Alaska Beacon

Leading members of the Alaska House of Representatives said Friday that Gov. Mike Dunleavy’s ambitious long-term state fiscal plan has almost no support among legislators and is almost certainly dead on arrival.

House leaders spoke with reporters Friday morning, a day after members of the House Finance Committee heard two hours of public testimony on the governor’s proposed statewide sales tax, the cornerstone of his multi-part proposal to bring state expenses and revenue into line over the next five years.

Every Alaskan who testified — almost 30 in total — was against the tax.

“This is just pure speculation on my part, but what you hear folks in the hall say is, if there’s a vote today on the sales tax, it could be a zero to 60 vote,” said Rep. Neal Foster, D-Nome and co-chair of the House Finance Committee.

House Minority Leader DeLena Johnson, R-Palmer, said there might be a handful of legislators who would still support the governor’s plan, but it’s pretty clear that it lacks the support it needs to become law.

“From the testimony that was taken last night in House Finance — when everyone who called in spoke in opposition — it certainly makes it hard to think there’s a lot of people that aren’t very cautious about saying they’re for the governor’s plan,” she said.

The governor’s plan calls for a seasonal statewide sales tax, changes to the state’s oil and corporate taxes, a constitutionally guaranteed Permanent Fund dividend formula, changes to the structure of the Alaska Permanent Fund and a tighter spending cap in state law.

Those changes are being proposed because oil and investment revenue can’t keep up with demand for services and dividends, and lawmakers are unwilling to cut services any more than they already have.

Since 2015, legislators and governors have cut state agencies’ budgets by 16.6%, after accounting for inflation. The state’s capital budget, which pays for new construction and maintenance, has been cut by more than 80%.

Every year since 2016, the Permanent Fund dividend has been cut below the amount called for in state law.

With so much deferred maintenance, public schools — particularly in rural Alaska — are decaying and literally collapsing. The state is now facing a lawsuit alleging that school funding is so low that it violates the Alaska Constitution.

Dunleavy’s proposal would be a way to stanch the fiscal bleeding. The new taxes are intended to be temporary because the Dunleavy administration expects North Slope oil production to rise, boosting state revenue, and it expects that a proposed trans-Alaska natural gas pipeline will be built and generate more money for the state.

Even before this week’s presentations and public testimony, many legislators were skeptical of the plan, and saw the new taxes as merely a way to pay a larger Permanent Fund dividend.

“I’m a logic person,” said Senate Minority Leader Mike Cronk, R-Tok, on Jan. 28, one day after the governor debuted his plan.“We’re going to tax those people that are productive so everybody gets a check? That don’t work for me. … That’s just not logical to me,” he said.

Lawmakers analyzed the sales tax first, in a series of hearings this week, but because it received such a negative reaction in public testimony, legislators are now wondering if it’s worth considering any other part of the governor’s fiscal plan, given that they are all viewed as one package.

Foster said it doesn’t look like the governor’s proposal could be amended and improved enough to get sufficient support in the Capitol.

“Sometimes, you could say, ‘We’re kind of close on things, and there’s a lot of great areas that we can work on,’ but this one just seems to be — folks are just really, really unhappy,” he said.

There are costs to inaction as well. The Institute of Social and Economic Research recently estimated that the state has missed out on 2-3% of its gross domestic product over the past 10 years because of the lack of a fiscal plan. Without a long-term structure, legislators have gotten dragged into annual debates over the size of the Permanent Fund dividend, which has prevented them from discussing other pressing issues.

Some lawmakers have concerns beyond the sales tax. Johnson thinks the governor’s proposal for a revised fiscal cap is inadequate. Because it would be in state law, rather than in the constitution, future legislators could ignore it just as they do the current Permanent Fund dividend formula.

That’s why she calls it a “spending beanie,” instead of a spending cap.

“I personally think it’s rather small, and it would be easily overcome,” she said. “And for that reason, I think of it as a spending beanie.”

Speaker of the House Bryce Edgmon, I-Dillingham, said he’s skeptical of this proposal’s chances after years of other attempts to enact a fiscal plan.

“I won’t regale you with tales from years past, but on the Finance Committee, we have spent weeks and weeks going through a lot of this stuff, and it never got a compromise when it came to the floor. So that’s the issue at hand here,” he said.

Rep. Calvin Schrage, I-Anchorage and another Finance co-chair, said that after hearing Thursday’s public testimony, he’s not sure the governor’s proposal can be successful either. “There is so much education that still needs to take place and studying that needs to be done for us to be able to move it forward in a way that would get broad support,” he said.

