Alaska governor calls for tax increases to stave off steep service cuts

By Rory Carroll

(Reuters) – Alaska Governor Bill Walker on Thursday painted a dire picture for the state if lawmakers fail to adopt new sales and income taxes, but said he was pessimistic that a deal would be reached during the current special legislative session.

A collapse in oil prices has left Alaska with a $4 billion budget gap. Despite some spending cuts, new taxes are required to stave off devastating cuts to public services, Walker said during a news conference in Juneau, the state capital.

“We cannot resolve this issue solely with reductions in spending,” Walker, a Republican turned independent, told reporters.

Walker said that if the legislature takes no action, there will be a 75 percent reduction in public safety services, a 67 percent cut to education, and an 80 percent reduction in transportation services.

“The reductions are so significant they are really hard to fathom,” Walker said.

The cuts would require laying off 100 state troopers – bringing the total number down to 200 troopers – as well as laying off 14,000 teachers and closing rural airports and greatly curtailing the state’s ability to tend to roadways.

“I don’t say this because we’re trying to scare somebody; this is what we are facing,” he said.

Walker has proposed a 5 percent tax on oil produced from the state’s North Slope when the crude rises above $55 a barrel has and called for a reduction in the number of tax credits available for some oil companies.

He also proposed a 6 percent income tax, which would be the state’s first in 35 years, as well as a 3 percent sales tax starting in 2018.

Those proposals have yet to gain traction with lawmakers in Juneau. Some of them have said they would rather take up the issues when the legislature reconvenes in six months, as opposed to tackling it during the special session.

If the legislature refuses to act during the special session, it could come to a close as soon as Friday, Walker said.

(Reporting by Rory Carroll; Editing by Jonathan Oatis)