ANCHORAGE – Today, the Alaska Independent Democratic Coalition released a memo from the Alaska Department of Revenue showing the Republican-proposed budget spends $600 million more on oil tax credits than provided for under Alaska’s statutory cap on credit payments.
The memo states in part that “as part of ACES, the Legislature added language to indicate an intent that the amount we’d spend wouldn’t be too large, compared to our actual tax revenues.” The State’s Tax Division calculates that the tax credit cap is $91 million at current oil prices.
“Republican leaders propose to spend $700 million in this year’s budget. That’s $609 million more than the oil companies are entitled to,” said House Finance Committee member Rep. Les Gara (D-Anchorage). “Placing a reasonable payment cap on oil company tax credits would save the state money in tough financial times and provide room to negotiate a bi-partisan, revenue-neutral budget with Republicans. However, paying them $600 million more than they are entitled to treats oil companies better than children and seniors.”
Rep. Gara was apprised of this law when researching areas of overspending by the State.
“The House and Senate Majorities should join us in working towards a bi-partisan budget,” said Alaska Independent Democratic Coalition Leader Rep. Chris Tuck (D-Anchorage). “Instead, some Republican leaders are threatening to jeopardize future Permanent Fund dividends and give oil companies more than the law requires.”
The intent of the law capping the amount of oil tax credits that can be paid in a fiscal year is to protect the State of Alaska during times of low oil prices.
“If we reduce tax credits by $200 million we can reverse damaging cuts to education, assist our seniors in need, and avoid increases to local property taxes,” said House Finance Committee member Rep. David Guttenberg (D-Fairbanks). “We can cut the budget and protect and educate Alaskans at the same time.”
Cutting tax credit payments would have little impact on oil companies. The credits are paid as qualified applications come in. A $200 million reduction to the estimated $700 million in credits would likely fund the credits for the first nine or ten months of fiscal year 2016. Companies that file after that would have to wait perhaps two or three months for their payment at the beginning of the next fiscal year.
“Our Coalition supports limiting the oil company tax credit payments until this state has its fiscal house in order,” said Rep. Tuck. “We should never give oil companies $600 million more than promised by the law and children $48 million less than promised by the law. Those priorities are backwards.”
The memo from the Director of the Tax Division within the Alaska Department of Revenue is attached.