Gov. Mike Dunleavy opposes tax bills and urges creation of joint fiscal plan group after session ends

Yahoo

10-05-2025

May 9—JUNEAU — Gov. Mike Dunleavy wants the Alaska Legislature to form a "joint team" with his administration to forge a long-term fiscal plan for the state.
The Legislature is grappling this year with a substantial deficit and a dire fiscal outlook due to diminished oil revenue. The Senate approved an austere budget this week ahead of final negotiations with the House. Lawmakers have warned the state's fiscal outlook likely will be even more dire next year.
On Friday, Dunleavy also issued an administrative order that seeks to limit state spending. The order would implement a statewide hiring freeze for public sector workers and a freeze on out-of-state travel with some exemptions for public safety and other positions. Dunleavy said that was needed with oil prices falling and tightening fiscal conditions.
However, Dunleavy in a Friday letter made clear that he opposed several tax proposals being considered by lawmakers this year.
In recent years, legislators have discussed countless proposals intended to balance the state's budget for the long term. Measures have been considered to change the state's Permanent Fund dividend formula; institute a tighter legislative spending cap; and impose new taxes to raise revenue. But virtually all of those measures have been rejected by the Legislature.
Members of the bipartisan Senate majority introduced a new dividend formula bill that would pay a $1,400 PFD this year, but it has failed to advance. The Senate this year has supported a $1,000 PFD, but some senators have said they hope Alaska's finances improve to pay the larger dividend figure in the future.
Senate majority members have also favored new revenue-raising measures to balance the budget, but the House has shown little appetite for bills that would hike oil taxes. The Legislature did broadly approve Senate Bill 113 this week, which would raise revenue by taxing out-of-state businesses online.
Dunleavy on Wednesday sent a letter to legislative leaders, saying that he opposed "standalone tax measures." He said that a "tax-and-spend" approach would not lead to a long-term, sustainable fiscal plan for Alaska.
"As I have consistently stated since my first term, a truly durable fiscal plan must include revenues, but it also requires clear guardrails: spending limits, statutory and regulatory reviews, and policies that make Alaska the most competitive state in the nation for investment and new business growth," Dunleavy said in his Wednesday letter.
Dunleavy formally requested that legislators establish "a joint team" with his administration after the legislative session ends later in May to "develop a comprehensive, sustainable long-term fiscal plan that ensures stability and fosters economic growth."
Kodiak Republican Senate President Gary Stevens on Friday said Dunleavy's proposal had not been discussed yet by the bipartisan Senate majority caucus. But Stevens said it was "a reasonable idea." He compared it to a legislative task force that worked last year to make recommendations to aid the ailing Alaska seafood industry.
However, Stevens said he was "sorry" to hear Dunleavy opposed tax bills being considered by lawmakers this year. Those revenue-raising measures include:
—SB 113, which has been estimated to raise between $25 million and $65 million per year for the state treasury. The revenue raised from that bill has been earmarked to fund reading incentive grants and career and technical education. The Legislature approved the measure this week on a combined 42-18 vote. But Dunleavy has opposed it, telling school superintendents that he was against tying revenue raised from that bill to education funding.
—Senate Bill 92 would impose the same corporate income tax rate on privately held oil companies as those paid by public corporations. The tax would apply to Hilcorp, which operates the Prudhoe Bay oil field and produces the vast majority of natural gas from Cook Inlet. The Senate is set to hold a final vote on that measure next week, but lawmakers say it could face long odds of being approved by the House. The measure is estimated to raise up to $150 million per year.
—Senate Bill 112 would reduce tax credits available for oil companies from $8 to $5 per barrel. Senators say they don't expect the measure will be approved by the Legislature this year. The tax credit change has been estimated to raise between $100 million and $300 million annually.
Anchorage Republican Rep. Mia Costello, the House minority leader, voted for the tax on Outside businesses that operate online. Costello said that she would have "a conversation" with Dunleavy if he chose to veto SB 113. But she did not say Friday if she would vote to override.
Costello said that prior efforts to forge a long-term fiscal plan have failed because "not everybody likes" the various proposals being offered. She applauded the governor for trying again, and said that "the discussion is very important to have."
Lawmakers have said that Dunleavy has largely been absent from fiscal policy debates and discussions about new revenue measures. In 2021, he announced support for a new dividend formula, but he has since kept proposing dividends following the 1982 formula in state statute. In 2023, Dunleavy said that he would introduce a statewide sales tax proposal, but he never did.
In a brief Friday interview, House Speaker Bryce Edgmon, a Dillingham independent, declined to comment on Dunleavy's opposition to revenue-raising bills. He said of Dunleavy's plan for a joint fiscal policy team that, "We could have used it a long time ago."
Lawmakers have previously attempted to forge a durable fiscal plan during Dunleavy's tenure as governor.
In 2021, a bipartisan and bicameral working group devised a framework intended to make the state's finances sustainable for the long-term. The policies were pitched as a package that could attract support across the political spectrum, but none have been approved by the Legislature.
Wasilla GOP Sen. Mike Shower, the Senate minority leader, said that the state's gloomy fiscal outlook means the Legislature needs to act soon. He said that "if we don't do something, this problem only gets worse for us."
Shower was a member of the 2021 fiscal policy working group. He welcomed Dunleavy's request for another attempt to craft a bipartisan solution. But he was opposed to simply studying the fiscal problems facing the state.
"We study and study and study and never do anything. And I think that's a frustration for everybody, probably in this building, including the governor on down. I am, frankly, tired of studying and not acting," he said.