“I think folks are just kind of waiting until next year before we, you know, really take a serious stab at some of those things, like the income tax,” Foster said.

“I have higher hopes for next year than I do this year. You know, a new executive leadership branch and the leadership there,” he said.

Later in the day, in a one-on-one interview with the Alaska Beacon, Dunleavy said lawmakers are going to be disappointed if they think that negotiating with a new governor will be any easier.

Dunleavy is term-limited and leaves office in December.

“A governor who goes in there and puts out a plan like this in their first or second year, they’re going to get the same thing we’re getting now,” Dunleavy said. “And that doesn’t work.”

When an Alaskan flies to Seattle and looks out the airplane window, they’ll see construction cranes dotting the skyline, Dunleavy said.

“Washington is a state that does not have an income tax. It’s a sales tax. Washington’s economy is actually pretty good,” he said.

He referred to a fiscal analysis performed by the Institute of Social and Economic Research at the University of Alaska Anchorage, which found that a seasonal sales tax with large exemptions would fall more on nonresidents than an income tax would.

“The sales tax is the best thing we could come up with,” he said, referring to that analysis.

Reducing the PFD to balance the budget — the Legislature’s preferred policy since 2016 — is the most regressive option, harming poor Alaskans more than rich ones, ISER found.

“Taking the PFD is the worst thing you can do for the average person,” Dunleavy said.

He appeared frustrated by legislators’ actions and the lack of an alternative plan coming from the House or Senate.

“I’ve never seen a fiscal plan introduced,” Dunleavy said. “The closest I’ve ever seen was the first fiscal working group just a couple years ago.”

In 2017, the Alaska House of Representatives approved a state income tax as part of a three-part fiscal plan, but it did not become law.

The state Senate, including Dunleavy, voted down the income tax, killing the House’s plan.

“A tax is not a fiscal plan,” Dunleavy said when asked about that history.

He said that with 120 days in the legislative session, lawmakers have time to work on the issue and figure things out.

“Here you go: My last year, there’s no political skin in the game. I’m not going to lose anything because I’m not running for anything. And here’s an opportunity for these guys, and out of the gate, they said, ‘There’s not enough time.’ So if there’s not enough time for this,” Dunleavy said, “What are they spending their time on?”

The number of out-of-state workers in Alaska is continuing to rise and is near an all-time high, according to a new report published this week by the Alaska Department of Labor and Workforce Development.

In 2024, almost 23% of non-federal jobs in Alaska were held by someone who did not live in the state. Nonresidents earned roughly $3.8 billion, or about 17% of every dollar earned from a non-federal job.

In some industries, the proportion of nonresident workers was much higher:

Among oil and gas workers, 40.5% were nonresidents. Among miners, nonresidents made up 44.2% of all workers, and nonresidents averaged higher wages than residents did.

The state has been collecting nonresident worker data since 1990, and the new figures are the second-highest on record, behind only 1992, which used a different job classification system. That year, 23.7% of Alaska workers were nonresidents.

The proportion of nonresident workers has been rising steadily since the COVID-19 pandemic emergency layoffs of 2020.

Rob Krieger, an economist with the Department of Labor, wrote about the new report in an article for this month’s Alaska Trends magazine.

He noted that the rise comes amid a decline in the number of Alaskans who are between 18 and 64 years old, what economists call “prime working age.”

From 2013 to 2024, the number of Alaskans in that age range has declined by about 34,000 people, or 7%.

During that stretch, more people have moved out of the state than have moved in, and the state’s average age has risen steadily, leading to more deaths and fewer births.

“It’s pretty clear that is kind of what’s contributing to what we’re seeing with employers having to rely heavily on nonresidents,” he said.

“Every industry now is starting to lean more heavily on nonresidents, including ones that have historically not. Even things like state government and local government, we’re starting to see more nonresidents,” Krieger said.

In most industries, nonresidents earned less than residents did because nonresidents tended to hold seasonal jobs.

Across the state, nonresidents averaged $16,302 in wages for any given quarter of the year. Residents averaged $16,531, indicating that nonresidents and residents were generally paid about the same.

Gunnar Schultz, a Department of Labor analyst who compiled this year’s report, said the numbers are based on unemployment insurance reports filed by employers with the state. Alaska requires employers and employees to pay into the state’s unemployment insurance fund.

Those numbers are then contrasted with Permanent Fund dividend applications.

“Did you apply for a 2024 PFD or 2025 PFD? If you applied for neither, you’re a nonresident,” he said.

