With some major issues facing Alaska state government, it will be a year of tough decisions for legislators. Perhaps the biggest challenge lies in resolving the state's financial worries.
Alaska has a long road ahead to get the state budget from where it is now (about $1 billion a year short) to where it should be (balanced, with a sound, long-term fiscal plan). In his annual address before the Legislature Wednesday, Gov. Tony Knowles put forth a proposal that would make a good down payment toward true fiscal responsibility.
If Knowles' goal was to make a clear case for how the state should start accounting for its own fiscal health, he succeeded. He put forth a proposal that includes a sampling of taxes: a modest state income tax projected to raise $350 million, a head tax for cruise ship passengers that would bring in $20 million, and a 10 cents per-drink alcohol tax that would raise $30 million.
Of those, the most complicated is the income tax. Here are the basics: The tax level would be based on how much federal tax an individual or family pays, which means those who make more would pay more, and those in the lower income brackets would bear less of the burden. Of the total $350 million it would raise annually, $275 million would come directly from Alaskans, $25 million from people who work in Alaska but do not live here, and $50 million would be paid by the federal government, as state income tax payments are deducted from federal taxes.
This proposal puts a good share of the financial burden on Alaskans, but also includes substantial revenue from sources other than Alaskans' pocketbooks.
Of course, the impetus behind this proposal and any others that follow is the pending financial crisis. The state is facing an annual budget shortfall somewhere in the neighborhood of $1 billion, and so far the Constitutional Budget Reserve has been tapped to cover the difference. That savings account will be completely depleted in just a couple of years, so other revenue sources must be found soon or necessary state services could be in danger.
Many of our state leaders seem to recognize the need for immediate action in order to ensure long-term fiscal stability. However, some legislators still maintain that no action is needed this year. That is not only an unfortunate position to take, it also is blatantly untrue. Without at least a start this year toward resolving the state's fiscal woes, it won't be long before Alaskans -- and legislators -- are forced into much less palatable options. Never mind that these issues should have been addressed already -- enough time still remains but only if a real commitment is made now.
True, the governor's plan would raise about $400 million a year, a figure that is well shy of the budget gap. But it is not realistic to think such a large shortfall could be overcome in one Legislative session--particularly in an election year. At the very least, Knowles' plan is a good starting point, although simple math proves that more actions will be required in the near future.
The Legislature should use the governor's proposal as a basis for finding long-term, workable solutions to the state's fiscal problems. Denying such problems exist will not make them go away.
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