Fairbanks: Mining in our Backyard, BSA Increase, Revenue and More!

March 28, 2023

Dear Neighbors,

Fairbanks looks like it will experience a bit more winter weather this week. Here in Juneau, Spring seems to be in full swing. Outside of the Capitol some of the crocuses are blooming. Seeing a pop of color means session is even closer to a rapid end! In this edition you will learn about updates on potential bills to bring revenue to state coffers, information on mining in the Interior, an update on school classroom funding and the Downtown Polaris Building demolition update!

Crocuses outside the Capitol

Mining in Our Backyard? Pros and Cons.

The League of Women Voters of the Tanana Valley, the Fairbanks Daily News-Miner and KUAC will be hosting a forum entitled ‘Mining in Our Backyard’ with speakers representing the industry, the state and community organizers. It will be on Thursday, March 30 from 7-9pm at the Schaible Auditorium on the University of Alaska Fairbanks Campus and live broadcast on KUAC-FM 89.9.

Funding the Future of Alaska, Education Funding Increased!

The House Education Committee advanced House Bill 65 Wednesday to increase the per-student education funding by a total of $800. The base amount the state pays schools per student would rise from $5,930 to $6,730. While this is a great step in the right direction, this is still less than what public school advocates have urged, and less than what us in the Senate proposed-- $1,000 this year and $348 next year.

I would like to extend a big thank you to everyone who testified in the house for the BSA increase, funding these students is funding our future. I sincerely hope that the House Finance Committee amends the bill and increases the dollar amount to properly take care of our students and future. The hearing can be watched here.

Revenue Forecast? Sunny or Stormy?

The Spring 2023 Revenue Forecast was released last week with a large thump. With lower oil prices, unpredictability in the stock market and global uncertainty, it is important to approach the fiscal year budget with caution so that Alaskans can have a stable and predictable path forward and a balanced budget. According to the report, oil prices, as well as production are going to decline in Fiscal Year (FY) 2023 and 2024. Alongside that, investments like the PFD are going to be less than originally believed. Those two factors and the record inflation our state is facing are all leading to the grim predictions we saw last week.

While there were some technical difficulties with Governor Dunleavy’s livestream, part of it can be found here.

Revenues to Pay for Police, Public Education and Plowing

A picture of Sen. Kawasaki next to the Trans-Alaska Pipeline

A new oil tax revenue bill, Senate Bill 114, was introduced by the Senate Rules Committee and aims to fix several flaws in our oil tax law. Current law gives oil companies up to an $8 tax credit per barrel of oil produced. This is projected to cost Alaska over $1.2 billion per year for the next decade. This is the equivalent of every Alaskan giving the oil industry nearly $1,800 per year from their PFD. The promise from the industry was that these credits would lead to more oil investment, more oil revenue, more jobs, and a growing PFD. Instead, capital investment has dropped by over 50% across the North Slope and from $877 million in Prudhoe Bay in 2014 to $220 million in 2022. And for that $220 million in Prudhoe Bay investment, the State gave over $700 million in tax credits.

To make matters worse, for the first time in state history - and due to a loophole in our corporate income tax laws - we now have large producers on the North Slope that pay zero corporate income taxes. This loophole cost the state over $100 million this year alone.

Whereas oil revenue historically has funded roughly 85% of Alaska's budget, because of tax cuts and credits and loopholes, oil revenue now funds between 15% and 30%. How has that deficit been made up? By cutting the PFD to fund government. Except even that is not enough now, as we are projected to have a $400 million deficit next year even after cutting the PFD to a 50-50 dividend. And that's before needed increases in education funding and deferred maintenance funding.

As for the promises of increased oil jobs - jobs in the oil industry have plummeted from 14,600 in 2014 to 6,700 last year. Alaska can no longer afford these extravagant tax credits that are not generating any additional investment or jobs and instead are draining our savings. SB114 cuts the oil tax credits from $8 to $5 per barrel. This will save the state roughly $450 million per year. To those who say this is a big increase, I would remind them that back in 2013 the Senate version of the oil tax cut bill had these tax credits limited to $5 -- and the oil industry was fine with it then. It was increased in the House at the last minute and never modeled at current oil prices.

Another Way to Pay for State Government?

Also this week, by Republican colleague Rep. Ben Carpenter introduced a bill that would create a 2% sales tax statewide with very few exemptions as a starting point to discuss the need for a broader fiscal plan. My colleague and many others see the considerable need to find ways to cut the deficit, balance the budget and keep Alaskan priorities well-funded and the equation must include revenue generation through taxes or fees.

Alaska remains one of only five states without a statewide sales tax and the only one that does not also have a personal income tax. One problem with a sales tax is that it would be regressive by nature-meaning the people of lesser means would need to pay a disproportionate amount of income for basics of living like food or clothing. I appreciate the work of my colleague with whom I served with on the 2021 Fiscal Policy Work Group to devise a sustainable, durable fiscal plan for Alaska-despite my dislike of a sales tax. I look forward to more discussions about how to balance the budget and which levers to use which will get the support of the public and fellow lawmakers. You could read the news on the Anchorage Daily News HERE.

Polaris Soon to Be ‘History!’

Senator Kawasaki in front of the Polaris Hotel

The Polaris Hotel was built in 1952 with an annex constructed in 1978 in downtown Fairbanks. The apartment building was later turned into a hotel until it closed. In 2001, 800,000 gallons of water flooded the basement and the building has been sitting, effectively untouched since then.

Many Fairbanksan have reached out in the hopes of hearing news about the decaying building. We finally have some news! On Wednesday, April 12 at 1:00pm there will be a commemoration and demolition event for the Polaris building. I am very excited to see what happens to the area next.

My Staff and I are Here for You

As always, I and my staff are are still working for you. Feel free to contact my office and we will assist you with issues important to you and your family.

Working Hard for Fairbanks Families,