maintenance in our schools is dead on arrival.
And also zeroed out for the university as well as the car system.
Iris Samuels with the Anchorage Daily News, I want to ask a budget question not related
to the fiscal plan and that's about the hearing that occurred in the finance committee this
morning about transportation funding.
I know that you had some questions for the governor's administration on the timing needed
backfilling his vetoes for that funding.
I'm curious if your questions were
satisfactorily answered this morning
and given what you heard,
where you stand on the timing needed
for the supplemental funding bill,
do you think that there's a need to draw from the CBR
kind of early in the session
as we've heard called for from industry groups?
Thank you, Senator Wolk.
Senator Esteban.
Well, let me, Senator Keel and myself,
sat through the meetings on that subject
in both transportation and finance.
We're about halfway through
the process of the vetoes.
We'll go through, we've gone through OMB's process,
the governor's processes of his logic
and why he did what he had, according to the staff.
We will go though the legislative side of that,
I think if I remember right or tomorrow and and take a look at that. So we're about halfway through that process.
The issue of the timing. There has been a lot of concern expressed since last spring on the
STIP. We've had even calls from the banking industry concerned about their contractors.
So, then when you take the match money for the budget for this current year's building
program, that just exaggerated the issue substantially, particularly in Fairbanks and along the
highway corridor.
I've told us that it's not going to change the bid schedule if they get the money in
this year's budget, which is may end of the session, right?
They all have a problem clearly after September or into September, but they need it in this
cycle here.
From the industry's perspective, for just planning and comfort, they'd want it sooner
than later.
recognize their position and their concern, and I don't disagree with it at all.
It would be nice to get it done early, but it takes three quarters of vote.
And I do not know if there is three-quarters vote in the two bodies to advance that.
It is probably fairly likely, if not highly likely it is going to end up coming in
when we deal with the supplementals for this current year and deal
with FY27 budget. That's if I had to make a recommendation
to the industry, that's what I'd tell them the plan for.
If we can get these voting support to get the money from the CBR, which
takes a total vote, um,
that process could probably be done fairly fast.
But until we get a commitment that the votes are there,
Long grind
Sorry, you're looking for help from the governor's office
Himself to get the minority caucuses on board. Can you talk about what you are hoping to see from
the Governor's Office on that? Well
All of the items in the supplemental or governor governor s items the legislature hasn't added stuff
to the subliminal
So if the governor wants a supplemental, he needs to go and get his votes
We won't even be in this mess. Okay, I'm sorry that we really need to move on. I appreciate all of the discussion on the Governor's
omnibus
Fiscal plan I almost said ominous. I meant almond of us and so we're all looking forward to getting into those details
Is big issues facing us this session probably bigger and more issues than I've ever seen before so
We'll work as well as we can to get through all these things. Thank you so much