California Journal of Politics and Policy

Since the early 1980s, Alaska has relied on oil taxes for almost all of its state government revenue.  Like many resource-based economies, including many of the Western states, the result is a boom and bust economy.  With production declining and the price of Alaska’s North Slope crude around $75 per barrel, the state is in a bust cycle, with a large state government deficit.  Although Alaska is experiencing a somewhat improved revenue outlook compared to 2017, the state’s executive and legislative branches continue to wrestle with unpopular political choices; do we implement a state income tax, tap the state’s Permanent Fund sovereign wealth fund (and thereby reduce or eliminate Alaska’s annual Permanent Fund Dividend payment to Alaskan residents), or some combination of those two approaches?  In Spring 2018, the Alaska State Legislature—supported by Independent Governor Bill Walker—chose the first of these options, tapping Alaska’s Permanent Fund to fund state government operations for the first time.  The result is a dramatically improved fiscal position for 2019, and although the state remains in deficit, chances of a balanced budget are much improved.  Use of the Permanent Fund has not been popular, however; a number of incumbents who supported the use Permanent Fund earnings were defeated in November 2018 by opponents who campaigned on the issue.  At the moment, Alaska’s fiscal future remains in doubt.