Fiscal Policy Caucus crafts deficit-reducing plan

Posted: Thursday, February 28, 2002

JUNEAU (AP) -- A group of lawmakers began crafting a specific plan to use an income tax, Permanent Fund revenues and an increased alcohol tax to close the state's billion dollar deficit.

A seven-member subcommittee of the bipartisan Fiscal Policy Caucus met Wednesday to draft a concrete plan to recommend to the full panel. Caucus members are pressing for a House floor vote on a package by March 20.

The subcommittee's four Republicans and three Democrats, all from the House, have settled on a 4 percent income tax, based upon federal taxable income. That is expected to raise about $360 million.

Subcommittee members also want a new approach to calculating permanent fund dividends that would cut the dividend and also somewhat reduce the fund's long-term purchasing power.

The plan would base the annual payout on the average market value of the fund and its earnings, splitting the proceeds 50-50 between dividends and government.

In the first year, the overall payout would be 7 percent, above the 5 percent limit that the permanent fund corporation says would ensure inflation-proofing. That would yield $1.75 billion, or $875 million each for dividends and government, said Deputy Revenue Commissioner Larry Persily.

The payout percentage would drop to 6 percent in the second year and to 5 percent in the third and subsequent years.

The subcommittee also endorsed the dime-a-drink increase in the alcohol excise tax sponsored by member Lisa Murkowski, R-Anchorage. That would bring in about $30 million a year.

The subcommittee also will discuss a cruise ship head tax, an increase in the motor fuel tax and increased contributions from the oil and gas industry.

The Fiscal Policy Caucus has met some resistance from House leaders. Members say they're aware that they face even stiffer resistance from the more conservative Senate Republican majority.

Senate President Rick Halford of Chugiak and Finance Co-Chairman Dave Donley of Anchorage have said repeatedly that the Senate won't initiate broad-based taxes this year.

Instead, Republican senators are touting proposed constitutional amendments to put a cap on state spending, freeze state hiring and force the executive branch to come up with priorities for budget cuts.

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