Standard & Poor’s Rating Services (S&P) released a report on Tuesday that warned if the state did not work to improve the fiscal situation; a credit downgrade was in store. The credit rating agency lowered its outlook for Alaska to “negative”. S&P believes, like many around Alaska, that budget cuts alone are not enough to turn the tide on Alaska’s fiscal crisis. They also noted that Alaska lawmakers were unwilling to open the state’s most promising sources of revenue.
Possible revenue sources include introducing a state sales tax, personal income tax or tapping a portion of the Permanent Fund. Other possibilities include capping the Permanent Fund Dividend payout and/or changing or eliminating tax credits to within the oil and gas industry. A variety of revenue sources will most likely be needed to make a difference in the budget without a severe cut to government services.
This report is not the first to warn of a possible downgrade for Alaska’s credit rating. Moody’s revised its outlook for Alaska in December 2014 to reflect a “negative” outlook.
Lawmakers have a lot on their plate in the coming months and it will be important for them to listen to the community groups that are working hard to bring awareness to the fiscal policy issue. The survey conducted by the Rasmuson Foundation is a great start to the discussion and groups like Commonwealth North are working hard to find responsible solutions that will help move Alaska out of its current fiscal hole.