Alaska House Passes Final Piece of a Comprehensive Fiscal Plan to Protect the Alaska Economy
House Bill 115 Enacts a “School Tax” to Fund a Great Public Education System
Juneau – Today, the Alaska House of Representatives passed the “Education Funding Act” to set up a stable revenue stream to help pay for Alaska’s constitutionally mandated public education system. House Bill 115 is the final piece of the Alaska House Majority Coalition’s comprehensive fiscal plan to pass the Alaska House of Representatives.
“The failure to pass legislation to address Alaska’s mounting fiscal challenges is the reason why we have decided to put aside our differences and join together to change the direction of the Alaska House,” said Speaker of the House Rep. Bryce Edgmon (D-Dillingham). “This resolve has allowed our members to cast floor votes on fiscal plan measures for the first time in years. We have passed a responsible budget that reduced spending by $82 million, we have passed a bill allowing structured use of the earnings of the Alaska Permanent Fund, we have passed oil tax credit and subsidy reform, and now we have passed a school tax. By passing all the components of a comprehensive fiscal plan, we have kept our word to put the future of Alaska first.”
HB 115 will raise an estimated $687 million for the Public Education Fund once fully implemented, including $80 million from nonresidents who come to Alaska to earn a living but don’t contribute to essential state services. The bill includes a $4,000 personal exemption that applies to every person in a household. Permanent Fund Dividends are also exempt from taxation, and the bill allows Alaskans to choose to apply some or all of their PFD to pay the school tax.
“Passing HB 115 means that legislation representing all four pillars of our comprehensive fiscal plan has passed the House, which sets up the normal end of session negotiations,” said House Finance Committee Co-chair Rep. Paul Seaton (R-Homer). “Our economy is in a recession and every expert to come forward has advocated for a comprehensive response that protects Alaska from the volatility of oil prices. We must put in place a fiscal plan that uses more than just one revenue source. Combining the appropriate use of Permanent Fund earnings with this modest school tax spreads the burden equally across the state.”
The members of the Alaska House Majority Coalition have labeled public education as a top priority and the budget that passed the House left K-12 funding unchanged from the current fiscal year. However, the version of the budget that passed the Senate includes a $69.3 million dollar cut to the Base Student Allocation, which equals a loss to school districts of $265 per student. This directly impacts classroom instruction and will result in the loss of 700 hundred teachers across the state. The State Senate also approved a cut to the University of Alaska that has been labeled devastating by University officials, who would be forced to respond to the Senate’s proposal by suspending and discontinuing academic programs and laying off professors and support staff.
“Many lawmakers advocate for cutting public education in these tough fiscal times. I argue that they have it backwards—we need to ensure our children’s education. Without new revenue we will have worse educational outcomes, which is bad for kids and bad for our economy,” said House Health and Social Services Committee Chair Rep. Ivy Spohnholz (D-Anchorage). “Every Alaskan child is every Alaskan’s responsibility—so says our state’s constitution. I cast a yes vote today because it is the right choice for our shared future and for the kind of Alaska that does right by our children.”
The school tax in HB 115 is a bracketed income tax based on federal adjusted gross income. The tax would work similar to the federal income tax with employers’ withholding tax payments and the ability for individuals to file tax returns electronically.
“Public education is our top priority, which is why we oppose the State Senate’s incomplete fiscal plan. The school tax in HB 115 is a direct alternative to a proposal from the Senate Majority to cut $750 million from the annual state budget over the next three years. Satisfying those cuts would require well over half a billion dollars beyond the already devastating cuts of $69 million from K-12 education and $22 million from the University proposed by the Senate this year,” said House Education Committee Chair Rep. Harriet Drummond (D-Anchorage). “Our commitment to public education is why we passed this school tax. Without this tax, education will continue to be targeted by lawmakers to fill a budget gap our children and young adults played no part in creating. Schools are not bloated government, they are the foundation of a great state and deserve to be supported as such.”
HB 115 passed the Alaska House of Representatives today by a vote of 22-17. The bill will be sent to the Alaska State Senate for consideration after a reconsideration vote by the House.