By Ed Martin, Jr.
Alaska’s Constitution promises equal protection, maximum local self-government, and uniform taxation within units of government. Yet Alaska’s local governance framework—unique in the United States—creates an inherent disparity between organized boroughs, which must assess property at “full and true value” and fund schools, public safety, planning, roads, and local services, and the Unorganized Borough, which pays no local taxes, conducts no property assessments, and depends entirely on State general funds for many of the same services.
For decades, this imbalance was tolerated as a product of geographic remoteness and historical development. However, since 2016, the Legislature’s repeated reduction of Permanent Fund Dividends (PFDs) has introduced a new constitutional tension:
PFD reductions function as a statewide tax, borne equally by residents of both organized and unorganized areas, while only residents of organized boroughs also bear local property taxes.
This creates a two-tiered burden that the framers of Article X never anticipated.
Constitutional Framework: Equal Protection and Local Governance
Article I, Section 1: The Equal Protection Clause
Alaska’s equal protection clause is broader than the federal version. It prohibits arbitrary disparities in how similarly situated persons are treated by government.
Article X: Structurally Different Units of Governance
| Organized Boroughs | The Unorganized Borough | |
| Local Government | Exercises local taxing and assessment powers | Lacks local government; State provides services (Art. X §12) |
| Property Taxes | Required to annually assess property at full and true value (AS 29.45.110) | No obligation to levy taxes or assess property |
| Infastructure | Must provide education funding, planning, public facilities, etc | No local contribution to schools or public infrastructure |
Because the Constitution itself created the distinction, courts hold that residents of organized vs. unorganized boroughs are not “similarly situated” for equal-protection purposes.
This is why litigation challenging the tax disparity has repeatedly failed.
The “Full and True Value” Mandate and Disparate Local Burdens
AS 29.45.110 requires that municipalities assess property at market value. This statutory command forces inflationary increases in taxable value, produces higher annual property taxes regardless of local income conditions, applies only to organized municipalities.
These mandates reflect the historical assumption that organized boroughs would build their own revenue bases while the unorganized borough would remain sparsely populated with minimal governmental needs.
That assumption is no longer accurate.
PFD Reductions: A Statewide Tax That Magnifies the Disparity
Since 2016, Alaska has diverted billions in PFD payments to cover state spending.
As recognized by economists and the Alaska Supreme Court (Wielechowski), the withheld portion of the PFD is functionally a statewide tax collected from all Alaskans equally. But the benefits of this revenue are not equal. Services funded with diverted PFD dollars include:
- Public education
- Troopers and VPSOs
- Public health
- State infrastructure
- Welfare programs
- Rural aviation
- Transportation system subsidies
These services are disproportionately State-provided services in the Unorganized Borough. Residents in organized boroughs help fund these services both through local taxes and reduced PFDs.
This creates a two-tier fiscal burden:
| Resident | Local Taxes? | Statewide PFD Reduction Tax? | Net Burden |
|---|---|---|---|
| Organized Borough | Yes (property + sales) | Yes | Highest |
| Unorganized Borough | No | Yes | Lowest |
This is the first time in Alaska history where organized-borough residents are effectively taxed twice, while unorganized-borough residents are taxed once.
Constitutional Tension: Equal Protection vs. Article X
Although courts historically allowed the disparity because “similarly situated persons” analysis distinguished between the two borough types, the introduction of a statewide tax (PFD reduction) changes the constitutional landscape.
Unlike local taxes, PFD reductions apply to all residents equally. The previous argument that unorganized residents are “not similarly situated” weakens because all residents are equally subject to the PFD reduction, but only some must additionally pay property taxes.
This undermines the integrity of the equal-protection framework because the statewide tax (PFD reduction) funds services that only some people receive without contributing locally.
The Legislature has effectively shifted the cost of unorganized-borough services onto residents of organized boroughs. Is this a form of unconstitutional cost-shifting? Probably not under current case law. Is it legally permissible but inequitable taxation? Absolutely. Is it contrary to framers’ intent for “maximum local self-government”? Strongly yes. Is it politically volatile? Undeniably.
Why Courts Would Uphold the System (For Now)
The Alaska Supreme Court would likely uphold the current dual-burden system for the following reasons:
- Article X’s textual framework explicitly allows borough differences.
- The PFD is not constitutionally mandated in any specific amount.
