Lawmakers waste no time in debating closing fiscal gap

Posted: Tuesday, January 15, 2002

JUNEAU (AP) -- Lawmakers took a first step toward a possible statewide tax aimed at closing the $1.1 billion deficit in Alaska's budget when they returned to work on Monday.

They began talking about it.

Senate President Rick Halford, R-Chugiak, vowed to work with leaders in the state House to formulate a plan that would close a chronic gap between state revenues and expenses.

But he gave no indication that a plan would be in place by the end of this legislative session. And he does not think the public embraces the need for immediate action.

''We've basically been three years away from a disaster for the past 10 or 15 years,'' Halford said.

Lawmakers returned for the second session of the 22nd Alaska Legislature to begin tackling a budget deficit that prognosticators say won't heal itself in the way of past crises.

A key part of the state's budget is a savings account called the Constitutional Budget Reserve, which has contributed $4 billion to state coffers since 1990.

That fund is expected to be down to $2.3 billion by the end of this fiscal year and empty by July 2004.

A caucus of bipartisan lawmakers spent the summer highlighting the looming problem in a series of meetings around the state.

The caucus failed to emerge with a plan, but instead offered up a series of statewide and industry taxes along with ideas to use permanent fund earnings to close the deficit.

Members of the caucus want the Legislature to agree on a comprehensive plan this year in order to avert more painful tax increases and cuts in state services down the road.

Business leaders punctuated that call with a series of advertisements that ran in the state's largest newspaper on Monday.

The advertisements were displayed prominently through the Anchorage Daily News urging lawmakers to take action in this, an election year where 57 of 60 lawmakers could be up for re-election.

''Before our economy comes to a complete stop, we need the Alaska Legislature to adopt a fiscal plan for the state,'' one advertisement said.

Kevin Bruce, with the Anchorage firm Northwest Strategies, which coordinated the campaign, said the advertisements were meant to send a strong message to lawmakers to act.

''I think this is a reminder shot that there are a lot of people interested in solving this fiscal plan,'' Bruce said.

However, a past House Majority Caucus poll showed that the public is not supportive of statewide income or sales taxes and does not want permanent fund earnings used to balance the budget.

Halford likened this latest budget crisis to one in 1999 when Alaska state government -- which is very dependent on oil revenues -- was faced with a $1.2 billion deficit after oil prices sank to $9 per barrel.

Gov. Tony Knowles proposed a plan that included an income tax and a plan to use permanent fund earnings to balance the state budget. But oil prices rebounded, the crisis was avoided, and an advisory vote on balancing the budget failed at the polls.

''That's part of the reason the public doesn't give us a lot of credibility when we come back with the same story,'' Halford said.

Halford said it is unclear how serious the situation is this year. But any deficit is a problem that needs to be addressed, he said.

''I don't think we are that close, but it doesn't mean we are not closer than we were 15 years ago,'' Halford said. He said any fiscal plan that emerges will be incremental and will have to include restraints on state spending.

House Speaker Brian Porter, R-Anchorage, said a consensus of House members agree that despite the recent polls, permanent fund earnings and a statewide tax are needed to close the state's deficit. But, ''we're certainly a long way from implementing anything like that,'' he said.

Gov. Tony Knowles will give his State of the State Address on Wednesday and he is expected to outline a specific plan to raise state revenues.

Rep. Bill Hudson, who co-chaired the Fiscal Policy Caucus, said his group is anxious to hear what Knowles announces.

Hudson, a Republican from Juneau who favors a statewide income tax, said the Legislature will never win public support for such a plan. But ''the gap is very real (and) it's extremely large,'' Hudson said.

''In my opinion, the public will never be ready for what we have to do,'' said Hudson.

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