Morethan any other state in the union, Alaska is dependent on state revenue from oiland gas production. With the commodity price collapse well over a year old, thestate is now facing a budget deficit approaching $4 billion while the governor andlegislators argue over how to approach the issue.

Alaska'sbudget deficit sits at $3.8 billion and will continue to climb unless prices reboundquickly or major changes are made to the budget, said Grace Jang, communicationsdirector for Gov. Bill Walker. And the fate of the state's budget is inextricablylinked to its huge supply of hydrocarbons.

"Upto 90% of state revenue comes from oil," Jang said in an interview. "[Thedeficit] is due largely … to low oil prices, as well as low oil production."

How tofix the deficit has become a source of contention between Walker, an independentelected with Democratic backing, and the Republican majority that comfortably controlsboth houses of the Legislature. Walker and the Legislature have already clashedover the fate of the Alaska StandAlone Pipeline, which the governor championed, and the Alaska LNG pipeline,which the state bought a 25% interest in for more than $64 million in 2015. The two sides are preparingto square off again.

In aletter to members of the state House and Senate dated March 23, Walker said he wasprepared to call a special session of the Legislature once the current session endsApril 17. He also said measures to balance the budget by 2019 would have to includea tax hike to go along with a reduction of tax credits for oil and gas producersthat the Legislature is already working on.

"Thereare three things that must happen in 2016 to achieve the goal of a truly sustainablebalanced budget: Reduced state spending, restructure of Permanent Fund Earningsand Dividend program, and new revenues to include some form of a broad-based tax,"Walker wrote. "Make no mistake, I consider these requirements written in pen;how they come together, however, is still very much in pencil."

Republicanshave indicated for months that they will look for Wite-Out to eliminate any taxincrease Walker puts in pen.

"There'sbeen some tendency on the part of the administration to start throwing around ordersto the Legislature, and we just don't respond to that," Sen. Pete Kelly ofFairbanks, a member of the Senate Finance Committee, said at a news conference inDecember 2015. "I'm not getting into the tax business while I know governmentis still too big."

RepublicanSen. Pete Coghill of North Pole told the AlaskaDispatch that the Legislature can come up with alternatives that do not includea tax increase or a special session, but Walker's impatience is not speeding upthe process.

"Butby getting all frustrated and doing dramatic things, it doesn't get it faster,"Coghill said. "He wants to hurry up something that can't be hurried up."

ShouldWalker decide to call a special session, Jang said, he would be likely to do sowithin 24 hours of the regular session gaveling out.