- The Court rarely invalidates legislative fiscal policy.
- The framers left revenue structure decisions to the Legislature.
However, Courts can uphold a system while acknowledging it has become fundamentally unfair. This is the position Alaska has reached.
The Path Forward: Legislative Responsibility
The Constitution does not require equal tax burdens across boroughs. But the Legislature has the authority and the responsibility to correct inequities caused by mandatory full-value assessments, lack of taxation in the Unorganized Borough, and PFD reductions functioning as a statewide tax.
Available remedies include statewide assessment in unorganized areas, allowing organized boroughs to cap assessments (e.g., 5%), restoring the statutory PFD formula to eliminate the hidden subsidy, and modernizing Article X through constitutional amendment.
These are legislative policy decisions, not judicial ones.
The combination of a mandatory tax and assessment burden on organized boroughs, zero local tax burden in the Unorganized Borough, and a statewide tax via PFD reductions has created a dual taxation system never envisioned by Alaska’s framers. While technically constitutional, the system is inequitable, unsustainable, in conflict with the promise of “maximum local self-government,” and politically corrosive. Legislative reform is both warranted and overdue.
Ed Martin, Jr. is a retired 50+ year IUOE, General Contractor and long-time Alaskan with a strong belief in the National and State Constitutions and the inherent rights of citizens. He devotes his retirement to investigating Constitutional violation(s) in hopes of protecting the eternal rights of liberty.
TO: Mr. Ed Martin,
While in Juneau I spent a great deal of my time attempting to point out the inequities of those in certain parts of the unorganized borough, with per capita wealth surpassing many in the organized borough, paying little if anything for state services. Schools in certain wealthy REAA’s being the premier example.
If you would like to engage in further discussion, please let me know.
Thank you for your work.
Gary Wilken. (retired 2019)
State Senator – Fairbanks / Ft. WW
[email protected]
Without a doubt, the state is absolutely being steered down a road of mutually assured destruction. Ove a third of Alaska’s population is on Medicaid, which is financially unsustainable. Much of the rural population has become increasingly dependent on state money for everything from fuel to power in areas where there exists zero economic activity, which is also economically unsustainable. The federal government has printed all the money it can without becoming insolvent, so the dollars from DC are going to be much reduced. Alaska has become a welfare state and everybody working in private industry is being screwed to support the largesse to those that do not.
And there is much more than your stated facts. Those of us who “do” are being taken as suckers by those who “don’t” and never will do anything but complain and scream how they are victims.
No, not good idea. While there are many points to be made, the first question you should ask is why you think municipalities have to implement a property tax? They have to assess but they don’t have to use property tax for revenue. This idea is only about enslaving those areas where people want to live the quiet life without another unneeded layer of government. As long as the State of Alaska only lets you collect backdue property tax “in rem”, meaning only by taking the house, it will be a patently unjust system and those who can least afford to lose their largest asset will suffer.
You’re no doubt familier with the phrase “No Taxation Without Representation!” right? The vast areas of the state, specifically the REAA’s are the very epitome of “Representation (state spending!) Without Taxation!”
I appreciate your your comment: “…..areas where people want to live the quiet life without another unneeded layer of government.” Sure. Are you also ok with those same areas having state funded schools, Troopers, roads etc? Or should the state just continue to pick up the tab for all services?
The education piece always upset me. If you live in a borough, property taxes (mandated) pay for education. 75% of my property taxes go to the school district. But in a majority of the geographic state, villages, towns, and small regions pay NOTHING for education.
Time to change that. Somehow. I know the lawsuit with Ketchikan…. but come on.
I don’t know where Mr. Tired lives. I live in the Fairbanks borough. 75% of my taxes here definitely do not go to education.
It is 70% or so here in Anchorage. The Mat Su Borough is like 60%.
By the way… the state unequally favors non-borough resients by making folks who live in every borough pay more. The folks an unorganized areas pay nothing.
I am childless by choice and I tire of paying the dollar costs and negative externalities of children.
The PFD has proven to be a worm on a hook jigged by Hammond and Randolph. Bob Richards was right. It will end up making subsistence look like a walk in the park.
Very informative article thank you for publishing
As a “civilized society” we are in the throes of death: rigor mortis will soon to follow. Do as you think that you must: hoard your gold or beg for your heavy soul, but you can’t forestall death.
