I hope it's been a great start to 2022 for you and your family! My staff and I have just made our annual journey to the capital for the legislative session that began yesterday. I wanted to take this opportunity to provide you with updates for the coming session, including my committee assignments, the governor’s proposed state budget, and legislation that I’ve introduced that I hope will be enacted this year. Thank you for taking a moment to read through my latest e-News.

This session I will again serve as a member of the Senate Finance Committee. This committee is responsible for the state's annual budget and every bill that affects the finances of the state. Creating a responsible budget is vital this year and many other important pieces of legislation will be heard by this committee. 

I will also again chair the Senate Finance budget subcommittees for the Judiciary (the Alaska Court System) and the Department of Military and Veterans Affairs (DMVA). Through meeting presentations and discussions in these subcommittees, the appointed members and I closely examine the agencies’ proposed budgets and seek information about their fiscal needs to best serve Alaskans and the state’s interests. The subcommittees then offer changes to the proposed budgets for consideration by the full Finance Committee. In addition, I will serve as a member of the budget subcommittee for the Department of Public Safety. This budget subcommittee examines and makes recommendations for budget items related to Alaska’s law enforcement programs and services.

I’m eager to get to work on the Senate Finance Committee this week and on my budget subcommittees. Please contact my office if you have issues related to the tasks of my committees that you’d like to bring to my attention.

Under Alaska law, the governor is responsible for proposing a budget for the next fiscal year, which begins July 1, for the operations of the state government departments. Because the Alaska Legislature is constitutionally authorized with the appropriations power, the budget must be proposed for consideration by the legislature each year ahead of the legislative session. The governor released his fiscal year 2023 proposed budget on December 15th. 

Despite attempting significant budget cuts in the past, the governor's proposed budget would require a withdrawal of nearly $1.7 billion from the earnings account of the Permanent Fund to spend on government. 

I have long argued that to pay for state services and projects, I believe we should cut back on the massive tax breaks we give the oil industry – currently about $1.3 billion per year - and not cut the people’s PFDs. Our oil and gas reserves are finite and each year that passes without fixing our broken tax system, we miss another chance to ensure the people receive their constitutionally mandated maximum benefit from the resources we all collectively own. 

Under the PFD statute enacted in 1982 and adhered to for decades until 2016, last year’s PFD would have been about $3,870. Instead, Alaskans received a PFD of less than 1/3 of the statutory PFD, at $1,114. This year, the statutory formula would yield a PFD of $4,200. In his FY23 budget, the governor has called for a PFD of $2,564 for each qualified Alaskan—and it remains to be seen what the people will receive when the legislature and governor have completed this session’s budget cycle. 

At face value the governor’s proposed budget appears to balance out. However, his plan also replaces state funding with $375 million in federal Covid-19 relief aid. This federal money is a limited funding source that will not be available for use by the state in future years. This means that, in reality—despite using the Permanent Fund earnings and reductions to the statutory PFD—there will be a budget shortfall of at least $375 million in future years.  

This is a time when Alaskans should be receiving their maximum PFD. The pandemic over nearly the last two years has hit Alaska’s most vulnerable families in the worst possible way. From missed work due to mandatory business shutdowns, for COVID infections, or simply due to repeated close contact exposure, and taking care of impacted loved ones, or having to pivot to remote learning for their children, and with supply chain problems causing skyrocketing prices of basic needs like groceries and household goods, as well as market conditions and harsh winter weather causing significant increased costs to energy bills for heating and electricity—the pandemic period has tested Alaskans’ physical and emotional health as well as their pocketbooks. At this unprecedented time especially, I would not recommend cuts to Alaskans’ PFDs this year.  

Governor Dunleavy's proposed funding of $199 million for oil tax cash credits far exceeds the statutorily recommended amount, and should receive close scrutiny. The 2006 statute enabling payment of the cash credits to the oil companies is completely discretionary—meaning they legally need NOT be paid at all. 

Yesterday Governor Dunleavy introduced SB 166 to put a bond proposition on the ballot in November to pay for construction and maintenance projects across the state. While I am looking forward to working to ensuring vital construction projects are funded throughout Alaska, I was troubled to see that Gov. Dunleavy was including $22 million for the U-Med Access/ Bragaw Extension in the bond. This would connect Elmore and Bragaw between UAA and APU and put a major thoroughfare in the middle of residential neighborhoods. This project was abandoned in 2016 when the Municipality of Anchorage withdrew its support for the project after overwhelming opposition from the affected neighborhoods. I cannot support funding for this project and will work to ensure that the bond packet is focused on projects that are actually needed and supported by the communities they effect.

I filed new legislation to address campaign contribution limits in Alaska. Last summer in a two-to-one split panel decision, the Ninth Circuit Court of Appeals struck down Alaska’s contribution limits that have existed for decades and have been overwhelmingly supported by Alaskans. Without new limits placed into law, the wealthy can now possibly make unlimited campaign contributions—drowning out the voices of average Alaskans and tilting the political playing field in their favor. The Senate Democrats urged the governor to seek reconsideration of the Ninth Circuit’s decision by a larger panel of the court; the Dunleavy administration refused to do so. 

The chief judge serving on the panel had issued a very strong dissent, noting that Alaska's existing campaign contribution limits were justified because corruption in Alaska was "significantly more serious a matter than elsewhere" and that Alaska is "highly, if not uniquely, vulnerable to corruption in politics and government." 

