Week three of the legislative session felt comparatively normal compared to the first two weeks. Governor Mike Dunleavy (R – Alaska) gave his annual State of the State address to a joint session of the Legislature. It was postponed one day due to travel issues to Juneau. The Senate passed a bill that would bring back defined benefit pensions for public employees, though it faces an uncertain future in the House. And members of several utilities were in town with the Alaska Power Association, which was fortuitous with the energy issues in Southcentral due to the cold temperatures.

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State of the State 

Governor Dunleavy’s annual State of the State address, originally schedule for Monday night, was moved to Tuesday night due to travel issues to Juneau. Ten of his commissioners and five of his six guests were supposed to arrive in Juneau on early Monday, but due to a myriad of issues everyone (including myself) did not get in until 9 pm. You can read my account of the whole travel ordeal here.

His State of the State address, which lasted around 50 minutes, focused on the state’s inability to get new projects or infrastructure built, education, energy, and of course, the dividend. He definitely said the right things when it comes to our complete inability to build things in this state like we used to. But I question his sincerity.

Dunleavy has been governor for more than five years, and things are not looking up. He’s not solely to blame for these problems. Former Governor Bill Walker killed projects like the Susitna-Watana hydro project and the Knik Arm Bridge when oil prices crashed, but we remain stuck in this malaise even after Dunleavy won re-election in 2022. It’s going to take many years to right this ship, and I don’t see much right now to be optimistic about.

Dunleavy also touched on education. And while he did not specifically mention Senate Bill 140 (the bill the House majority loaded up and then kind of abandoned) he raised many of the priorities that the House majority included, like more funding for charter schools. It’s unclear what will happen this session with education, but Dunleavy and the Republican-led House majority are more aligned than either of them are with the Senate majority.

Sunset on corporate income tax exemption raises uncertainty for some businesses

The following is an excerpt from this week’s edition of the Alaska Political Report. You can click here for more information about the Political Report. A subscription is $1,299/year per organization. Discounted pricing is available for non-profits and government entities. Our coverage of the budget starts with the governor’s proposed budget, and we track everything in detail through the entire process. If you have any questions or would like to subscribe, please email jeff@akpoliticalreport.com.

On July 1, 2023, an exemption for the state corporate income tax expired. This expiration could have a potential $2 million impact on Alaska businesses, and according to one advocate, could be much higher.

This exemption stemmed from a 2013 bill, Senate Bill 83, that was passed by the Legislature and signed into law by then-Gov. Sean Parnell.

According to the Department of Revenue’s annual report, “Certain small corporations are exempt from corporate income tax. These are corporations that have less than $50 million in assets and that meet certain industry requirements. The exemption sunset on July 1, 2023.”

The most recent Independent Expenditure Report, published on July 1, 2022, says the revenue impact in 2020 – the most recent year available – was $2 million, and that between 10-40 corporations benefit from the exemption.

But a letter recently sent to several legislators by Jana Weltzin, an Anchorage attorney who represents several Alaska businesses, indicates the number of affected corporations could be higher. In the letter, Weltzin referenced the 2018 Trump Tax Cuts and Jobs Act and said that “many small businesses made elections to be C Corporations in order to benefit by the 21% flat tax rate C Corps.”

A bill could retroactively restore the exemption, but no such bill has been introduced. We reached out to the Department of Revenue asking for an updated number of C Corporations that would be affected by the sunset of the tax exemption. We will provide an update when we hear back.

Update: After this was published we learned from the Department of Revenue that for tax year 2022, 122 businesses claimed the exemption and for tax year 2021, 136 businesses claimed the exemption. 

Other Happenings 

Governor Dunleavy released his supplemental budget this week. It totals $171 million, or roughly a 3.3% increase from the amount appropriated for operating and capital needs last session. The bulk of it, $95 million, is for fire suppression. One entertaining item from judgements and settlements:

The Senate passed Senator Cathy Giessel’s (R – Anchorage) pension bill, Senate Bill 88, 12-5 on Wednesday. It’s anyone’s guess what the House does with it. Last session they buried a House minority pension bill in a House State Affairs sub-committee after it started getting some traction. It hasn’t been heard since. And even if the House manages to pass some form of the Senate’s bill, and even if a conference committee can produce something both bodies can agree to, I doubt Dunleavy would sign it. The labor unions are pushing hard for this bill. This is sure to become a very loose issue this session!

I predicted Joseph Lurstema would last one month. I was off by two weeks. Security seems to get called a lot on the fourth floor of the Capitol…

After the energy situation this week in Southcentral, this joint House/Senate Resources Committee hearing on Wednesday afternoon is sure to be a good one.

Senator Matt Claman (D – Anchorage) was absent from the Capitol this week. His office finally released a statement on Thursday. He was taken to Seattle for some kind of medical issue. Claman is in great shape and is a river guide in the Grand Canyon. He says he has been given a clean bill of health and will be returning to Juneau.

This is always a fun event!

This Week’s Loose Unit

While a lot of loose stuff happened this week, one really stood out. And while I hate to do this I am again making myself this week’s Loose Unit.

During Governor Dunleavy’s State of the State he introduced a woman who manages the Subway on Government Hill. He said she has two kids and is a great example of why the PFD is so important. He also said he knows her because he frequents the Subway on Government Hill. I’ll admit I found that one hard to believe. This is a guy who gets on the plane last and is the first to get off. He’s not exactly a guy I figured for frequenting a Subway in a lefty part of Anchorage.

Anhyoo, after the speech I attempted to ask her what kind of sandwich he orders and how often he comes in. But she was rushed away to the Governor’s cabinet room on the third floor. I reached out to one of Dunleavy’s press people to see if I could talk to her, but was told she was shy and that I needed to provide the questions in advance. Then I reached out to her on Facebook Messenger but she blocked me after I did not immediately respond to her. AHA!, I thought. I then tweeted this:

Here is where it started getting loose. I immediately heard from several of Dunleavy’s former staffers that he is in fact a Subway addict. But does he really frequent the Subway on Government Hill, I thought. Turns out he does. I was then asked by one of Dunleavy’s press people to come to the Ramada to meet with her. She knew exactly what kind of sandwiches he orders (BMT or Steak and Cheese). And I was even shown a video Dunleavy made for her inviting her to be a guest at the State of the State. Jenna was also cool as hell. She also now has a great story to tell!

After the correction tweet, someone texted me, “Thank God this is resolved you absolute psycho.” So yeah, I definitely earned Loose Unit status this week.

If you have a nomination for this week’s Loose Unit, or if you have any political news, stories or gossip (or any old pics of politicians or public officials) please email me at jeff@alaskalandmine.com.