PHOENIX - Alaska Gov. Bill Walker's $4.2 billion fiscal year 2018 budget proposal offers spending cuts along with a new fuels tax and another effort to tap the state's massive Permanent Fund.
Walker released his budget Dec. 15, and the centerpiece of it is much the same as the spending plan he proposed last year.
Introducing more government cuts to bring spending down to 77% of the level when Walker took office two years ago, the plan reintroduces Walker's "Permanent Fund Protection Act," which passed the Senate in the previous legislative session but failed to become law. That provision would help fund government services such as education with "sustainable draws" on the more than $55 billion fund to combat the effects of decreased revenue due to low oil prices.
"We have reduced state spending by more than $1.7 billion, and will continue to seek efficiencies and contain costs," Walker said. "We have closed dozens of state facilities across Alaska, impacting services Alaskans have grown accustomed to receiving. But Alaskans are increasingly looking for budget stability to protect Alaska's economy. We can't cut our way to prosperity. Since 2013, we have cut state spending by 44%. To fund services Alaskans rely on, it's critical to discuss new revenue. We look forward to working with the legislature to pass a sustainable fiscal plan during the upcoming session."
Walker also proposed a motor fuels tax which, if passed by the legislature, would be the first significant state tax Alaskans have paid since 1970.
The revenue generated would cover transportation costs, like road maintenance and snow removal.
S&P Global analyst Gabriel Petek said not much has changed for Alaska since last year, with the state once again facing a structural budget gap of about $3 billion.
"The main difference from last year to this year is that a year has passed," Petek said.
Even if the legislature adopts Walker's budget proposals, there is still a roughly $900 million gap in the budget, which would need to be covered by a draw on the state's constitutional budget reserve. Walker has indicated that a broad-based tax, such as an income or sales tax, is likely going to be necessary. The state currently has neither a sales nor an income tax.
"There are going to probably be some difficult negotiations up there," Petek said.
There has already been some renewed pushback against the Permanent Fund draws proposed by Walker, an independent.
Sen. Mike Dunleavy, a Republican state senator, released a statement expressing concern about how Walker's plan could affect the dividends that the state pays to its citizens out of the fund annually. The state already reduced payouts this year.
"The founders of the Permanent Fund, including former Gov. Jay Hammond, wanted this fund to be permanent, and they knew those in power could not restrain themselves from spending the fund away irresponsibly," Dunleavy said in his statement. "Therefore, I will be working with other legislators to protect the fund and the PFD against a government that appears committed to spending it."
