Election year should provide impetus for closing budget gap

Posted: Sunday, January 11, 2004

Alaska's lawmakers are back in Juneau for the start of the second session of the 23rd Legislature which begins Monday. That doesn't mean they've been idle since their adjournment in May, however.

In fact, there seemed to be more legislative activity than usual over the interim with lots of discussion on possible solutions to the state's fiscal gap and ways to increase education funding.

While conventional wisdom has been legislators will be afraid to act on hot-button topics this year because it's an election year, all the activity during the interim is a hopeful sign that the opposite will occur. Legislators have been busy talking to Alaskans and getting their ideas so they can get to work on those important issues as soon as the session convenes.

The fact that it is an election year should be a catalyst for making the tough decisions. Alaskans should resolve now not to re-elect any legislator who tries to put off those decisions. The litmus test should be: How did this legislator improve the state's financial picture?

The state's budget gap isn't new. For 11 of the last 13 years, Alaska's spending has exceeded its revenues. Lawmakers have filled the gap with money from the state's Constitutional Budget Reserve. Since at least 1999, the year after oil prices took a major dive, Alaskans have spent countless hours debating the budget gap. In fact, in 1999, the Peninsula Clarion ran a contest seeking readers' solutions to the state's financial situation. The winner was Soldotna resident and community activist James E. Fisher. His answer is as timely now as it was then. We reprint it here as inspiration for legislators to act. The state has talked about this issue long enough.

Mr. Fisher's thoughts and solutions on the budget gap: Is there really a budget gap, when all public resources of Alaska are considered? There have been arguments that such does not exist. Wouldn't other states look at we Alaskans in bewilderment when we claim to be lacking in public resources to the extent of a "budget gap." I hope we aren't believed to be fools.

For a reasonable solution of the touted "budget gap," Alaska needs to accept responsibility for the existing conditions and our needs for the services we get (but are not always ready to acknowledge) from our various levels of government. We do receive essential services, i.e., education, public safety, health, etc. and etc.

...(C)ries to "cut the budget" (are) really a demand to reduce a service of somebody other than the demander. Have any of us heard with any frequency, or at all, from someone asking to cut a budget in which they might be immediately interested? Since we have had about six years of budget reductions, further slashes should be avoided.

For the most equitable spread of the costs, a state income tax based on ability to pay is fairest and would reach even those outside of organized boroughs. It is also the most economical to administer, requiring probably not more than 2 percent of receipts. A sales tax could cost up to 10 percent or more to administer and would badly impinge on the boroughs and cities, so should be avoided.

The most painless of needed revenues would come from permanent fund earnings (which are separate from the corpus, or body, of the fund).

Considering all the above, the most reasonable solution to a budget gap will include an income tax, based on ability to pay, and use of permanent fund earnings in an amount which will enable continued permanent fund dividends.

Among other suggestions for reducing the budget gap from that 1999 contest were:

Privatize as much as possible.

Have the Legislature meet every other year.

Establish a state sales tax.

Consolidate smaller school districts. Go from 52 to no more than 10 school districts statewide. This cuts 42 sets of top administrators.

Cut the budget across the board based on a fixed formula developed by the Legislature and the governor to ramp down state spending approximately 25 percent over the next five years.

Start an Alaska lottery.

Cap the permanent fund dividend at $1,000, $1,300, $1,500 or $1,600.

Create a toll fee for all tourists traveling by motor home to Alaska.

Pay legislators less.

Raise taxes on tobacco and alcohol.

Those answers from 1999 are an indication that Alaskans are and have been willing to do things differently than they've done them in the past. Lawmakers who fear not getting re-elected if they act on this issue should really fear not getting re-elected if they don't. Plenty of solutions for closing the gap between state spending and revenue have been out there for a long time.

We can't wait to see what happens this session.

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