GUEST COMMENTARY: House Majority ‘school tax’ fails to achieve fairness

The Alaska State House passed the “Education Funding Act” as House Bill 115 on April 16 by a unanimous vote of all 22 House Coalition members. However, none of the other 18 members of the House voted for the bill. The measure advanced to the Senate where it will likely stall.

The Speaker of the House refers to House Bill 115 as a “tax for schools;” the co-chairman of the House Finance Committee characterizes the bill as a “school tax;” and Rep. David Ortiz calls the bill “an education income tax.” Further, the House Majority Coalition claimed in an April 26 press release that the “money collected from the Education Funding Act would be used to fund K-12 education in Alaska.”

The phrases “tax for schools,” “school tax,” or “education income tax” do not appear in the bill.

Also missing from House Bill 115 is any requirement to fulfill the claim of the House Majority Coalition that “the money collected from the Education Funding Act would be used to fund K-12 education in Alaska.”

Instead, lines 26-30 on page 22 of the bill require the tax proceeds to be deposited into the State General Fund; allow (but do not require) the legislature to appropriate the proceeds for education; and, most importantly, expressly declare that the tax proceeds are not dedicated funds.

In other words, the legislature would be free to appropriate the tax proceeds for any public purpose. House Bill 115 is a state income tax — plain and simple.

The characterizations of House Bill 115 as a “tax for schools,” a “school tax,” and an “education income tax,” and the assurance that the tax proceeds would be used for education are disingenuous. Alaska’s constitution strictly limits the dedication of state taxes.

The legislature might, in its discretion, appropriate for education all $687 million in annual tax revenues expected from House Bill 115 if it becomes law. However, it is equally possible that all $687 million in new taxes would simply supplant $687 million of the current $1.2 billion in state funding appropriated for education.

School funding could remain the same or even decline despite enactment of the so-called “school tax.”

The House Finance Committee is spending the week of May 1 examining Alaska’s fiscal policy. Representative Seaton, Co-Chair of the Finance Committee, states, this “weeklong series of meetings will allow us to compare and contrast the competing fiscal plans that have passed the House and Senate … our plan is the best choice … because it’s complete, comprehensive, and fair.”

The characterization of the House’s fiscal plan as “complete, comprehensive, and fair” ignores significant long-standing failings in the state’s fiscal and political policies that should have been addressed long ago, but would remain if House Bill 115 became law. The lack of a remedy renders the Coalition’s plan incomplete and unfair.

Ironically, while House Bill 115 cannot be properly characterized as a “school tax,” the state has levied a genuine school tax (albeit one of highly questionable legality) for more than a half century.

The long-standing state school tax has raised several billions of dollars over time. As observed by Alaska Supreme Court Justice Daniel Winfree just last year, the state mandates that organized boroughs “raise specified funds for the State’s public schools system; it is a revenue source for the state — and a tax by any other name remains a tax — and the revenues are dedicated to the state’s public schools system even though they never enter the State’s treasury” (see State v. Ketchikan Gateway Borough, Op. No. 7075, page 40 (Alaska January 8, 2016)).

The critical flaw in the tax to which Justice Winfree referred stems from its application to just Alaska’s 34 municipal school districts — the legislature has allowed 19 districts in Alaska to be exempt from the tax simply because residents of those districts have chosen to remain unorganized. (Many regions in Alaska never had a choice as they were forced by the State legislature and governor to incorporate as boroughs in 1963; these include Anchorage, Fairbanks, Mat-Su, Kenai, Ketchikan, Kodiak, Juneau, and Sitka).

There is no rational basis for the exemption of the 19 districts (e.g., fiscal capacity). The current system allows Alaskans in those 19 districts to escape taxation for local services while benefitting indirectly through higher school funding from the State made possible by the school tax levied on the 34 municipal districts.

Now, the House Majority Coalition wants to impose a bogus school tax on all of Alaska. Thus, if House Bill 115 becomes law, residents of Alaska’s 34 municipal school districts would be subject to two school taxes: one, the school tax referred to by Justice Winfree which will take more than $250 million from municipal school districts this year alone and, two, the bogus school tax in House Bill 115 that will take an estimated $687 million from all Alaskans.

The House’s fiscal plan is incomplete and unjust.

Dan Bockhorst lives in Ketchikan.

05/03/2017 - 2:14pm