While it seems obvious that contribution limits are necessary to combat monied, special interest influence in Alaska politics, I’m disappointed that Governor Dunleavy refused to defend Alaska’s anti-corruption campaign finance laws to the maximum extent of his ability and as mandated by the Alaska Constitution. The legislation that I’ve introduced would reinstate campaign contribution limits and address some of the court’s concerns with Alaska’s statutes, like providing for inflation adjustments over time. I look forward to working with my colleagues on a permanent fix.

Last year I filed Senate Bill 25, the Alaska Online Checkbook Act. The intent of the Online Checkbook Act is to create a free, searchable database that provides Alaskans with easy web access to comprehensive and detailed information on state spending, in the interest of transparency and accountability. This will encourage better understanding of state operations and ultimately help ensure that funding is directed to the state's most important needs. 

Senate Joint Resolution 12 urges Congress to repeal the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) of the Social Security Act. The WEP cuts the Social Security benefits of public employees in Alaska if they switch between work in the public sector and private sector or the military. In 2021, this loss could be as much as $498 per month, or about $6,000 a year. The GPO cuts spousal or widows’ benefits for public employees for no reason other than their work time in the public sector. This cut could amount to as much as 2/3rds the value of the individual’s government pension. 

Because Alaska is one of few states that no longer provides a defined benefit plan and does not offset coverage by Social Security, the WEP and GPO affect more Alaskans per capita than in any other state. Public employees in Alaska are essentially punished for choosing to work in public service. The WEP and GPO negatively impact recruitment and retention of Alaska public employees like firefighters, police officers, and especially teachers. Those who do not want to be subject to these provisions will simply look elsewhere for employment. Punishing individuals for choosing public service runs counter to retaining dedicated Alaskan workers and recruiting the best of the best to and within Alaska. Passage of SJR 12 will demonstrate that the Alaska Legislature opposes arbitrary and unfair cuts to the rightfully earned Social Security benefits of Alaskans. 

My resolution passed through the Senate State Affairs Committee last year and now awaits a hearing in the Finance Committee. Alaskans deserve to retire with dignity. I believe my colleagues in the Legislature agree with me and will help me pass this resolution this year.

Last year I once again filed a resolution to constitutionalize the Permanent Fund Dividend. Senate Joint Resolution 1 would place the question of constitutionalizing the PFD—based on the historic funding formula—to a vote of Alaskans. I was pleased that it gained traction and passed through the Senate State Affairs and the Senate Judiciary Committees. SJR 1 now sits in the Finance Committee. Alaskans are tired of experiencing cuts to their PFD every year since 2016. As I mentioned, while the 2021 PFD was $1,114, under the statute calculation it should have been $3,870. This year, while the legislature and governor have not yet set the PFD amount—by statute, it should be about $4,200. In total, every Alaskan has suffered about $9,700 in reductions to their PFDs over the past six years alone. 

I hope that this is finally the year that Alaskans are given the opportunity to decide whether to enshrine the PFD in the Alaska Constitution to prevent future cuts by the governor and legislature once and for all.

& SB 107 – Comprehensive Oil Tax Reform

Last year I also introduced two bills, one addressing a defect recently discovered with our corporate income tax laws and the other offering a comprehensive fix to our failed oil tax regime. I filed SB 106 to address a latent flaw in Alaska’s corporate income tax structure that allows highly profitable oil and gas entities that are not publicly traded corporations to avoid paying corporate income tax to the state. The problem was discovered with Hilcorp’s purchase of BP Alaska in 2020. Hilcorp is a “closely held corporation” said to be owned by one individual, a Texas billionaire. Under Alaska law, the income of publicly owned “C-corps” is taxed, but as a privately held company, Hilcorp Alaska is not legally subject to Alaska’s corporate income tax. During its time here, BP made significant profits from extraction of Alaska’s oil resources. It has been estimated that through the corporate income tax, BP contributed $25 to $60 million dollars in recent years to Alaska’s general fund to support important state services. 

Hilcorp is expected to achieve similar profit margins to that of BP in Alaska, if not improve on them. Yet Alaska will lose substantial tax revenue due to this loophole in our tax system—money that one Texas billionaire gets to keep for himself. SB 106 would eliminate this egregious “Hilcorp Loophole” by amending the state tax code to require even non C-corp entities making significant profits from Alaska’s oil and gas resources to pay the same tax rate as public C-corps do under the law. 

SB 107 would, among other things, increase revenue to the state from the oil companies by raising their tax rates and eliminating the state’s “per-barrel credit,” which allows companies to keep up to $8 per barrel of oil produced depending on the market price of oil. Since their creation in 2014 through this fiscal year, the per-barrel credit will have cost Alaska $5.8 billion in revenue. In FY23 alone, Alaska will lose $1.25 billion to these credits, and over the next nine years—without a change to the law—we will lose $9.95 billion due to these credits. 

SB 106 and SB 107 were each assigned two committees of referral by the Senate President, to the Senate Resources Committee and the Senate Finance Committee. I submitted bill hearing requests for these bills last year, but unfortunately I haven’t been granted hearings for either one. This is dismaying to me given the fiscal problems Alaskans have endured since our oil tax laws were changed in 2013, but I will keep fighting for these reforms for as long as necessary while serving in the Alaska Legislature.  

As always please give me a call or send me an email with any questions or concerns.