United States: More on the fiscal crisis in Alaska

United States: More on the fiscal crisis in Alaska

It seems that the Alaskan tax policy is being too generous with oil companies. On top of the fact that there is no income or value-added tax (VAT) in Alaska, every year oil companies operating in Alaska are granted wealthy tax credits, this year amounting to $1.2 billion. That is roughly the amount of the state’s deficit, for the reduction of which governor Mike Dunleavy now has a plan to slash $440 million, as reported before.

Under the referred plan, features a 40% cut in the University of Alaska funding, a $58 million reduction to the state’s Medicaid program, and considerable slashes to several social security programs. That or the Alaska Permanent Fund (APF) gets cut in half. The professed need to perform these draconian cuts flies in the face of the inexistent tax policy in Alaska, a clear ultra-liberal state of affairs which mainly benefits oil companies operating in the State.

State Senator Bill Wielechowski, a long-time APF defender has recently introduced a bill aimed to eliminating the unjustified tax credits to oil companies, but hasn’t got much support until now. One reason for this is that, traditionally, Alaskans are pretty averse to taxation, no matter who or what is targeted by it. However, scrapping these enormous tax cuts and introducing income and consumption taxes could be, in the long term, the only viable road to provide middle-class and lower income Alaskans the social security spending they need, and the APF unconditional payment they deserve.

More information at:

Tim Higginbotham, “Don’t Blame the Alaska Permanent Fund Dividend”, People’s Policy Project, July 18th 2019

André Coelho, “United States: Alaska’s desperate governor considers massive cuts to university budget to keep Dividend”, Basic Income News, July 9th 2019

United States: Alaska’s desperate governor considers massive cuts to university budget to keep Dividend

United States: Alaska’s desperate governor considers massive cuts to university budget to keep Dividend

Mike Dunleavy, sitting on top of an oversized Alaska Permanent Fund Dividend check. Picture credit to: Anchorage Daily News.

Basic income yes, but not at any cost. The alarm comes from Alaska, where governor Mike Dunleavy has announced cutting his 2020 state budget by as much as $410 million, one-third of which will fall upon the University of Alaska. To the University, that represents 41 percent of its own annual budget, which means that, if applied, these cuts would render the state’s university unrecognizable. Dunleavy calls this move a “policy choice” linked to his professed promise to increase the Permanent Fund dividend Alaskans benefit each year.

Arguably, consequences for the Alaskan economy, and particularly for the state university, would be devastating.

The University President, James R. Johnsen, has stated that this “will strike an institutional and reputational blow from which we may likely never recover.” And the implications for the wider Alaskan economy and even throughout the world may be far reaching since research has shown that investing in universities has considerable positive effects on the economy, and also because the University of Alaska is a core centre of research for Arctic issues. This is particularly important these days, in the middle of a climate crisis).

These budget cuts from Dunleavy’s Office are, however, rooted in a deeper rationale and tradition. That is because politics in Alaska of late have been largely tied to oil money, and the collection of taxes has been scarce, or nonexistent.

Michael Howard, professor at the University of Maine and specialist in basic income related policies, has stated on Facebook:

“A better framing of the problem in Alaska would include Alaska’s lack of an income tax, reliance on oil revenue to fund state government, and the steady decline of the oil revenue. Alaskans don’t have to abandon the dividend in order to fund the University. They just need to pay income taxes like people in most other [US] states. However, this story does vividly illustrate that universal cash payments in practice always need to be evaluated in comparison to the competing policies for government spending and the budget constraints. Slashing the university budget by 41% ought not to be an option.”

More information at:

Cas Mudde, “Alaska’s governor is trying to destroy its universities. The state may never recover”, The Guardian, July 6th 2019