Q & A on State of the State

Posted: Wednesday, January 28, 2004

Editor's Note: The following was prepared by Gov. Frank Murkowski's office in response to questions received following the governor's State of the State address on Jan. 13. This is the third in a series of questions and answers that will be printed this week.

Q: Many Democrats have been adamant about seeing a whole fiscal plan. Do you think your proposal to use a portion of the permanent

As the conference deliberates, let it be clear to Alaskans that there are two important principles on which I will insist for use of any portion of the

permanent fund income. First, the people of Alaska must agree. We must have a vote on the proposal in November. Second, I will work with the Legislature for an effective constitutional spending limit in order to assure Alaskans that government will be frugal and efficient. This spending limit must also be on the November ballot.

Gov. Frank Murkowski in his State of the State address

fund income for public services without also proposing an income or sales tax fulfills what the Democrats have been asking for in regard to a long-term, comprehensive fiscal plan?

A: The Murkowski administration's fiscal plan is based on a lot more than how a portion of the permanent fund income is used. It's about controlling state spending and getting a smaller, smarter government. It's about developing Alaska's natural resources to create jobs for Alaskans, build healthy local communities and return revenues to the state treasury that will support a great quality of life. It's about creating a fiscal environment in which the private sector will want to invest in Alaska. In short, it is the five-point plan that the governor announced in his State of the State address.

The permanent fund started with an initial investment of $54 million. Today, it has grown to $27 billion. It often has brought in more money than in annual income than oil revenue. The fund's annual income goes to dividends and the earnings reserve. The governor asked in his State of the State address that Alaskans consider how big the fund should grow as they watch essential public services, like education, decline. No other state has anything like the permanent fund.

The governor has said that to immediately jump to broad-based taxes without first looking to what role a portion of the permanent fund's income could play is narrow and shortsighted.

Q: Has government excess been cut enough to justify reducing the permanent fund dividend by taking a portion of the permanent fund income for government?

A: One of the hardest questions on which to get Alaskans to agree is: When has government been cut enough? The Murkowski administration's goal is not to simply "cut government spending," it's to ensure that government departments are obtaining the expected results and that the money being invested in public services is spent wisely and efficiently. The "Missions and Measures" program implemented by the Legislature is ongoing.

Unquestionably, there are many good ideas for doing the job better and for saving money. The governor has said that state employees are leading this effort by coming up with excellent recommendations and ideas. But the size of the state's revenue deficit is too great at the present time to cut our way out. Additional revenues are needed now, and in time those revenues will come from new resource development. Whether the size of government grows in future years depends on the needs of Alaskans for public services, population growth and external factors.

Q: Why not reduce government services and employees instead of using a portion of the permanent fund income for government?

A: The governor is calling the Conference of Alaskans to look at precisely these issues. Are Alaskans really prepared for the kind of state that would result from significantly reduced government services?

At present, nearly 70 percent of the general fund state budget goes to fund K-12, the university and health and social service programs. The other 30 percent is for public services such as Alaska State Troopers, highway and airport maintenance, prisons, the court system, environmental protection, criminal prosecutors, homeland security and management of fish and game. It may be extremely tough to get agreement on where to cut 25 percent (about $565 million) in services.

Q: Is the governor's proposal actually an effort to use a portion of permanent fund income to grow or at a minimum maintain the current size of government?

A: Gov. Murkowski has said that his administration will continue to reduce spending while maintaining programs that are a priority to all Alaskans. As he said in the State of the State speech he would support a constitutional spending limit to ensure Alaskans that the availability of permanent fund income for public services does not result in a spending spree.

The reality is that 50 percent of the projected permanent fund payout almost fills the gap between recurring revenues and expenses and thus there would be no money for a spending spree.

Q: Didn't the governor promise during the 2002 campaign not to use permanent fund income?

A: The governor was accused by his opponent during the 2002 campaign of having a plan to use permanent fund income to fund state government. He had no such plan at the time and said so. He promised that any use of the permanent fund earnings would be preceded by a vote of the people.

The governor will forward to the Legislature the results of the answers provided by the Conference of Alaskans to the governor's four questions so that the Legislature can place the issue on the November 2004 ballot for a vote of the people.

Q: During the last campaign Gov. Murkowski promised no new taxes and no use of the permanent fund dividend without a vote of the people, yet he supported a handful of new taxes and now is announcing he might support using a portion of the permanent fund income for government. Is he reneging on his campaign promises?v

A: During the campaign the governor said he would not support an income tax. The taxes he has supported to date are focused on the principle that those who benefit from a service should help pay for it. The governor has also been very

clear that Alaskans would have the opportunity to vote to approve any change in the dividend program. What he is proposing is exactly in line with what he said.

Q: As Gov. Hammond has said, using a portion of the permanent fund income for government instead of the dividend will in fact be a "tax" which will fall only on Alaskans. When the governor ran he talked about having tourists and out of state workers pay their fair share for government first. Has he changed his position?

A: Gov. Murkowski has not changed his position. He believes non-Alaskans need to pay their fair share. For example, the administration proposed a transient accommodations tax, which would apply to travelers and other tourists. The governor supported a seasonal sales tax last session for the same reason.

Taxing out-of-state workers is a more difficult proposition because the federal Constitution does not permit it, but the administration is looking for ways to accomplish it other than an income tax, of which Alaska residents would pay about 93 percent.

Q: Is the Conference of Alaskans a way to hide behind a group to make a decision the governor should make?

A: The idea of the conference is that many heads are better than one. The governor is relying on the conference to examine the many options and identify the best one for Alaska. Alaskans need the assurance that any proposal for use of a portion of the permanent fund income is as objective as possible. The conference group has agreed to put politics aside in its


Q: Why didn't the governor propose this conference during the campaign?

A: The governor has said that there are many issues that come up when governing that do not always come up during a campaign.

Q: Would the governor support including the dividend in the Constitution if that is proposed by the Conference of Alaskans? What about education?

A: The question is what role should permanent fund income have in maintaining public services. The governor is looking forward to receiving the conference recommendations. He does not intend to try to influence the outcome of the conference on this point by stating his own opinion.

Gov. Murkowski's administration has cut spending and will continue to do so. The governor believes that for the long-term fiscal stability of our state the question of using a portion of the income of the permanent fund can't be ignored.

On Thursday: Questions on resource development and how the Conference of Alaskans is different from other conferences on the permanent fund and economic policy.

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