Alaska had almost 15,500 federal workers in 2024; those aren’t included in the report, nor are members of the military and self-employed Alaskans.

That last category includes many commercial fishermen.

The report separately analyzed those jobs, and based on permit data and other information, “nonresidents were an estimated 49 percent of the harvesting workforce, which includes permit holders and their crew, and nonresidents took in 57 percent of gross harvesting earnings.”

Two of Alaska’s largest news organizations and two top reporters did not commit defamation when they described a former state employee’s statements about rape, a state judge ruled on Tuesday in Anchorage.

Jeremy Cubas, a former aide to Gov. Mike Dunleavy, sued Alaska Public Media, the Anchorage Daily News, Nat Herz and Curtis Gilbert last year. American Public Media, a national organization, was also named in the suit.

Cubas resigned in 2023, shortly before the publication of an article that described comments he made in two podcast episodes. He filed suit almost two years later, seeking more than $5 million in damages and lost wages.

Cubas specifically challenged two parts of the article — a paraphrase that said Cubas “said it’s fine for a man to force himself on his wife” and the statement that Cubas “made comments about rape.”

In a 22-page order, Judge Christina Rankin said the second statement “is an accurate quote of Cubas’ own statement” in the podcast.

“Defendants used accurate, direct quotes from Cubas in the article. Therefore, Cubas can prove no set of facts that Statement Two is unfairly abridged, mischaracterized, distorted, or littered with slight inaccuracies,” Rankin said.

For the first statement, which was a paraphrase rather than a direct quote, Rankin concluded that it is “a fair abridgement” of Cubas’ words.

Cubas had argued that his belief that it is impossible to rape one’s wife — something he said during the two podcast episodes — is not the same as saying it is fine to “force yourself” on one’s wife.

Cubas’ core argument, Rankin concluded, was that the wording of the paraphrase was such that it implied Cubas believed it was OK for a spouse to “violently rape one’s own wife.”

“However, it is the alleged defamatory statement itself that the Court needs to review for truth, not the plaintiff’s inflamed version of the statements,” Rankin wrote.

She concluded that given the context given in the article, a reasonable reader would not share Cubas’ perceived implication but would instead “believe what defendants assert he said.”

Cubas did not return a voicemail message seeking comment on Wednesday.

Because Rankin concluded that the article is accurate, she did not take up Cubas’ other arguments, which included the idea that Cubas was not a public figure and that the reporters had malice against him.

“The court recognizes that this was good, solid journalism,” said Ed Ulman, president and CEO of Alaska Public Media. “The opinion lays things out thoroughly, but in the end it was simple. Truth is a defense in a libel case.”

Former state legislator Jonathan Kreiss-Tomkins, a Democrat from Sitka, is running for governor, he said Tuesday.

Kreiss-Tomkins, frequently known as “JKT,” served in the Alaska House of Representatives between 2013 and 2023. He becomes the 16th candidate and third Democrat to enter this year’s gubernatorial election.

Incumbent Gov. Mike Dunleavy is term-limited and unable to run for a third term.

In Alaska, the top four vote-getters, regardless of political party, advance from the August primary to the November general election. In November, Alaskans use ranked-choice voting to name their preferences.

Kreiss-Tomkins said he’s running because Alaska has big problems and he’s interested in solving them.

“I really enjoy working with people from diverse backgrounds and different viewpoints and perspectives to try to forge compromise and get things done,” he said.

While in the Legislature, Kreiss-Tomkins was a member of the bipartisan, bicameral fiscal working group that in 2021 drafted a plan intended to bring the state’s finances in line over the long term.

Though that plan was never enacted, its components resemble the fiscal plan introduced this year by Gov. Mike Dunleavy.

“We’re in a perpetual budget uncertainty,” Kreiss-Tomkins said, identifying the state’s fiscal situation as his No. 1 issue.

Since oil prices plunged in 2015, legislators and governors have struggled to balance Alaska’s budget on an annual basis, occasionally bringing the state to the brink of a government shutdown.

“We’re living and dying by the price of oil, and we have a structural budget deficit, so the state’s finances are not especially in order, and that is, I think, probably the highest-order problem,” Kreiss-Tomkins said.

He said Dunleavy hasn’t been able to work across party lines and hasn’t been successful with the Legislature. Kreiss-Tomkins contrasted that with his own experience as a member of a Democratic-independent-Republican coalition majority in the state House.

“I feel like we need that same spirit in the executive branch, and if we could have a governor and an executive with that approach and mindset … there’s a tremendous amount of good that we can get done for Alaska,” he said.

