What's New

Fiscal Policy: State of The State Debate

Alaska’s Fiscal Crossroads: Three Perspectives on the State’s Future

Legislative leaders and a former senator dissect Governor Dunleavy’s State of the State address, revealing deep divisions over taxation, spending, and the Permanent Fund Dividend

Commonwealth North Policy Forum, February 5, 2026

ANCHORAGE — In a virtual forum that drew 50 participants, Alaska’s legislative leaders offered starkly different visions for the state’s fiscal future, highlighting the deep fault lines that continue to define budget debates in the nation’s northernmost state.

The Commonwealth North event, held just two weeks after Governor Mike Dunleavy delivered his final State of the State address, featured Senate Majority Leader Cathy Giessel, Senate Minority member James Kaufman, and former state senator Natasha Von Imhof. Their presentations revealed not just policy disagreements, but fundamentally different philosophies about the role of government, the value of the Permanent Fund Dividend, and Alaska’s economic trajectory.

The True Cost of the Dividend

Giessel, a lifelong Alaskan and registered nurse with a history of bipartisan coalition-building, opened the presentations with a stark reminder of the state’s evolving fiscal landscape. Drawing from a graphic in her slides, she illustrated how investment earnings, primarily from the Alaska Permanent Fund, now dominate state revenues. In fiscal year 2025, these earnings accounted for 43.7 percent of total revenues—totaling $19.2 billion—eclipsing federal contributions at 36.1 percent and petroleum at 12.9 percent. When restricted to unrestricted general funds (UGF), the Permanent Fund’s role swells to 59.8 percent of $6.3 billion, with petroleum trailing at 30.1 percent. “Oil and gas have been the main source of our revenue,” Giessel noted, “but that’s changed.” She emphasized the legislature’s constitutional duty to pass a funded budget, while highlighting “heavy lifts” like navigating a massive gas pipeline project and deploying $272 million in federal funds for rural health transformation on a tight timeline.

Giessel set the tone with data-driven visuals that underscored a profound shift in state finances. In FY 2025, investment earnings—largely from the Permanent Fund via its Percent of Market Value (POMV) draw—contributed 43.7 percent to total revenues of $19.2 billion, outpacing federal funds (36.1 percent) and petroleum (12.9 percent). Narrowing to unrestricted general funds (UGF) of $6.3 billion, the Permanent Fund’s share rises to 59.8 percent, with oil at 30.1 percent.  “Oil and gas have been the main source of our revenue,” Giessel noted, “but that’s changed.” She emphasized the legislature’s constitutional duty to pass a funded budget, while highlighting “heavy lifts” like navigating a massive gas pipeline project and deploying $272 million in federal funds for rural health transformation on a tight timeline.

She urged reframing the PFD not as an individual annual check but as a massive governmental expenditure: a $1,000 dividend, for instance, costs the state roughly $680 million in total. Since the program’s inception in 1982, Alaska has distributed over $33 billion in dividends. Notably, when voters established the Permanent Fund in 1976 and launched the PFD in 1982, the state still levied a personal income tax—a broad-based revenue source later repealed, leaving the dividend as a direct claim on resource wealth without offsetting personal taxation.

Giessel highlighted the governor’s FY27 budget proposal, which her slides depicted as deliberately underfunded. To deliver a “full” statutory dividend, the plan would require $1.68 billion in additional UGF—effectively eliminating funding for the Department of Corrections, judicial branch, public safety, capital projects, water protection, and more. This gap, she implied, would necessitate a substantial draw from the Constitutional Budget Reserve (CBR) or drastic cuts, though exact CBR figures for the current cycle were tied to ongoing legislative negotiations.

Giessel, who chairs the Senate Resources Committee and has initiated a special committee on Arctic affairs, stressed the need for sustainable projects in healthcare and resource development, warning that the state’s reliance on the Permanent Fund demands careful stewardship.

The Spending Cap Solution

Senator Kaufman, representing South Anchorage, approached the fiscal challenge from a different angle: trust and predictability. A former quality manager in the oil and gas industry, Kaufman’s presentation emphasized “sequence risk” — the idea that doing things in the wrong order can doom well-intentioned reforms.

His central proposal: a spending cap mechanism modeled on the Percent of Market Value (POMV) formula currently governing Permanent Fund withdrawals.

“The POMV was mentioned earlier as a spending cap,” Kaufman explained. “Well, it’s not. That’s a revenue cap on a very select segment of revenue.” His proposal would extend similar percentage-based controls to the entire state economy.

