Everybody must pitch in to square Alaska’s budget, and the time is now

Alaskans have lost 13,500 jobs the past two years, in part because too many leaders have kicked the can down the road and not fixed the worst budget crisis in state history. We're mired in a recession. People are talking about leaving the state. Businesses are laying people off. Today the deficit exceeds what we have left in savings. We've reached the time of reckoning.

It's time to act, not duck.

Alaska is on the cusp of losing the ability to fund public education, and the police and prosecutors we need to protect our homes. We need to pull together to make responsible decisions. But we're also battling corporate-funded campaign groups and legislators who are selling snake oil. They pretend, with no explanation, that we can fix three years in a row of record $2.5-$3 billion budget gaps by magic and inaction.

Alaska's massive budget gap isn't going away, and we're now out of savings to cover it. For years prior House and Senate majorities have spent our savings, which exceeded $15 billion just a few years ago, to cover the deficit. The "keep cutting the budget" crowd doesn't want you to know we've cut the budget by $3.5 billion, or by 40 percent, since 2013. Even with those deep cuts, a $2.5-$3 billion deficit remains today.

[Alaska Gov. Walker calls legislators back for 4th special session of the year]

Why is the deficit so big? Spending has gone down, not up. Per-person state spending, in inflation-adjusted dollars, is near the lowest it's been in 40 years.  Low oil prices have shriveled the revenue we once used to pay for basic services.  And a very weak 2013 oil tax law that brings Alaskans far less than a fair share for our oil doesn't help. But even if our bipartisan House majority coalition could get our oil reform bill past our Republican Senate colleagues, that by itself can't solve a $2.5-$3 billion deficit.

What about the easy soundbite solution of continued, deeper cuts? After $3.5 billion in annual budget cuts since 2013 already, experts and studies show more deep budget cuts will kill thousands more jobs, extend our recession and keep harming businesses. We should always cut waste, but not the services Alaskans need so they can have a state they don't want to leave.

According to the university and others, every additional $100 million in new cuts kills 1,000-1,500 private and public sector jobs. Why? When there is less grant money, construction money and fewer wages going into the economy, there's less money spent on construction, homes, and at restaurants and businesses. Those businesses shrink and lay people off.

We should keep making cuts that are sensible, but recognize schools, the university, senior and disability services, road maintenance and public safety have been held at funding levels that do not keep up with inflation. Those basic services are cut when funding falls behind actual inflation costs. More conservative legislators have pushed deeper cuts in these areas. Our bipartisan House majority coalition has battled to reverse cuts to education, basic services and the things that we feel create dignity and opportunity.

Our bipartisan House majority coalition also passed a full plan to close the budget gap. It was designed to be fair to people of all incomes, but was not set in stone. We've said we're happy to make principled compromises to reach consensus.

That's brought out negative campaign attacks by wealthy interests and Outside corporations, who'd rather keep all their money than chip in to help. The so-called "business" groups who've funded the attack ads would rather harm the economy and harm more businesses so their preferred candidates can win the next election. Politics shouldn't be about class warfare and eyeing the next election. I'm proud of the many wealthier Alaskans who have said they'd like chip in.

So today over 6,000 Alaska corporations and lawyers, realtors, banks and doctors are exempted from paying corporate or any other taxes. Even the most profitable oil companies still enjoy unaffordable sweetheart tax breaks. And Alaska drifts toward a budget Armageddon.

[Without fanfare, Walker administration announces $1100 Permanent Fund dividend amount]

Our Republican-led Senate colleagues have offered some, but partial action.  There is room for compromise. Their PFD-cut-only plan cuts the dividend to $1,000 (our House majority plan balances the budget with a $1,250 and growing dividend, recognizing low-income, senior and rural Alaskans rely on the PFD heavily). The Senate plan leaves roughly $500 million of the deficit to fester. We don't have the savings left to responsibly cover that deficit.

No one's plan can be perfect. But we need to come together and act before more damage is done. I'll leave you with a few numbers.

The Senate's $1,000 PFD spins off roughly $1.85 billion in Permanent Fund earnings (the Permanent Fund principal cannot legally be touched) that could close part of the budget gap.  A $1,250 dividend spins off roughly $1.7 billion in Permanent Fund earnings. Neither solves the budget gap. We'd still need another $700 million or so to solve the deficit.

A near-lowest-in-the-nation income tax gets revenue from out-of-state workers, has wealthier Alaskans chip in, can exempt lower income Alaskans, possibly be capped and could contribute roughly $650 million toward fixing the deficit. With that, owners of high-profit corporations and businesses would finally chip in a small percentage of their corporate and business profits.

A sales tax can raise roughly $400-$700 million. But adding a 3-6 percent state sales tax to, for example, a 6 percent sales tax that is paid in Nome, brings objections from people who live in communities that have local sales taxes. And sales taxes hit lower income people harder.

A fair tax on profitable oil companies could raise $50-$200 million or more today, and perhaps $800 million and more at higher future oil prices.

Finally, I'm OK with those legislators promising a $2,300 PFD. They just need to level with people that they'd increase the deficit by an additional $800 million-$1 billion. That proposal requires even higher income or sales taxes to cover the deficit, or an additional $800 million-$1 billion in cuts that would likely harm schools, public safety, opportunity, and fairness for children, seniors and those with disabilities.

We're all in this together. There are no easy answers. The only easy answer is what's been done. We have 13,500 job losses and a recession to show for that.

Rep. Les Gara is vice chair of the House Finance Committee and has served in the state House of Representatives since 2003. He can be reached at rep.les.gara@akleg.gov.

The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com.