If you live in an unorganized borough….FIGHT TO STAY THAT WAY ! You are an example to the nation of whatAmerica was and should be. You are the ones who opened up Alaska ! You live w/o many services and endure high prices for basics. Self govern. Govern less? Govern best !
Thanks
The author is perpetuating the same old myth – after saying that the dividend had no effect on borough v unorganized borough infrastructure, school, and tax – he now goes to say that somehow robbing us of the PFD increases the disparity in services. Borough residents – and now I am one having left the bush almost three years ago – if you want all that local say and representation you (not the bush) must pay for that. Disappointed? Too bad – quit electing communists and you will find a great deal more satisfaction in your local government. STOP blaming the bush for your own inadequacies. There is no fairness issue here, only selfishness and distortions and bold lies.
Well done, Ed. Cheers –
I’ve lived in unorganized boroughs and organized boroughs. Its time to organize all boroughs to equalize the taxation issues and the create better use of state and federal and private industry funding. If not, then I suggest a tax on all corporations including the wealthy native corporations.
The same old argument that leaves much information out. In most unorganized boroughs communities have a sales tax to support the local government, fire departments, police departments, etc. Much of the land in unorganized boroughs belongs either to the Native Corporations, or the Federal Government. Native Corporation’s land is exempt until it is developed or leased. If the Federal Government owns it the State of Alaska receives impact aid to offset what could be charged in property taxes. Force the unorganized boroughs to organize and you add another layer of government that needs money to operate without a way to pay for it. If you are so opposed to paying property tax for services feel free to relocate to an unorganized borough area. We could also look at reinstating an Alaska State Income Tax.
We use to have a flat 100.00$ per year tax on working class. My parents paid that, give our dividend back and tax us a flat per year tax inflation adjusted of course. I prefer to remain in unorganized area, Copper Center, close to the area I grew up, Sourdough. I lived under taxed areas both Anch 9 years and Southern Ca. 5 yrs. I paid lots of taxs and received very little in return, pot holes both, houses burn down all 3, hm less all 3, police response for theft and crime not much help and crapy school results the same all 3. Further more dividends tax is on children, what other state does that? Not Ca in ‘85/90. 4 out 7 schools have closed here, now they are bussed in from up to 50mi, school closes at -50*. Does Anch do that? We don’t pay but we have to be more self reliant. I worked my entire life, my parents did as did my inlaws. We had to leave in summers or work what local jobs push to shove. Just don’t over spend Mr. state government
Imagine if the racial demographics were reversed in this inequity.
Despite the Native corps pulling in billions – their members getting quarterly dividend checks, federal welfare, etc – they pay next to nothing.
We can say the truth again – Trump won.
The pfd is probably the worst thing Alaska government ever did. It takes over every legislative session. As a conservative I hate the government giving out money like people deserve it because they live here. Yet, as Alaskans we pay the state nothing in taxes. Just end it already and run the state instead of this constant argument. If $1000 or even $3500 is going to make or break you you have way bigger problems.
I’m wondering why the MSB, FNSB, and the KPB, don’t start their own L/E? Remove the Troopers, which is subsidized by the State. Those boroughs need to start paying.
Honesty Test: if your borough is taxing you and you do not feel it is worth it, would it not be worth it to move out here?
Or do you like your urban setting too much to let go?
You have the ability to chose.
Property tax, any more tax, on rural Alaska will be a temporary fix. What little local business that exist will dry up, and in time the state will have to deal with the financial burden again.
Family and friends went trough something like this decades ago….
Look what happened to upstate New York. Around the finger lakes there use to be a decent economy then it got taxed out of state. The leading “business” are now state and local government, Medicaid, welfare, social services, SNAP payments, and drug rehab. Which the state still pays the bigger burden for.
Take for example Chemung County, New York, and other upstate counties face real economic challenges, high poverty rates, low median household incomes, and crime. Many families are struggling to meet basic living costs which the state has to subsidize anyway through SNAP and Medicare benefits.
In Chemung County the median effective property tax rate is 3.89%, which is higher than the national average of 1.02%. plus, the sales tax is 8.00%, combining both state and local taxes, contributing to the overall tax burden in the area. Which brings back the need for public assistance.
Taxing rural Alaska will only be a temporary fix to a problem that has and will be practically unfix-able. through taxation.