For Kaufman, the spending cap represents a prerequisite for any discussion of new taxes. “I refuse unless we’re going to have a more significant discussion about spending protections,” he said, arguing that Alaska’s current status as a tax haven — with no state income tax or broad-based sales tax — gives it a competitive advantage that shouldn’t be surrendered without structural safeguards.

“How do we become a reliable partner in people’s lives, in people’s business endeavors?” Kaufman asked. “We need to put structures that help assure that.”

The Demographic Reality Check

Von Imhof, now four years removed from the daily pressures of legislative politics, opened with what she called the “devil in the details” of Dunleavy’s optimistic address. While the governor touted population stabilization and 6,000 new jobs, Von Imhof presented Alaska Department of Labor data painting a more troubling picture.

“The total population in red — yes, it’s increased overall,” Von Imhof said, walking through demographic charts. “But youth in yellow is down by 5,000 people. Working age in green is down 12,000 people.” The retiree population, meanwhile, has surged by more than 23,000 since 2020 as older Alaskans “age in place.”

Alaska’s population trends show a declining working-age population despite overall stability. Chart presented by Natasha Von Imhof.

The implication was clear: Alaska’s workforce — the engine of economic growth — continues to hemorrhage residents seeking opportunities elsewhere, even as the overall population numbers suggest stability.

The Dividend Dilemma

At the heart of the debate lies Alaska’s unique Permanent Fund Dividend, a yearly payout to residents funded by oil wealth that has become both sacred cow and political lightning rod.

Von Imhof introduced what she called “Comparative Dividend Currency” — a visual framework showing the PFD’s massive scale relative to other state spending priorities. One slide showed the University of Alaska and Department of Labor budgets dwarfed by the bright yellow bar representing PFD spending.

The state’s spending on the Permanent Fund Dividend (yellow) compared to investments in the University of Alaska and Department of Labor.

“We as a state would rather give a man a fish for a month or two, rather than teach him to fish for life,” Von Imhof said, her frustration evident.

Over the past six years, the state has spent between $650 million and $1.5 billion annually on the dividend — money Von Imhof argued could have funded capital projects, infrastructure, tourism facilities, and crisis treatment centers. In Governor Dunleavy’s current budget proposal, the PFD represents $2.2 billion, nearly one-third of the total unrestricted general fund budget.

“We don’t have a fiscal crisis,” Von Imhof declared. “We have a priority crisis.”

Unrestricted general fund spending for the past six years, with the PFD shown on the far left.

The Coalition-Building Challenge

Senate Majority Leader Giessel, a lifelong Alaskan and former Senate President, brought a different perspective shaped by years of building bipartisan coalitions. She defended the current legislative approach while acknowledging the challenges ahead.

On the question of taxation, Giessel highlighted a specific inequity in Alaska’s corporate tax structure. The state taxes C corporations like ConocoPhillips but has no mechanism to tax S corporations — privately held companies whose earnings flow directly to owners. Because Alaska has no personal income tax, these companies effectively pay no state income tax at all.

“There is a bill that would remediate this,” Giessel explained. “Actually, it would probably bring in $90 to $100 million a year, and that’s about equal to what a C corporation would pay. This is a very equitable correction in our tax structure that should have been corrected back when we got rid of our personal income tax.”

The proposal represents the kind of targeted policy adjustment that characterizes Giessel’s approach — incremental changes designed to address specific problems rather than sweeping reforms.

Crime, Homelessness, and Public Safety

While fiscal policy dominated the discussion, Von Imhof also addressed the elephant in the room for many Alaskans: visible homelessness and public safety concerns, particularly in Anchorage.

Despite overall crime rates declining, Von Imhof presented a series of stark images of tent encampments, outdoor deaths, and struggling businesses in Midtown Anchorage. “Homelessness and public camping are still significant problems,” she said. “There are tents, large encampments, a take-over of public spaces, and intoxicated people on drugs and/or alcohol displaying disturbing and threatening behavior.”

Her diagnosis: the state lacks the infrastructure to address the crisis. “We need a crisis intervention center for drug and alcohol treatment, detox, behavioral and mental health therapy, and rehabilitation,” Von Imhof said, careful to distinguish between criminalizing homelessness and addressing actual crimes while providing treatment opportunities.

Once again, she returned to her “Comparative Dividend Currency” framework, showing spending on the Departments of Corrections, Law, Public Safety, and the Judiciary stacked against the yellow background of PFD expenditures. 

We are not building crisis navigation facilities,” she said. “We are not engaging enough in workforce development for nurses, social workers, case managers, recovery coaches.”

