Restrooms in state parks and at the Palmer visitor center are among the 49 projects approved for funding from head tax receipts.

The Alaska Legislature appropriated $85.8 million from the $50 cruise passenger head tax to fund 49 projects that range in the amounts of $430,000 in improvements to Wasilla’s airport train station, to $10 million for the Port of Anchorage expansion.

The following is a reprint from the Alaska Legislative Digest March 27th issue:

Gradually the legality of the cruise ship tax is getting ‘outed’ – yes there are problems

Alaska’s cruise ship “head tax” seems to be gradually getting “outed.” No one wants to ask the question directly on constitutionality. The Attorney General’s office has avoided direct response (as we understand, it was instructed not to comment). But gradually questions are emerging. Snippets from legal advice have surfaced; discussion over last year’s appropriated projects, and those proposed this year, reveal legal doubts. An Office of Budget and Management memo, responding to questions requested in writing by the Senate Finance Committee, gives insight to legal concerns.

OMB memo gives reference to legal concerns

The memo, signed by OMB Director Karen Rehfeld, said that Gov. Palin a year ago declined to submit projects to be funded from cruise ship tax revenue, arguing then that this was the Legislature’s responsibility. However, interestingly, the memo acknowledges that the Department of Law in 2008 advised the Legislature to fully appropriate the money: “… because not doing so might open the state up for class action suit by passengers.” What this makes reference to is that the state may not use the proceeds of the tax as general revenue. It is also notable that the reference is not to the “cruise operators,” but rather to “passengers,” because they are the ones taxed.

Money has to be spent and cannot be used for state general revenue

The irony here, as the memo outlines, is that the Legislature fully appropriated the proceeds of the tax last year (FY-09) for projects related to tourism or marine improvements, but the governor vetoed $18.3 million in projects, including a cruise ship impact study. The catch is that these funds, like other unspent funds in state accounts, lapse into the state general fund at the year’s end. OMB argues that these unappropriated funds are “still available” for legislative appropriation. The issue is that cruise tax money, to be more legally defensible, should be spent on projects that support the cruise industry, such as shore side improvements to marine facilities.

The basic question? The constitutionality of a tax to enter a state!

However, what has been studiously avoided is the basic constitutional question of how far extended from the support of a ship or marine facility use of such a tax may go. Again, the memo cites that representatives of the attorney general’s office met with legislators and staff in the closing days of 2008. The purpose was “… to discuss questions … about restrictions on expenditure of the tax proceeds.” Again they advised that not spending the money or holding these proceeds to succeeding years could increase chances of litigation.

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