Dunleavy’s office says he’s opposed to new taxes, limiting options in the coming budget debate

Gov. Mike Dunleavy has changed his approach to the state’s operating budget, but he hasn’t changed his opposition to new taxes, his office has confirmed.

Alaska faces a $1.5 billion budget deficit in the fiscal year that starts July 1, and the governor’s statement is significant because without higher taxes, balancing the state’s budget will require cuts to government services, cuts to the Permanent Fund dividend, spending from savings or some combination of the three.

“Governor Dunleavy will not be proposing new or higher taxes in the upcoming session, and has said on many occasions he does not support new taxes without a vote of the people,” Dunleavy’s deputy communications director, Jeff Turner, wrote by email.

Speaking at a Commonwealth North event on Dec. 18, Office of Management and Budget deputy director Laura Cramer said the governor is not proposing any new revenue “but the governor is open to a conversation. He will put no ideas forward, but he is willing to have the discussion.”

The governor has made similar remarks to lawmakers in private.

“What he said to us was that he was going to be open to the ideas … whether he would support them remained to be seen," said Senate Minority Leader Tom Begich, D-Anchorage, describing a meeting between him, Sen. Bill Wielechowski, D-Anchorage, and the governor.

Turner wrote that Cramer said “the governor is open to having a conversation about new revenue sources and he welcomes Alaskans who support the creation of new taxes to explain why they think that is a necessary to balance the budget. So the answer is no, the governor does not support new taxes.”

Begich was surprised by that answer.

“I was not left with the impression that he was closed to the idea of new taxes,” he said.

When the Dunleavy administration released its annual budget proposal earlier this month, it also released a series of prospective 10-year plans that offered possible solutions for resolving the deficit. One scenario, labeled “balanced approach,” calls for resolving the deficit with taxes, reductions to the dividend and spending cuts.

After its release, former Office of Management and Budget director Donna Arduin said on talk radio that in her experience, “If you’re trying to push things in a direction and you lay out five scenarios and you call the last one a balanced scenario, I would read that as, ‘This is where we would like things to go.’”

Arduin left her job in October and has not yet been replaced. The following month, the state’s revenue commissioner resigned, saying that “the discussion is turning more and more towards taxes" and he wanted Dunleavy to have a revenue commissioner aligned with that vision. The commissioner has also not yet been replaced.

“The governor is not endorsing any of these visions for Alaska,” Turner said about the scenarios offered in the 10-year plan. “Rather, he will be spending the coming months engaging with Alaskans to gain a better understanding of the will of the people.”

In a subsequent email, he referenced a constitutional amendment proposed by the governor that would require any new taxes to be approved in a statewide vote.

“If taxes are the desire of a majority of Alaskans across the entire state, the governor is willing to have that conversation with legislators, and hopes to see his proposed constitutional amendment moved forward to allow Alaskans to vote on any proposed measure,” Turner wrote.

On an East Coast trip, the governor was asked by Bloomberg radio about a proposed ballot initiative that would raise taxes on older North Slope oil fields. While the governor didn’t offer an opinion, he said the state should consider the idea with caution, so as to not threaten a “renaissance” in North Slope development.

Proponents of the initiative say it will generate as much as $1 billion in additional state revenue per year.

No significant tax increases have yet been proposed in the Legislature.

Brad Keithley, a former oil and gas consultant who now writes on budget issues, said Sunday on Twitter that based on projected deficits over the next decade, the state would need a 13% sales tax or a state income tax equivalent to half the federal rate to make ends meet while paying a dividend according to the traditional formula in state law.

Since 2013, the state has relied on spending from savings, spending cuts and (since 2016) dividend cuts to balance its annual deficit.

Keithley, in a line echoed separately by Arduin on talk radio, said those dividend cuts are taxes.

“We’ve got taxes," he said. "The question is are we going to continue those taxes, or are we going to flip to something that’s more equitable?”

Correction: This article has been updated to more accurately describe Brad Keithley’s experience and background. He is a former oil and gas consultant who writes on budget issues, not an economist.