Kreiss-Tomkins said the campaign season will show how he differs from the other two Democrats in the race: former state Sen. Tom Begich, and current state Sen. Matt Claman.

When it comes to the number of other candidates in the race, Kreiss-Tomkins said it’s not a bad thing for Alaskans to have so many choices.

“Seeing so many people willing to run sort of reflects the importance of the election and the gravity of the problems facing Alaska,” he said, adding that he expects “some winnowing of the field as time goes on.”

Candidates for Governor

• Former state Sen. Tom Begich (Democrat)
• Former state Sen. Click Bishop (Republican)
• Former Anchorage Mayor Dave Bronson (Republican) and Lt. Gov. candidate Josh Church (Republican)
• Former state revenue commissioner Adam Crum (Republican)
• Current state Sen. Matt Claman (Democrat)
• Lt. Gov. Nancy Dahlstrom (Republican)
• Matanuska-Susitna Borough Mayor Edna DeVries (Republican)
• Kasilof resident Jessica Faircloth
• Anchorage podiatrist and state medical board member Matt Heilala
• Former state Sen. Shelley Hughes (Republican)
• Former state Rep. Jonathan Kreiss-Tomkins (Democrat)
• Author Hank Kroll (Registered Republican) with Lt. Gov. candidate Tommy Nicholson (Undeclared)
• Angoon resident and former teacher James William Parkin IV (Republican)
• Former Attorney General Treg Taylor (Republican)
• Palmer resident Bruce Walden (Republican)
• Businesswoman Bernadette Wilson (Republican) with Lt. Gov. candidate Mike Shower (Republican)

Alaska’s state ferry system is at risk of a partial or total shutdown this summer due to the failure of the federal government to issue a key annual grant.

“Currently right now, we have a shortfall in our budget,” said Dom Pannone, director of program administration and management for the Alaska Department of Transportation and Public Facilities, to members of the Senate Finance Committee during a Monday morning hearing.

Money from the Federal Transit Administration’s rural ferry program pays for almost half of the Alaska Marine Highway System’s operating expenses, but the administration failed to open its annual grant process in fiscal year 2025, which ended Sept. 30.

The ferry system’s budget runs according to the calendar year. Last spring, the Alaska Legislature and Gov. Mike Dunleavy budgeted $171 million for the 2026 ferry budget. Of that, almost $78 million was supposed to come from the rural ferry program.

Without that money, the system could be forced to tie up its ships in midsummer, at the peak of the state’s annual tourist season.

“Right now, we have a federal chaos problem,” said Sen. Jesse Kiehl, D-Juneau and a member of the Senate Finance Committee.

Ryan Anderson, commissioner of the state DOT, said his agency is “looking at several options” to prevent a shutdown of the ferry system.

If a federal grant isn’t delivered, DOT would make significant changes to the summer ferry schedule, which is slated to begin in May.

Anderson said the state could “dispose of the Matanuska,” the state’s oldest active ferry, which has been tied up dockside as a “hotel ship” because of maintenance costs.

The ferry Kennicott, coming out of drydock, or the Columbia, another old mainline ferry, could be tied up as a hotel ship instead of the Matanuska, he said.

On Monday, neither DOT officials nor state legislators could say why the Federal Transit Administration has failed to make grants available.

“What is going on in Washington, D.C.? That’s always a tough thing to work with,” Anderson said.

U.S. Sen. Lisa Murkowski, R-Alaska, secured almost $1 billion in the 2021 Infrastructure Investment and Jobs Act bill for the rural ferry program, which was written in a way to steer much of the money to Alaska.

By text after Monday’s hearing, Murkowski spokesman Joe Plesha said the Federal Transit Administration told her office it will release the FY26 ferry grants this spring but did not give a timeline.

“We are directly engaged with the FTA and working to advance the release of this grant funding as soon as possible,” Plesha said.

When Murkowski got the ferry language signed into law, it was the first time the federal government had significantly funded operational expenses for Alaska’s ferry system.

“In this particular case, it can actually pay for the operations of those (ferry) vessels,” Anderson said, noting that includes operating costs like crew and fuel. That billion dollars was to be spread across five years, and the program disbursed more than $252 million nationwide in FY22, $170 million in FY23 and $194 million in FY24.

Alaska received more than five-sixths of the total distribution in that time, something that allowed Gov. Mike Dunleavy to divert state dollars to other parts of Alaska’s annual budget.

Alaska DOT estimates that about $410 million remains available for the federal government to disburse.

