In divided Alaska, the choice is between paying for government or giving residents bigger oil wealth check

Source: Paola Banchero, The Conversation, July 15, 2019

The Alaska legislature was unable to get enough support to block the cuts through a veto override late last week.

The budget cuts will be immediate, affecting most Alaskans. ….

….. How did Alaska, one of the country’s richest states with a $65 billion savings account fueled by oil royalties and leasing revenues, get into this position?

The troubles have been a long time coming.

As the state prepared to reap the benefits of its oil reserves in the 1970s as the trans-Alaska oil pipeline neared completion, voters approved in 1976 an amendment to the Alaska Constitution establishing the Alaska Permanent Fund.

The idea was to save a slice of the current oil windfall in a special fund for future generations when the oil ran out. Meanwhile, the rest of the massive oil royalties – $391.5 million in 1976, more than four times the amount collected the previous year – flowed into state coffers. That meant less need to rely on the traditional way government raises money: taxes. So the legislature repealed a state income tax and the Alaska school tax in 1980.

Now, most Alaska communities have no sales tax and property taxes are low. The total state and local tax burden on Alaskans is the lowest in the country.

In addition to repealing state taxes, Alaska legislators in 1980 approved a payout from mineral royalties to state residents called the Alaska Permanent Fund Dividend, or “PFD.” ….