During a visit to Homer last Thursday, Gov. Bill Walker touted a relieved, cautiously optimistic message: Alaska is on the mend, fiscally. Walker’s talk at the Kachemak Bay Rotary Club and an interview with the Homer News was part of a post-Legislature tour by state officials. On Tuesday, Rep. Paul Seaton, R-Homer, and Alaska Department of Revenue Tax Division Director Ken Alper also spoke at the Homer Chamber of Commerce and Visitor Center for a chamber brown-bag luncheon.
Walker discussed the progress he said the Alaska Legislature made in finally passing a budget fix plan through Senate Bill 26, which allows the state to draw up to 5.25 percent of the Permanent Fund Earnings reserve to pay for government services and make annual dividend payments.
“For the first time since the mid ’80s, we no longer are relying about 80-90 percent on one commodity,” Walker told a room full of residents at the Rotary Club meeting in the Best Western Bidarka Inn. “The amount of health care that we have in Alaska shouldn’t be tied to the price of oil. The quality of education shouldn’t be tied to the price of oil.”
Walker said the Legislature’s move essentially reduced the state’s approximately $3.7 billion budget deficit to a gap of about $700 million.
“I can say that we have made that turn,” Walker said, making an analogy to how an oil tanker needs miles to switch direction. “We made it before we ran out of money.”
Walker said it’s not a permanent solution, however. He stressed the need to continue diversifying Alaska’s revenue, and looking at the different options to do that. In an interview with the Homer News later that day, Walker said an income tax is not an option he’s “enamored with,” but that it would be helpful in that it would target the large amount of the workforce that lives out of state.
Seaton expanded on that point at the chamber luncheon on Tuesday. A member of the House multiparty majority, Seaton said the House had been reluctant to approve Senate Bill 26, the bill that ultimately allowed the state to tap Permanent Fund earnings to pay for government. That wasn’t enough and didn’t address in the long term the gap between fund earnings and status-quo funding. The House agreed, but that kicks the can down the road, Seaton said.
“It made the most sense to me to have an income tax,” Seaton said of finding a revenue source to fill the fiscal gap. “…We need to get the revenue someplace.”
“Every state in the union has figured out you can’t run a government without some tax on income or sales,” he added.
The House had proposed a progressive income tax that included a standard deduction and didn’t tax the PFD. Alper said that Alaska now has the lowest per-capita tax of any of the United States, about $500. If we had an income tax, the per-capita rate would rise to $1,000, making Alaska the second lowest in the nation behind New Hampshire, and far below the per-capita tax rates of states like Hawaii and Connecticutt.
“I can’t imagine how that’s going to lead to thousands of Alaskans leaving the hills and heading to Texas,” Alper said.
Walker said there are pros and cons to any kind of tax-based revenue the state could implement, but that the state won’t get out of its fiscal situation without some form of revenue.
“We’ve diversified our economy in Alaska, but we’ve not diversified our revenue,” he said at the rotary meeting. “Our revenue is continually tied to one … commodity.”
Alper also spoke of how a state sales tax would harm the 105 cities and villages that collect sales taxes. In response to a question from the Homer News about how a state sales tax could allow large online retailers like Amazon to pay local taxes to places like Homer, Alper said to keep an eye on a case now before the U.S. Supreme Court, South Dakota v. Wayfair Inc. South Dakota is challenging a 1992 case, Quill v. North Dakota, which said states could only collect taxes in which a retailer had a physical presence.
If the court rules in favor of South Dakota and says Amazon and other retailers have to collect state and local taxes, Alaska might want to come up with some statewide mechanism to recover taxes from online retailers, Alper said.
Walker also pointed to expanding Alaska’s economy and goods beyond its borders as a way to continue diversifying the economy and bringing in revenue from new places. He used his China trade mission as an example. Along with state officials, the governor is currently in China touting 35 Alaska companies to that foreign market. The innovations Walker spoke of include Alaska-made baby food, kelp salsa and Alaska brewed beer.
When it came to Homer-centric issues, Walker took some time to share his thoughts with attendees of the meeting. In response to a question from the audience, he clarified his stance on the Pebble Mine project, which many Homer area residents are vocally against.
“I’m fish first,” Walker said. “And when you have two resources you’re trying to develop, (and) one is renewable like fish, and one is nonrenewable, I will always defer to the renewable, to fish. And so I have taken that position. And I have heard from those who don’t like that position. … I recently said to somebody … I said, ‘what if you’re wrong? What if you’re wrong? What if you’re wrong about that and we lose that fishery?’ Over half the world’s supply of sockeye come from there (Bristol Bay.)”
Another question heavy on the minds of Homerites was that of the Homer Harbor’s potential expansion. Asked about money for capital projects from the state, Walker said it’s not likely to be available soon, but that the state is in a better position to provide that kind of help in the future.
The District 31 Republican Party chair, Nona Safra, and two GOP challengers to Seaton’s seat, John Cox and Sarah Vance, attended Tuesday’s chamber meeting. They all have questioned Seaton’s commitment to the party after he joined Democrats in forming a House majorty. A member of the audience asked a question Republicans have been pushing Seaton on: Will he run again, and if so, which party?
Seaton has filed an intent to run for re-election. As to which party he will choose, “That decision will be made soon,” he said.