In each of the three prior grant years, it took between 152 and 199 days from the time the grant application period opened to the time the grant was awarded.

That timeline means that even if federal transit officials were to open the grant process tomorrow, a decision might not be made before the start of the summer ferry schedule in May.

Dunleavy and the Legislature could extend the timeline by changing the ferry system’s budget calendar so that it starts July 1 along with all other state agencies, but if there’s still no federal money, that would just extend operations until January 2027, and then the system would face a $150 million cliff instead of a $78 million one.

Sen. Bert Stedman, R-Sitka, said that finding “backfill” money will be difficult in either case.

“Our budgets are getting tighter and taking away the flexibility the (finance) committee has to backfill some of these holes, and this particular hole could be significant, pushing $80 million,” he said.

The ferry funding issue could persist even if the federal transit authority resumes paying grants, because its ferry operations program is set to expire this year.

“What happens when that grant money is gone?” asked Sen. Mike Cronk, R-Tok.

“This year, the surface transportation reauthorization is up for renewal,” Anderson said. “This, we understand, is part of that discussion: Will the rural ferry program continue over the next subsequent four years?”

Anderson said that even if Congress renews the program, the current Alaska-favorable rules might be rewritten.

“Other states are very interested in this program as well because they have a lot of similar challenges,” he said. “Nationwide, there’s support for a program such as this. The questions that are out: How will the rules be rewritten, and how competitive will the program be? That will be the challenge.”

A $300 million project to build a new Coast Guard base in Juneau for the icebreaker Storis likely will not be complete until at least 2029, the service’s top admiral said in a U.S. Senate hearing last week.

The Commandant of the Coast Guard, Adm. Kevin Lunday, testified Thursday in front of the U.S. Senate’s subcommittee on Coast Guard, Maritime, and Fisheries, chaired by Sen. Dan Sullivan, R-Alaska.

During the hearing, Sullivan pushed Lunday on his timeline for work in Alaska. Congress approved almost $25 billion earlier this year for new Coast Guard construction, including hundreds of millions for work in Alaska.

In August, the Coast Guard commissioned the icebreaker Storis, a converted oilfield services ship, at a ceremony in Juneau. The Storis will be based in Juneau, the Coast Guard has said, but not until new facilities are built.

“Are we on time, on schedule?” Sullivan asked.

“We’re moving quickly to be able to execute that funding and have that pier and infrastructure there ready by 2029,” Lunday said.

The Coast Guard had previously said its target was 2028.

“They’ve talked about 2028 before with regard to Juneau and the Storis,” Sullivan said in a phone call with reporters afterward. “He did mention 2029, but part of my job is to make sure we have the money, make sure they make the decisions early, and impress them in oversight hearings like this, to get them to keep their timelines if they put them out there, but also try to move them closer in.”

Lunday was only recently confirmed to his position after President Donald Trump controversially fired Adm. Linda Fagan after the start of his term.

Sullivan said it’s only natural for a new appointee to play it safe.

“I think the default position is to be a little conservative on the timelines,” Sullivan said.

Sullivan also pressed Lunday on his plans for a series of new icebreakers the Coast Guard intends to build in coming years.

Sullivan has been campaigning to have several medium icebreakers based in Alaska in addition to the Storis. Lunday was evasive when Sullivan asked him when he would make a decision and whether he would choose Alaska.

“As (my team) develop options, one of the first ones that I want them to present among a range of options for consideration … is for homeporting of up to four icebreakers in Alaska,” Lunday said. “Although we are still pending a decision, that’s clear guidance I’ve given to the team.”

Afterward, Sullivan said he tried to pin Lunday down on the issue because he sees it as important.

“I love the Coast Guard, but I have had real issues with how slow they are,” he said.

While Lunday didn’t make a firm commitment, Sullivan said he viewed the day as “progress.” Sullivan said he wants to see the ships in Alaska because basing them here has an economic benefit that he termed “a virtuous cycle” — the ships create demand for local shipyard work and stores to sell things to the Coast Guard, members of the Coast Guard and their families.

Housing any new arrivals remains an unsolved issue, he noted. Communities throughout Alaska are experiencing critical shortages of housing and child care.

“In almost every community, housing is an issue, and it’s an issue throughout the whole state,” he said.

“This is where we need to get the state, the cities, the boroughs also, to come to the table and say, ‘Hey, we have land here that we can provide. … We have financing that we can help incentivize housing,’” Sullivan said.

He said the Coast Guard is contributing financially for housing, but that he has encouraged elected officials to look for ways to ease the issue.