Caught by Alaska Politics, Part 3

A picture I took during my brief stop in Hoonah, Alaska

Continued from Part 2

I was in Hoonah, a town in Southeast Alaska, for less than a hour, but that was enough time to see a notice on a bulletin board about creating a ‘Hoonah Borough’. The notice said that the state government has cut a lot of funding to Hoonah, and in order to keep government services operating in Hoonah, they needed new revenues. They were trying to create a Hoonah Borough so they could tax activities which occur in the region around Hoonah. Apparently a lot of people oppose creating a Hoonah Borough because they fear the borough government would impose a property tax, but the notice explains that the town of Hoonah already has the power to impose a property tax, and that the articles of incorporation for Hoonah Borough would have a clause saying that a property tax could only be imposed if a majority of voters vote ‘yes’ to a property tax in an election.

I think this is an illustrative example of how Alaska politics work.

Alaska, unlike other states, does not have county governments (or parish governments, like Louisiana). Instead, a region can create a ‘borough’ which acts like a county government. For example, Fairbanks is in Fairbanks North Star Borough. However, being in a borough is optional. Many parts of Alaska are not in any borough. Sometimes, the sum of all parts of Alaska which are not governed by any borough government is referred to as the ‘Unorganized Borough’. A settlement which is not in a borough can still incorporate as a city, for example, Unalaska is an incorporated city which can impose city taxes and city ordinances, yet is outside the jurisdiction of any borough government. For now, Hoonah is also a city government outside of a borough.

According to the Alaskans I talked to, the main reason some towns choose to be outside of any borough is to avoid paying the taxes necessary to support a borough government.

At a museum (I forget which), they explained that the North Slope Borough was established so that the Inupiaq people (the vast majority of the long-term residents in the North Slope region of Alaska are Inupiaq) could tax the oil industry (practically all of the oil in also in the North Slope region). The oil industry vigorously opposed the creation of the North Slope Borough (because they did not want to pay more taxes), whereas the Inupiaq activists pushed to establish the North Slope Borough so that their people could get more economic benefits from the oil drilling which was happening in their territory.

My guess is that the people who are trying to establish some kind of Hoonah Borough intend to put a tax on commercial fishing, because that is the only industry in the region which could pay any significant level of taxes (there are also the cruise ships, but the City of Hoonah can already tax cruise ships which dock there, they don’t need a borough government to tax them).

I want to point out that the new push to establish a Hoonah Borough is caused by cuts in state funding, meaning that either government services are going away OR a local government has to charge somebody new taxes to fund the services. Based on that notice on the bulletin board, I’m guessing that the notion of paying a property tax in Hoonah is very unpopular, thus they are trying to find some other kind of tax which will fund the services yet be less unpopular.

I do not want to imply that raising taxes won’t hurt. Of course raising taxes hurt. Alaska already has a high cost of living, raising taxes will increase that cost of living, just as cutting government services increases the cost of living. I can understand why the people of Hoonah do not want to pay for a property tax on top of the already high cost of living.

As I explained before, the loss of state funding can be traced back to decline in the oil revenues which has been the primary funding source for Alaska’s government for decades. Less oil revenues means less government services, lower permanent fund dividend, and/or higher taxes on things other than oil. If the state is unwilling to impose new taxes and cuts funding to local governments, then the local governments have to choose between imposing their own taxes or losing the government services.

I did not talk to anybody specifically from Hoonah about Alaska politics, but I heard a lot of Alaskans from that region talk about politics. All of them said that they think Governor Dunleavy and his politics are utterly awful. All of them prefer a reduction in the Permanent Fund Dividend over the deep budget cuts, because they believe that the budget cuts will raise their cost of living far more than a bigger PFD would compensate them for. They also prefer a PFD cut over a raise in their local government taxes. Now that I think about it later, it also occurs to me that these local governments may not get federal matching funds as easily as the state government, so choosing deep budget cuts instead of a PFD cut and/or statewide tax increase is a net financial loss for Alaska due to the loss of federal matching funds. Even if it is possible for these local governments to apply for federal matching funds, it is probably less efficient for a bunch of local governments to apply for federal matching funds than for the State of Alaska to apply for the matching funds.

You might think that, as a Californian, I might be happy about Alaska losing federal funding so that there are more federal funds for the other 49 states. I’m not. Given the remoteness of Alaska and the gigantic masses of federal lands in Alaska (federal lands make it harder for local governments to pull in sufficient tax revenues to sustain themselves), I think it is reasonable that Alaska residents receive more federal funds per capita than Californians do. And while Alaskans shooting themselves in the foot by disqualifying themselves for federal funding does mean, in a sense, that there are more federal funds for the other states, I think the damage to national cohesion is far greater than any benefits California or other states may get by getting a slightly larger piece of the federal funding pie.

I also want to share a quote from this news article:

Some lawmakers said Dunleavy is prioritizing having $3,000 permanent fund dividends this year. But Anchorage Democratic Sen. Bill Wielechowski said the vetoes didn’t touch one area that could balance the budget: the oil tax credits deducted by the major producers.

“These vetoes cut from the poor, the sick, our seniors, our kids — basically anyone who can’t afford to hire a lobbyist to come down here and lobby us. That’s who was cut,” Wielechowski said. “Who wasn’t cut? Some of the richest corporations in the history of the world.”

It also occurs to mean that declining oil revenues is not just a matter of budget crisis for the state government, it is a threat to the entire economy of Alaska. A substantial portion of jobs in Alaska depend on the oil industry. As those jobs disappear, can they be replaced? Especially if parts of the public sector disappear with the oil industry? While climate change messes with Alaska at a faster rate than it is messing with the other 49 states? It’s possible that this budget crisis is just one of the more visible signs of the deeper double crisis – decline of the oil industry and climate change – which is threatening the livelihoods of many (most?) Alaska residents.

To be continued…