Murkowski derides 'decline mentality'

Posted: Wednesday, February 20, 2002

JUNEAU -- U.S. Sen. Frank Murkowski said Tuesday that Alaska needs to change its mentality, not raise taxes, to deal with the state's financial problems.

''Proposals are made to pull money out of our economy through taxes rather than put money into our economy through jobs and development,'' Murkowski said in his annual speech to the Legislature. ''I call this the decline mentality.''

''I think it is time to pull out of the decline mentality and look north to the future,'' Murkowski said.

With the state general fund projected to face close to billion-dollar shortfalls this year and next year, the Revenue Department estimates a state savings account used to fill that gap -- the Constitutional Budget Reserve -- will be drained by mid-2004.

A bipartisan group of legislators that includes Murkowski's daughter, Lisa Murkowski, R-Anchorage, advocates action this year to close the gap before the budget reserve is gone.

The group has said a variety of measures, including income taxes, sales taxes, some use of permanent fund earnings, increases in alcohol taxes and a cruise ship head tax are options to consider in filling the gap.

''I applaud the efforts many of you are making in this regard,'' Sen. Murkowski said.

''But sometimes I feel that we have collectively stared at the graph showing the decline in production from Prudhoe Bay and the decline in state revenue for too long a period. It kind of affects our mentality.''

Murkowski offered support for only one tax proposal, a bill sponsored by his daughter, that would raise alcohol excise taxes by about a dime a drink.

It would generate about $30 million more a year, far short of the $1.1 billion gap expected in the coming fiscal year.

Murkowski is running for the Republican nomination for governor and is expected to face Democrat Lt. Gov. Fran Ulmer in the November general election.

He said his visit to the Legislature was not a campaign stop, but many of the questions he faced dealt with how, as governor, he would respond to the state's budget problem, which he acknowledged was ''the number one issue'' facing the state.

At one point in answering questions from legislators, Murkowski suggested a seasonal sales tax, but in a news conference afterward he was quick to clarify his position on that.

''I didn't say I supported it,'' Murkowski said. ''If I did, I didn't mean to imply that I support it.''

''I suggested it as one way to address how we can get everybody to pay a fair share,'' he said. He suggested structuring the tax so residents would get a refund on their permanent fund dividend and the tax would apply only to visitors.

He acknowledged that would not raise enough to fill the gap.

Murkowski proposes, instead, attacking the budget gap by growing the economy and reducing the rate of growth in government spending.

He also said he expects oil prices to rise.

Larry Persily, deputy commissioner of the state Department of Revenue, said the state can't count on big economic development to bail it out of its current deficit. If either Arctic National Wildlife Refuge oil or a gas pipeline become reality, revenues won't start flowing into state coffers for at least six years.

Corporate income taxes from all other industries total only about $50 million, Persily said. A doubling of revenue from that source would go only a tenth of the way to filling the hole, he said.

The department's most recent revenue forecast projects oil prices of $18-$19 a barrel this year and next, which is above the historic average, Persily said. Prices could, of course, rise or fall, he said.

Murkowski would not specify what cuts he might make in government spending. He said he wouldn't balance the budget ''on the backs of state employees'' and he'd seek their input in how to reduce state spending.

Murkowski suggested the Knowles-Ulmer administration had not done enough to support economic development, particularly in the timber industry.

At a news conference later in the day, Ulmer called Murkowski's approach to the fiscal gap ''fuzzy math.''

She said the Knowles administration has vigorously supported economic development, but it's not realistic to expect future development to fill a current gap of $1 billion.

''We all want to grow the economy. Show me somebody in this building ... that doesn't want more jobs and want more economic opportunity for our people,'' Ulmer said. ''But just do the math on how that actually would fill the budget gap.''

Ulmer said she won't discuss her own proposal to fill the budget gap until the end of this legislative session, because she doesn't want to interfere with Gov. Tony Knowles' attempt to address the issue.

Knowles has proposed an income tax, a cruise ship head tax and an increase in the alcohol tax.

Ulmer did say she believes a broad-based tax needs to be part of the solution at some point.

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