Budget battles will continue during the next legislative session. That’s one of the big takeaways from an update given by the central peninsula’s delegation to Juneau at a Chamber of Commerce luncheon Wednesday.
Representatives Gary Knopp and Ben Carpenter along with Senator Peter Micciche each weighed in on what they anticipate going into next year’s budget process, which will start next month before the legislature gavels in in January. Micciche says he looks forward to another round of discussions about oil taxes, but won’t support an increase.
“It seems so simple. We can solve all of our budget problems by simply raising the taxes on one industry, right? That’s easy. You just affect one industry and not so many people hate you and lots of people would love you for doing that. But none of that has been evaluated on the long term effects on the industry. The industry that is still paying approximately 80 percent of what we do in our state...I think it’s imperative that we evaluate that publicly so that the folks that have thrown out the bumper sticker statements are not convincing people that it’s a good idea.”
Representative Knopp was also not in favor of looking to oil tax policy to cure the state’s budget ills, saying companies would be more likely to slow down there capital spending rather than take a hit to the bottom line.
He had a fairly optimistic view of the budget situation going into pre-session talks, specifically around the state’s undesignated general fund.
“This year, in UGF dollars, we took in about $2.4 billion in oil revenues, taxes, revenues, other sources; and we took in $2.9 billion on the interest earnings we passed in SB 26, so we had about $5.3 billion in UGF dollars, we spent $4.3 billion...minus the permanent fund dividends.”
That means that incoming revenues are more than keeping up with expenditures, especially given the billions of dollars in cuts the past few years. All expenditures except the PFD.
Representative Ben Carpenter continues to support a full PFD, while anticipating not just further cuts to the state budget, but a reduction in federal dollars to Alaska as well.
“Folks, federal spending reductions are inevitable. Our state is dependent on federal spending. And if you thought the budget crisis we have now with the shortage in oil revenue is bad, wait until our federal dollars dry up. Or at least get reduced. We need to wrap our brains around the fact that our national debt is going to cause some reduction in spending at the federal level eventually. If we do not right our state spending to be more in line with our economic output, meaning we can support our own state spending based on our economy, we’re in a world of hurt.”
Last year, the state of Alaska received $3.4 billion in federal grant dollars. Despite Carpenter’s warnings, federal spending isn’t slowing down, even under a Republican administration. Each of the last five years have seen federal expenditures grow. In 2020, that number is expected to be about $4.7 trillion dollars.