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Alaska Governor Proposes Tax Increases and Cuts to Medicaid After Expanding Obamacare

Government

An income tax increase and cuts to the state's Medicaid program cast a dim outlook for low-income Alaskans.

Alaska Gov. Bill Walker speaks at a news conference on Wednesday, Dec. 9, 2015, in Anchorage, Alaska. Walker unveiled his plan to close a $3.5 billion gap in the state budget, including instituting a state income tax for the first time since 1980. (AP Photo/Mark Thiessen)

Last year, Alaska Gov. Bill Walker unilaterally expanded Medicaid under Obamacare, despite a clear prohibition from the legislature.

Walker and the legislature are currently embroiled in a heated legal battle over whether the expansion is authorized under Alaskan law. At the time, many worried that Walker’s decision would put stress on the state budget and require cuts to other priorities and the most vulnerable. We have seen that elsewhere, and now Alaskans are seeing it first hand.

Alaska Gov. Bill Walker speaks at a news conference on Wednesday, Dec. 9, 2015, in Anchorage, Alaska. Walker unveiled his plan to close a $3.5 billion gap in the state budget, including instituting a state income tax for the first time since 1980. (AP Photo/Mark Thiessen)

As Alaska’s legislative session begins, Walker is proposing serious cuts to Medicaid.

Significant reductions in Medicaid are being made. Between reductions made by the Governor and the Legislature in the FY16 budget and the proposed reductions in the Governor’s proposed FY17 budget we will reduce the Medicaid budget by over $90 million in general fund reductions. Medicaid expansion-related reductions in other state programs are bringing us another $10 million.

That's $100 million in budget cuts related to Medicaid. And remember: the Walker administration has already proposed slashing funding for children and adults with developmental disabilities.

But this isn’t the only problem that Alaska’s poor have to face. Walker is also proposing a 1.5 percent personal income tax for Alaskans - something the state has not had since 1980. The proposal could squeeze the taxpayers for $200 million each year.

If that’s not enough, the governor is also proposing to “reduce the size of annual Permanent Fund dividend checks to an initial amount of about $1,000.” In Alaska, the Permanent Fund pays each Alaskan who has lived in the state for a full calendar year. It’s essentially a thank you for living in the largest, coldest state in the Union, but it’s something that many Alaskans do rely on.

Walker admits that “There’s no one who isn’t going to be impacted in some way, by what we’re going to propose.”

He is also proposing a tax increase on mining, fishing, tourism, and oil and gas - all industries that are critical to Alaska’s economy; industries that may be forced to make job cuts to absorb higher taxes.

All of these changes are being made to fund the state’s ballooning budget - a budget made larger by Walker’s expansion of Medicaid.

In fact, Medicaid is the second largest portion of Alaska's budget, just behind education costs. As the state’s share of Medicaid expansion costs begin mounting in the next budget, Alaskans will undoubtedly see more cuts to Medicaid, education and other programs to compensate for the hit to the state's budget.

During the expansion debate last year, Alaska State Sen. Mike Dunleavy noted "recent well-publicized reports of several other states that grossly underestimated the numbers and cost involved" should be studied.

One example of a state besieged by drastically increasing Medicaid costs is Kentucky - where they a saw much larger enrollment than expected.

According to an Associated Press report, Kentucky, for example, had almost 311,000 new Medicaid enrollees in fiscal year 2014. This figure is more than double what was projected for 2014, and more than they expected even through 2021. Kentucky was forced to revise its Medicaid cost estimate from $33 million to $74 million for fiscal year 2017, and the projection for 2021 is now a staggering $363 million.

A Kentucky state senator told the AP that Medicaid expansion had "created a 'monstrous hole' in their budget that they did not know how to fix."

Those who Medicaid was originally created to support - poor seniors, children, families, and the disabled - are the ones that will feel these cuts the most. That’s not a threat - it’s a reality we’re already seeing.

We don’t have to look further than California to see the devastating impact Medicaid expansion is having on the developmentally disabled. Thanks to the expansion-amplified budget crisis, California may not be able to keep the needed money flowing into groups like the Arc, which provide critical services to the disabled.

And in Alaska, instead of their vulnerable residents getting the help they need, they will face higher health bills, decreased access to care, and will continue to be targets of budget cuts as their state Medicaid costs balloon far beyond projections.

These budget cuts in order to afford Alaska's rising Medicaid costs are only the beginning. Legislators will face the same problem next year, and the year after that, and in perpetuity because of Walker’s decision to embrace and expand Obamacare.

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