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Legislator says closed caucus turned up budget options

Posted: Sunday, February 03, 2002

Debating state budgetary matters in secret makes him uncomfortable, Rep. Mike Chenault said Thursday, but the kind of frank exchange Alaska House members of both parties got during Wednesday's closed-door caucus may have helped set a healthy tone of cooperation.

"At times, there is a need for members just to say, more or less, what their true feelings are," the first-term Republican from Nikiski said. "People may not have been quite as open with their comments had the cameras been rolling."

All but two of the 40 members of the House met to discuss the budget shortfall, predicted to be $865 million this year and $1.1 billion next year. Only Rep. Scott Ogan, R-Palmer, and Rep. John Coghill Jr., R-North Pole, declined to attend because the meeting was not open to the public.

Many of those who did are members of the Fiscal Policy Caucus, a group formed last year to find ways to match state spending with revenues. The group issued a report Dec. 1, which, while calling for further cuts in spending, also proposed consideration of a battery of new taxes and tapping the Alaska Permanent Fund earnings to raise hundreds of millions in new revenues.

Many of the measures are not likely to be popular among various lawmakers, nor among many business owners and private citizens. Nevertheless, nothing is being left off the table.

In greater detail, the caucus proposed such things as capping the permanent fund dividend at $1,250, a move expected to raise $182 million; instituting a state income tax equal to 3 percent of the federal adjusted gross income, predicted to raise $270 million; a state sales tax of 2 percent that could raise $200 million. Other possible revenue-generators include tapping the Earnings Reserve Account surplus, increasing alcohol and motor fuel taxes, taxing cruise ship passengers, boosting oil and gas production taxes, an education tax on employment and lowering the percentage of federal mineral revenue sharing payments paid into the permanent fund.

All those proposals will be controversial, Chenault said, but if a fiscal package combining cuts and new revenue streams is to pass, it is likely to require compromise from every political sector of the House and Senate.

"There are parts and pieces I definitely don't agree with," Chenault said. "I'm most reluctant to deal with the ELF tax or to add more taxes."

The ELF, or Economic Limit Factor, is an adjustment to the oil and gas production tax rate based on the productivity of an oil field. There is a unique ELF for every combination of field size and well productivity, according to the Department of Revenue.

The caucus report suggests a 20 percent increase in the oil and gas production tax, which could raise an estimated $100 million a year. Chenault said that could be detrimental to the state economy.

"That forces industry to take their dollars and look elsewhere for development, not only around the nation, but around the world," he said.

Still, Chenault said everyone would need to be flexible and open enough to look at every proposal. It may well mean new taxes. Some could be levied where they have not been levied before, he said.

"We are going to see some that haven't contributed to the coffers in the past contributing," he said. "The free ride is over for a lot of segments of the state."

He also noted that requests by some industries might not be answered. The tourist industry, for instance, has asked for about $12 million to counter the expected effects of the downturn in tourism due to the Sept. 11 disaster.

Chenault said the state doesn't have the money, not while it is facing rising costs in education, a constitutionally mandated responsibility of the Alaska Legislature.

"When I look at the conditions of schools and try to justify giving money away that's a tough decision to try to make," he said.

The search for ways to cut spending also should continue, Chenault said.

"We need to -- I don't want to call them cuts, but rather efficiencies -- we have to look at trying to improve efficiencies in the current departments," he said.

The House may be ahead of the Senate when it comes to willingness to consider taxes and other ways to generate revenue, he said. But one thing the Senate has proposed -- a spending limit -- is an idea that has some merit, but one that should be approached with caution.

"Maybe that would be the first part of this whole program" to bridge the gap, he said. "But we don't know what that limit is."

Sen. John Torgerson, R-Kasilof, said he hadn't talked to anyone from the House side since their meeting and declined to offer an assessment of the House's closed-door caucus.

While the House's decision to meet beyond the coverage of the media may have attracted a lot of attention from reporters, Torgerson said no one should think the Senate is sitting on its hands when it comes to the budget gap just because it hasn't done something as dramatic.

The Senate Finance Committee is working on its own budget proposal for the fiscal year 2003 and it's likely to be different from that of the House.

"There are always differing opinions," Torgerson said. "They're never the same."

Torgerson, chairman of the Joint Committee on Natural Gas Pipelines, said he's been focusing his energies on the proposed gas pipeline project, not on the budget.



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