Stoel Rives tax partner Jonathan Iversen contributed an article to State Tax Notes titled “An Unclear Future for Alaska Taxpayers” (PDF), published October 4, 2021. In his latest column, Iversen provides an update on the status of the Alaska Permanent Fund and on actions taken during the regular legislative session and three special sessions to attempt to clarify the many questions that exist surrounding Alaska’s fiscal structure.
The Permanent Fund was created in 1976 through an amendment to the Alaska constitution as a mechanism to ensure that a portion — at least 25% — of the state’s oil wealth would be saved to benefit current and future generations of Alaska citizens. Much of the fund cannot be spent by the Legislature without approval from the voters. Total Permanent Fund returns for 2021 reached 30%, raising the fund’s value to $81 billion from approximately $65 billion in 2020.
Activity in the regular and special legislative sessions revolved in part around questions of whether and how much of fund earnings should be preserved versus being spent for purposes such as balancing the budget or paying oil and gas companies that earned rebatable oil and gas production tax credits. The state has not purchased any portion of the credits, which were offered as an incentive for companies to invest in Alaska oil and gas exploration, development, and production, for more than two years. The operating budget bill introduced by Gov. Mike Dunleavy (R) included a proposed appropriation of $60 million for tax credit purchases in fiscal 2022.
The regular and special sessions also saw the introduction of several tax bills, none of which passed. During the second special session, the Legislature was able pass a budget large enough to avoid a government shutdown, though it did not provide appropriations for several items, among them payment for the outstanding tax credits. H.B. 3003, the only measure passed during the third special session, earmarked $54 million as the payment for rebatable tax credits for fiscal 2022.
Iversen concludes: “The governor called a fourth special session just hours after the Legislature — set to convene on October 1 — and the subject broadly includes any acts related to a fiscal plan. Alaska taxpayers are rightfully on edge about potential tax increases, while holders of rebatable tax credits anxiously await the anticipated payment and hope for an additional appropriation. What lies ahead is unclear, but we do know that debates about taxes and payments for credits will continue. My next article will include an update on the Legislature’s progress (or lack thereof), perhaps with some reflection that is a little less muddy.”