Alaska needs a state-wide sales tax, or an income tax or something.

We are privileged to live in Alaska, not only to we get to enjoy the awesomeness of this state, but damn, we get paid to live here; pretty sweet on an individual level, but really not a very good political-economic situation.

Currently about 90% of the state’s general fund revenue is derived from oil and gas production. Production is declining, steeply, but so far we have been lucky, increases in the cost of oil and the taxes producers pay (in part thanks to Palin and ACES) have offset the decrease in production, enabling the state to continue to function, but this will not last forever. New developments, a gas pipeline and even Pebble may be able to offset the decline somewhat, but another Prudhoe Bay is probably not a reality, and as I see it Pebble is far from a reality. Furthermore, good old Ted is not in the senate and Alaska is getting past the point in its development where the Feds will continue to pump in so much money, our already oversized slice of the federal pie will get smaller, as it should.

Alaskans pay nothing for the services and good provided by the state and yet we expect them; our highways better be plowed and our school system better be funded. This has created a disconnect between Alaskan residences and the state government, the same kind of disconnect that enables petro-dictators in such places as Venezuela to continue their ways; because the funding for the government is not derived from individuals the “state” is no longer beholden to those individuals. I’m not saying Alaska ever has a chance of becoming Venezuela, but there are similarities which are worth thinking about. Do you really have the right to be upset about how the state decides to spend its money... no, you dont.

It may seem odd, and contrary to everything that seems logical, and it really is, but currently most economic development with the state of Alaska is bad for the state. Support industries (industries and businesses which provide services and goods to consumers within the state), contribute nothing to the state coffers. Economic development (think of the Target opening up), brings with it population growth, however there is no increase in state revenue to pay for the services which these new people will utilize because there is no broad-based tax on households to cover state spending. For every business that opens its doors the state’s budget gets larger, but its revenue does not.

Furthermore oil prices are so volatile that relying on it to the extent that we currently do is just plain stupid. We will continue to have a budget crisis and freak out every couple of years when the world economy has a hiccup and oil prices drop. We just passed the largest budget ever, does anyone remember what the budget situation was like two years ago, not so good.

There are basically three options the state has to deal with these issues: A statewide sales tax, a state income tax or using the Permanent Fund for its original purpose. All of them are politically unpopular and there are valid arguments against each one, but it boils down to the reality that Alaska cannot support state spending on its current level in the face of declining oil production and population growth. Eventually someone will have to have the political balls to step up and tell it straight to Alaskans. When that happens, support them, otherwise were just going to have bigger problems in the future.