ANCHORAGE (KTUU) — Spanning from the Canadian border to the west coast, Alaska's North Slope Borough is the No. 1 oil-producing district in the country according to the U.S. Department of the Interior — and the Dunleavy administration wants to capitalize on its oil property taxes to balance the state's budget for the coming fiscal year.
The governor's proposed budget for fiscal year 2020 would repeal the ability for municipalities to levy tax on oil and gas, exploration, production and pipeline transportation property. The plan proposes that $440 million in petroleum property taxes would go to fund state departments instead of municipal governments.
Tax revenue generated by leases to the oil industry makes up the lion's share of the North Slope Borough's income. In fiscal year 2015, it generated $492.3 million in revenue, with $354.2 million coming from local property taxes — the vast majority from oil and gas properties.
The borough uses this money to fund public services, and the Dunleavy Administration wants to change that.
"We're proposing to repeal municipalities’ credit against petroleum property taxes in order to appropriate these revenues to statewide programs,” Office of Management and Budget Director Donna Arduin said Wednesday. “Rather than to only those municipalities with oil, gas exploration, and transportation pipeline properties."
Sen. Donny Olson, D-Golovin, calls the proposal a declaration of war on rural Alaska.
"I think it's a short-sighted maneuver done by the Dunleavy administration to go ahead and put the budget deficit on the backs of rural Alaska,” Olson said. “Senate Bill 57 — 85 percent comes right from the North Slope Borough. It's one of those things where it appears to me that he's declaring war on rural residents in particular."
Olson says the governor will have a hard time cutting his way out of the state’s $1.5 billion deficit. The Executive Director of the Alaska Municipal League Nils Andreassen says the governor's proposal undercuts crucial North Slope Borough institutions.
"Public safety, health, emergency services — they conduct search and rescue for the entire North Slope, a region the size of California, and apply many of those services to some of the other municipalities,” Andreassen said.
If the borough loses that revenue, Andreassen says it falls on the state to make it up anyway.
"And the costs go back to the state if local governments don't have the ability to collect revenue on those properties,” he said. “I don't know how many hours in we are, but we're doing our best to understand things."
The AML is still looking at specific impacts, but Andreassen says petroleum property taxes account for at least half of the City of Valdez's budget, and one-tenth of the Fairbanks North Star and Kenai Peninsula Boroughs.