Q & A on State of the State

Posted: Thursday, January 29, 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 last in a series of questions and answers that will be printed this week.

Q: When can we expect to see revenues from resource development take the place of using any portion of the permanent fund income to pay for government?

A: Resource development is the first element of the governor's five-point plan and remains the key to long-term fiscal stability.

However, the short-term reality is that we will need revenue to maintain essential public services. Using a portion of the permanent fund income to maintain public services could be one way to bridge our finances from where the state is today to the point when new revenues from resource development start to come in.

Q: What is the difference between the conference that you are asking for and the number of other conferences on the permanent fund and economic policy that Steve Cowper, Tony Knowles and other governors have tried?

A: Narrowness of the agenda and certainty of schedule.

What Gov. Murkowski has proposed is not an open-ended government commission.

Moreover, he is looking for a result on a single issue. Linking this issue to taxes as various legislators have tried to do since 1992 has not worked.

The work of the Conference of Alaskans will be done in a short time period which will help the public have more focused information on the issues.

The recommendation of this conference will go to a special session of the Legislature for action. This also will focus public attention on this issue.

Q: Alaska voters soundly defeated the proposal to use a portion of the permanent fund for government in 1999. What will change their minds now?

A: One of the differences from 1999 is that Gov. Murkowski's administration has made real budget cuts, something the state hasn't seen since the mid-1980s when oil prices plummeted and the state had no other choice.

Voters in 1999 believed that more cuts could be made without significantly impacting essential public services and the voters at that time were correct. Essential public services will be reduced in the FY 2006 budget without significant new revenues.

In addition, Alaska doesn't have the same amount in the Constitutional Budget Reserve savings account as there was in 1999. The day in which that account will be depleted is closeri.e., we're closer to the edge of the fiscal cliff.

It's also helpful to recognize the many reasons why Alaskans said they voted no in 1999:

Some were concerned that government would go on a spending spree if it got access to permanent fund income. This can be addressed by the constitutional spending limit on which the governor will work with the Legislature to also have on the November ballot.

Some said it was just an advisory vote, so it didn't matter. This time around the proposal will be a binding constitutional amendment.

Some said the Legislature had the power to spend permanent fund income anyway. True, but the problem is that the Legislature doesn't believe it has "political permission" to do so. Approval of a constitutional amendment by Alaskans will give the Legislature that permission.

Some Alaskans didn't believe that under the current formula the dividend could ever be in jeopardy. But last year we saw that almost come true, so it could happen under the current earnings approach. The new mechanism will ensure a payout is available every year.

Some cautioned this was the "camel's nose under the tent" in terms of using a portion of the income. A carefully crafted constitutional amendment that limits how much permanent fund income can be used would make future intentions clear.

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