Kenai Peninsula faces projected $9M–$11M school-funding obligation under LNG tax bill

The Kenai Peninsula Borough faces a projected mandatory school-funding increase of $9 million in FY34 and $11 million in FY42 under the Senate Finance version of the Alaska LNG tax bill, according to Legislative Finance Division modeling prepared for the HB 381 conference committee.

How the Increase Is Calculated

All three bill versions exempt property subject to the Alternative Volumetric Tax from the Required Local Contribution. The Senate Finance and Senate versions go further, applying the RLC to the AVT revenue itself at 13.25 percent, calculated as 2.65 mills divided by the 20-mill petroleum property tax rate. The LFD presentation notes that the AVT portion is exempt from the 4 percent annual cap on RLC growth established by HB 28 this session, compounding the borough's exposure as LNG revenues scale up.

Which Boroughs Are Affected

The LFD analysis found the North Slope Borough unaffected because it already hits the 45 percent basic-need cap. Fairbanks North Star, Denali, and Matanuska-Susitna boroughs show negligible impacts through FY42. The Kenai Peninsula Borough stands alone as the municipality facing a material increase.

What the Conference Committee Will Decide

The House version exempts AVT-subject property from the RLC entirely and does not apply the RLC to AVT revenue. The Senate floor amendments include a staggered approach: the AVT-linked RLC add-on is reversed by a second amendment that takes effect five years after the Phase 2 final investment decision, restoring prior RLC treatment. The LFD presentation notes that, based on Department of Revenue modeling assumptions, this sunset occurs before the RLC is actually applied to the AVT.

The version the conference committee adopts will determine whether the borough's school budgets absorb a growing cost or remain exempt from the additional required local contribution tied to AVT revenue.

The conference committee was scheduled to meet Saturday to continue its review of the Senate floor amendments.