Economic Growth and Capital Investment

Von Imhof also challenged the governor’s characterization of Alaska’s economic growth. While Dunleavy highlighted increased North Slope investment and activity in construction, mining, healthcare, and energy, Von Imhof presented data showing Alaska near the bottom nationally for actual economic growth over the past decade.

A chart from the Alaska Department of Labor’s Economic Trends magazine showed Alaska second-to-last among all states for real GDP growth, ahead of only North Dakota.

Alaska ranks near the bottom nationally for economic growth over the past decade.

“Why? Because the state of Alaska is not prioritizing capital investment,” Von Imhof argued. The state’s capital budget, shown in blue on another chart, averages $150-$400 million annually from unrestricted general funds — a fraction of dividend spending.

Alaska’s anemic capital budget (blue) compared to Permanent Fund Dividend spending (yellow).

“Capital projects create year-round jobs that pay competitive wages, provide retirement and health benefits, that feed families for a whole year, not just one month or two,” Von Imhof said. “This will keep the working age population in Alaska.”

The Generation Gap

Perhaps Von Imhof’s most striking data came from an analysis of roughly 48,000 social media responses from millennials and Gen Z Alaskans discussing Anchorage. The results, she said, came from “the 30 and young 40-year-olds who are our emerging leaders.”

What these younger Alaskans valued: outdoor recreation, unique seasonal experiences, community feel, proximity to nature, and cultural diversity. What would drive them away: lack of job opportunities, high cost of living (especially housing), the opioid epidemic, and limited activities for children.

Notably absent from their priorities: the Permanent Fund Dividend.

“They want jobs, housing, and for our elected leaders to deal with crime associated with the drug epidemic,” Von Imhof said. “Not a check.”

The Governor’s Mixed Messages

The panelists also grappled with what Von Imhof called “confusion” following the governor’s address. In his speech, Dunleavy had declared, “We can support ourselves by creating more wealth from our resources, not pick-pocketing cash from each other’s pockets.”

Days later, his administration introduced legislation (SB 227/HB 284) proposing a statewide sales tax, changes to oil and gas taxes, and enshrining the Permanent Fund Dividend in the state constitution.

“Governor says in speech: ‘Not pickpocketing cash from each other’s pockets,'” Von Imhof noted. “But then drops a bill with a statewide sales tax a few days after the speech?”

She supported one element of the proposal: consolidating the Permanent Fund’s Earnings Reserve and Corpus into a single account with tighter spending controls. But the overall package left her with questions: “Where will the additional revenues be spent? Is there a plan for capital spending? What is the vision?”

Taxation: The Third Rail

The question-and-answer session revealed just how difficult Alaska’s fiscal challenges remain. When asked about new taxes to balance the budget, the three panelists offered characteristically different responses.

Giessel focused on her S-corporation tax proposal as a matter of fairness and equity. Kaufman made his spending cap prerequisite clear: “I’ll consider a tax if I can see progress on the protection side of it.” He worried about “sequence risk” — implementing taxes before spending controls and spooking businesses.

Von Imhof was perhaps most blunt: “If we’re gonna collect $700 million in taxes of any source, and we’re going to turn around and pay a $1,000 dividend, which costs about $680 million, why would we set up a $10 million bureaucracy in the government to collect taxes from people around the state and businesses around the state, only to turn around and spend and give it out in a check?”

Her message: determine specific spending priorities, understand what can realistically be collected from 700,000 people and tourists, and conduct rigorous economic impact analysis before implementing any new taxes.

The Path Forward

As moderator Jon Bittner noted, the forum showcased “a phenomenal range of perspectives” and “depth of knowledge” about Alaska’s economy. But it also highlighted just how far apart the key players remain on fundamental questions.

Senator Kaufman sees salvation in structural protections and strategic planning — spending caps that create predictability and trust. Senate Majority Leader Giessel focuses on incremental reforms and building coalitions capable of passing legislation. And Von Imhof, freed from electoral pressures, advocates for a wholesale reassessment of the state’s priorities and a honest reckoning with the opportunity costs of the Permanent Fund Dividend.

The next legislative session will test whether these divergent philosophies can find common ground. With Governor Dunleavy in his final term, oil prices volatile, and the working-age population continuing its exodus, the window for action may be narrowing.

As Von Imhof put it in her closing slide: “Lots of good things happening. But lots more can be done. Hopefully we can resolve the PFD calculation.”

The question is whether Alaska’s leaders can agree on what “resolve” means — and whether they can do it before demographic and economic realities make the choice for them.