Statewide employment nudged up again in May for the fifth month. The increases are small but steady, and are led by high-wage industries like petroleum (up 5.3 percent in May) and construction (up 6.9 percent). Significantly, professional and business service employment, which includes engineering, began rising in April (0.8 percent) and continued in May (up 1.1 percent) after months of decline. Other sectors like health care, retail, leisure and hospitality and trade, transportation and utilities showed continued small gains.

Dunleavy’s cuts, to Medicaid and municipalities, still being assessed
The impacts of the governor’s budget vetoes made Friday, June 28, are still being assessed. Health providers are wondering just how the state administration will achieve an additional $50 million cut to Medicaid on top of a $100 million reduction made already by the Legislature this year. The $100 million was linked to proposed program changes but the $50 million is basically an unallocated reduction. Since Medicaid is federally-mandated people just can’t be cut off. Absent reorganization, which takes time, savings could be achieved by cutting payments to physicians, nursing homes and hospitals. That would get very messy.

Money for the state ferry system, funded with a very limited winter service, was left intact in the vetoes, a relief to coastal communities. A cut of 50 percent of state school debt reimbursement was expected and can be handled by larger municipalities (with some local tax increases) but will hit small communities hard. We will report more on this.

Municipal League unit to coordinate local online sales tax payments
Alaska municipalities are working through tricky issues of tracking on-line retail sales and getting sales tax paid, a problem taxing jurisdictions and big online retailers like Amazon are wrestling with nation-wide. The Alaska Municipal League is leading the effort with a working group of its member local governments. A June 6 meeting organized by AML with about 50 local officials has produced a consensus that a special-purpose subsidiary organization will form and contract for software development that could be used initially by Amazon and eventually others to collect sales tax on purchases. It’s a complicated undertaking because there will be about 100 different municipalities with different tax rates and exemptions, but it appears doable. The AML subsidiary would be the point of contact for the on-line retailers, receive the tax payments and remit the money to local governments under the plan. There’s still a lot being worked out including agreements on certain common definitions.

Under a federal court decision any retailer with $100,000 or more of sales in a state will have to collect and make sales tax payments, but retailers and states are working out the mechanics. There is already a multi-state compact, the “Streamlined Sales and Use Tax Agreement” that 20 states have joined. The Alaska/AML group might be able to join this, although there may be state legislation needed. Multi-state businesses like working with states and local governments through multi-state compacts because terms are uniform, which simplifies administration.