Dunleavy’s lone revenue pitch—legalized gambling—may never materialize

The biggest problem facing Gov. Mike Dunleavy’s proposal to constitutionalize the dividend is the more than $1 billion structural deficit his proposal would create and the uncertainty on how it’d be filled. Most expect a deficit of that magnitude would require a combination of deep cuts and steep taxes, both of which the Dunleavy administration would very much like to not talk about until after the state locks the PFD into the constitution.

When pressed by legislators less willing to buy into his “C’mon, just trust me” plan, his administration has offered only vague details about “new revenue measures are very different than any tax that we’ve seen in Alaska” with the only specifics coming around a proposal for legalized gambling in Alaska, a move that has raised eyebrows for its potential social impact and what would likely be drop-in-the-bucket revenues.

But according to a hearing today, that proposal may never come.

Deputy Revenue Commissioner Mike Barnhill made the admission during today’s meeting of the House Ways and Means Committee. He told the committee that the state has hired a contractor (for nearly $400,000) to assess the potential for revenue and is preparing “a socioeconomic study” to be released later this fall along with “potential legislation,” which would presumably be the August special session.

Barnhill preempted questions about that potential legislation by adding, “I don’t have any update on the details of when that legislation or even if that legislation will be introduced at this time.”

The administration has said next to nothing about the gambling proposal or any other revenue proposals during this year’s session, instead arguing that the state must first enshrine the dividend before getting into less popular issues like cuts and taxes. However, previous estimates produced by the Dunleavy administration have not painted a particularly glowing picture for gambling revenues.

In a presentation given in May 2020, the administration estimated that taxes on card rooms would generate just $2.3 million annually while a full-suite of gambling like daily draws, instant lotteries such as scratch-offs and video lottery terminals could raise as much as $135 million annually. That full suite of gambling measures was proposed by Gov. Dunleavy during the 2019-2020 legislative session (and has not been reintroduced this year) but it failed to gain any traction in the Legislature.

This year, legislative leaders have expressed little enthusiasm for legalized gambling, noting its unknown social costs.

“I’m not interested in legalizing gambling, I’m not interested in legalizing prostitution to fix the problem,” Senate Finance Committee co-chair Sen. Bert Stedman, R-Sitka, said during a hearing this session. “So, we’ll see what comes to the table.”