Wednesday afternoon, the Senate Judiciary committee held its first hearing on Senate Joint Resolution 4 (SJR4), Gov. Michael J. Dunleavy’s proposed constitutional amendment requiring voter approval of any new State tax or tax increase. SJR4 is one of three constitutional amendments the governor is proposing – alongside SJR5, which would enshrine the old statutory formula used to calculate Permanent Fund dividend amounts, and SJR6, which would enact a legislative spending cap, restricting appropriations based on a three-year average.
SJR4 adds two additional subsections in Article IX, Section 1 of the Alaska State Constitution to require that any law establishing a tax or raising an existing one “shall not take effect unless it is approved by the voters of the State in the first statewide election held more than one hundred twenty days after the enactment of the law.”
If voters approve, the new tax or tax increase would take effect 90 days after certification of the election – or an effective date as approved by two-thirds of the legislature.
Mike Barnhill, Policy Director with OMB under Dunleavy, clarified in response to a question from Sen. Jesse Kiehl (D-Juneau) that, beyond obvious taxes like an income or sales tax, this would include any increases to the marijuana, tobacco, or alcohol taxes. If a gambling tax, or something similar, was passed by either the legislature or voter initiative, that would also qualify.
User fees, like driving, hunting, or fishing licenses, would not trigger a vote. However, if a change in a user fee is viewed as substantial enough to be considered a tax, it could be subject to voter approval. SJR6 does not define that threshold, which Kiehl cautioned could translate to litigation.
“It’s the hard cases that land you in court,” he offered.
Senator Peter Micciche (R-Soldotna) recommended defining concretely what would or would not be considered a tax.
Any new tax or tax increase established directly by voter initiative would require an additional vote of approval by a simple majority of the legislature in joint session. If the legislature fails to support the voter-supported effort, the will of the voters would be supplanted and the new tax or tax increase would be rendered null and void.
However, if a majority of lawmakers in either the house or senate didn’t approve of a proposed tax or tax increase, they could nix the idea entirely.
“It looks like it would be mandatory for there to be a joint session if the intention was to approve the people’s initiative,” Sen. Shelley Hughes (R-Palmer) noted. “If they were not intending to approve it, it doesn’t seem like they would need to hold a joint session. Am I reading that correctly?”
“It was the intent of the administration drafters of this to leave the decision, whether to consider a resolution in joint session approving the voters’ action, a matter of discretion for the legislature,” Barnhill answered. “So, if they choose not to take it up at all then the tax will not come into effect.”
In effect, SJR4 as currently written would accord the legislature veto power over a voter-passed initiative, instead of the normal requirement barring the legislature from any such action for two years.
The slate of proposals are modeled after a 1992 amendment to the Colorado State Constitution, known as the Taxpayer’s Bill of Rights (TABOR). That law was designed to curb government growth by prohibiting any new taxes or tax increases without voter approval and limit state spending as to not outpace population growth and inflation.
Any revenues that exceeded the limits set by TABOR were refunded to taxpayers unless a voter referendum reallocated funds for another explicit purpose.
Colorado’s TABOR laws also prohibit local governments from enacting or increasing taxes – reaching further than Dunleavy has proposed with SJR4.
Over the quarter decade the laws have been in effect, those refunds have returned over $2 billion to taxpayers, using funds that, in the past, would have gone to fund education, transportation, public safety, public health, and myriad other state services.
TABOR came under fire in Colorado in 2005, where, under the auspices of the laws, the state was painted into a corner: there was a $234 million budget shortfall spread across the coming two years, yet TABOR mandated that taxpayers must receive a refund of $345 million – money that could otherwise be used to plug the hole. (Alaskan observers might take note.)
The same year, Colorado voters approved a referendum to suspend the revenue limit established by TABOR over the next five years. Taxpayers voted to forfeit $3.7 billion in refunds (about $500 per person) over that span of time by a narrow 53 percent margin. In the trade, they saved an estimated 11 state parks from closure, a spike in tuition at state universities, an excess of prisoners straining the prison population, and massive cuts to health care funding for low-income Coloradans. (Again, Alaskan observers might take note.)
The Bell Policy Center, a Denver-based nonprofit focused on advancing economic mobility in Colorado, called TABOR the most restrictive scheme of limiting spending and taxes in the country. “Philosophically, these arguments are appealing. Everyone wants efficient government and a role in how our money is spent,” they wrote in 2017. “But our research also points to structural flaws in the amendment that have seriously impaired the state’s ability to set budgetary and program priorities and respond to crises, as evidenced during the recession of 2001-2003. In short, TABOR has created a state government that is hamstrung by inflexible rules, making it unresponsive and less effective. ”
Colorado’s law was championed by conservative activist, former state legislator, and convicted felon, Douglas Bruce. Bruce was sentenced to two consecutive 90-day terms in prison for tax evasion and violating probation last year. But TABOR still has a lot of supporters – most notably, Americans for Prosperity (AFP), the libertarian-conservative public advocacy group funded by Charles and David Koch.
AFP has dedicated a lot of time and resources pushing TABOR via their dozens of state chapters. Alaska is the latest target, and Gov. Dunleavy is the group’s willing surrogate.
In the description of the governor’s recent roadshow in support of his proposed budget, which was done in partnership with AFP, the group advertised, “The team of policy experts will feature the Governor and budget experts, along with a panel discussion, who will discuss how a spending cap and a Taxpayer’s Bill of Rights (TABOR) can curb wasteful spending in Juneau. Governor Dunleavy and members of his administration will present how his budget could help alleviate the overspending from years past that has put Alaska’s financial future at risk.”
In Senate Judiciary, Micciche boiled SJR4 down to two fundamental questions: “Does our current system of electing or not reelecting representatives suffice on the actions they take while they’re here? And the second question is, should the legislature be able to trump the voters in their initiative process? I mean, that’s what it comes down to,” he told his colleagues. Emphasizing the addition of the initiative override that the proposed constitutional amendment would afford lawmakers, he concluded, “The people are giving up substantial rights in this bill…. I think they’re giving up more than the legislators, and that’s where I struggle.”
He pointed out that the bill “sounds great,” but said he wanted to make clear that six senators could use the law to override a public vote of the entire Alaska electorate.
SJR4 passed the Senate State Affairs committee last week without any recommendations from committee members.
Judiciary held the bill over and Hughes announced a Friday morning deadline for amendments.
“We’ve got a lot to think about,” she said.
Dunleavy has made passage of all three proposed constitutional amendments a priority by threatening to hold the budget hostage.
“If the legislature does not want to pass the three constitutional amendments that we put forward, to me that means they don’t want to engage the people of Alaska,” Dunleavy told Tim Rockey in an interview with The Mat-Su Valley Frontiersmen. “If we don’t get constitutional amendments from the legislature to close this budget gap once and for all” – which, it should be made clear, none of these amendments would independently do – “and keep it closed, and we don’t get constitutional amendments that allow the people to vote on taxes and change to the PFD, there’s little choice left but to use the red pen.”
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