Editor’s note: This article has been corrected to note the proper legislative body. The sentence has been corrected to read “Stevens kicked off the town hall with an outline of the work facing the Alaska Legislature this session.”

By Jessica Shepherd

Homer Independent Press

State Sen. Gary Stevens, R-Kodiak, presided over a virtual town hall meeting on Jan. 28. The event was sponsored by Kenai Peninsula Voters and the League of Women Voters of the Kenai and moderated by Alex Koplin and Tina Seaton. 

Stevens kicked off the town hall with an outline of the work facing the Alaska Legislature this session. 

“The main issues we have to deal with this year are the budget, the gas line, which we’re hearing more and more about, and the fiscal plan,” he said. 

“In the operating budget, one of the big issues that I know people are following and have contacted me on, is education…. We met in August in a special session and were … able to move the…basic student allowance forward to higher than we had before. But one of the problems we are facing in Alaska is that we have decreased enrollment, so even though we increased the amount per student, the total amount is down about $25 million because of that decreased number of students.” 

Stevens praised the return of the school bond debt reimbursement (largely suspended for the past decade) of $41.6 million, but expressed concern about funding for community assistance, which helps the City of Homer and other cities and boroughs in the district. Gov. Mike Dunleavy funded that at $14 million, which is “about half of what it probably should be,” Stevens said. “That’s going to be an issue for us. We know how important it is for cities and boroughs to have that community assistance. We’ll continue working on that. The deal’s not done on that.” 

Additionally, Dunleavy’s operating budget did not fully fund the state retirement system. Stevens explained, “As you know, we have a debt there from our former retirement system … .The amount of money in the governor’s budget going to the debt we have is lower than it should be.”

Stevens expressed concern that the governor did not allocate funds in the capital budget for major maintenance for schools, the court system and the University of Alaska system. Stevens referenced the recent collapse of the school roof in Aniak as an example of the need to fund maintenance projects. He indicated that Congress would work to allocate funding for maintenance. On the plus side, the governor’s budget did include funding for shoreside facility maintenance for the Alaska Marine Highway System. 

He went on to explain that the third part of the state’s budget is the Supplemental Budget, which normally includes a match for federal Department of Transportation funding. Without this $70 million match, contractors are asking that the supplemental budget be passed sooner rather than later in the session, as they are hesitant to hire crews and bid on and move forward with transportation projects. 

The state’s budget is heavily reliant on oil prices, which are lower than expected. “For the current year [earnings are] down $181 million from what we had planned… and for next year, fiscal year ’27, it’s [decreased] 119 million. Lower oil prices really affect what we can do,” Stevens said. 

The state relies on two funding resources, oil, which has always been important, and earnings from the Permanent Fund, which pay “the lion’s share” of the state’s budget. 

Stevens then shifted to the governor’s fiscal plan, Senate Bill 227, which came out on Jan. 27. Stevens expressed disappointment that the governor, now in his eighth year, didn’t put forward these ideas before. 

“I really wish he had presented some of these ideas earlier so we could have been working on them,” he said, rather than trying to address them all in a 120-day session. 

The first item Stevens addressed in the governor’s fiscal plan is the implementation of a state-wide sales tax. This year-round measure would impose a 2% tax in the winter months, and a 4% tax from April – September, during tourist season. In Homer, that would increase the current state sales tax of 7.85% to an 11.75% sales tax.

“That causes problems for our cities, boroughs, and municipalities that also have sales tax. The state would take over collecting that tax and then remit to the cities and boroughs” their portion of the tax, but in doing so, would take away any exemptions for groceries and medicine. “That is a problem that is getting a lot of attention.”

The governor vetoed SB 113, which would have imposed a tax on out-of-state corporations that do business in Alaska, like Amazon. The legislature failed to override the Governor’s veto.

“Most states have that. It’s not charged back to the citizens of Alaska. The tax is paid by the corporation…. That would be a good bill to pass,” he said.

An additional concern with the governor’s fiscal plan is that the corporate tax would be eliminated. It would, however, raise taxes on oil and gas from 4% to 6%, and impose a 15-cent-per-barrel tax on oil coming through the pipeline to help pay for maintenance on the Dalton Highway.

The governor has placed additional conditions. His plan is to reduce the annual increase in state spending from 5% to 1% growth.

“That’s going to be hard to do because we know that things are more expensive every year.… And that’s on everything that the state does,” Stevens said. 

“Another very important thing is, the governor is demanding we have a constitutional amendment to effect the POMV [Percent of Market Value],” he said. 

Alaska currently spends 5% of the Permanent Fund’s value each year. In 2025, the Fund saw a return of 9.35%, reaching a value of $85.1 billion. The POMV came to $3.7 billion dollars, and the Permanent Fund Dividend (PFD) paid out $1,000 to all qualified Alaskans. The governor’s plan is to split the proceeds 50-50, allocating half to the PFD payout and half to running the government. This would result in a PFD in the range of $3,500 per recipient at the current POMV but create a substantial shortfall in funding available for state spending.

Stevens stated, “The problem is, here in the legislature, how do you pay for the services people want? We simply can’t afford it.” 

Stevens also commented on the gas pipeline, which has been in the planning phase since he began with the legislature in 2001. He would like to see us make use of the “enormous gas supplies in Prudhoe Bay, and of course, we need them all over Alaska, particularly in Anchorage and Fairbanks. But the problem is… what’s going to be our contribution? [Developers] are asking us to pony up more money… but we simply can’t put the people of Alaska on the line and say we’re going to fund the pipeline and you’re going pay for it for the next 20 years to 50 years… If the pipeline gets started, and we do the first phase and it stops, there will be a debt we have to pay.” 

At this point, the town hall opened for questions. 

• What about rolling back tax credits on the oil industry? That’s “unlikely at this time,” Stevens said.
  
  
• What about the effects of the state budget on mental illness? “I believe in taking care of people who can’t take care of themselves.”
  
  
• How do we address a shortage of public defenders? “We’re having trouble hiring prosecutors and defenders. … Justice delayed is justice denied. So, we have a problem there.”
  
  
• What about Ranked Choice Voting? “It’s served us well. It’s passed twice. I see nothing wrong with ranked choice voting.”