Murkowski proposes deep cuts and taxes to balance budget

Posted: Thursday, March 06, 2003

JUNEAU (AP) -- Gov. Frank Murkowski proposed spending plan on Wednesday night that would spare few Alaskans the pain of deep cuts and increased taxes for the next fiscal year.

''I think we all share in the responsibility to get our fiscal house in order and find a way to live within our means,'' Murkowski told a joint session of the Legislature on Wednesday.

Faced with a looming budget deficit that is expected to reach $1 billion before his first term of office ends, the governor said a mix of budget cuts and increased fees are needed.

Conspicuously absent from his address, however, was any mention of tapping the Permanent Fund for state government. That subject had been constantly talked about in capital halls since his administration mentioned the possibility last month.

His fiscal 2004 spending plan -- which begins July 1 -- proposes a $55 million cut in state spending and significantly lessens the strain on the state's $1.9 billion savings account, which was expected to be drained in two years.

It will mean the elimination of 21 state programs, including Longevity Bonuses for some seniors; and about 200 state jobs; a 25-percent reduction in local government support and $113.6 million in new taxes and fees.

Murkowski asked the Republican-controlled Legislature to chose from a $100 school head tax on wage earners or a seasonal sales tax aimed at capturing revenues from tourists and workers who live out-of-state.

Murkowski's election campaign emphasized expanding the state's oil and gas exploration -- specifically ruling out a broad-based tax.

Minority Democrats were quick to accuse him of breaking a campaign promise with voters following the speech.

''Our breath is taken away by the speed of which he broke his campaign promises and the way in which he's leveled these tax increases,'' said Senate Minority Leader Johnny Ellis, D-Anchorage.

The governor is also proposing a $15 ''wildlife conservation pass'' imposed on vacationers who use commercial tours.

He also proposed a 12-cent-per-gallon increase in the state's motor fuel tax to raise up to $41 million in its first full year of collection. Democrats argued that it will affect rural Alaskans who already pay a high price for fuels.

Other fees include a $5 ferry surcharge, an increase in motor vehicle title and registration fees and a $10 per tire surcharge on studded tires.

Pull-tab operators will pay more to the state through an increase in the charitable gaming tax -- now at 1 percent of gross revenues -- to raise 11.5 million. It would be increased to 5 percent under Murkowski's plan.

Murkowski again stated his objection to an income tax -- which Minority Democrats and some moderate Republicans had pushed last year -- and said he would never support it.

In recent weeks the Murkowski administration said it was considering a plan to use Permanent Fund revenues to fund education. But that was not mentioned in the speech, and Murkowski again said no change would in the Permanent Fund program would be approved without a vote of the people.

''Let me repeat again the pledge I made to Alaskans last fall, no change will be made to the dividend program without a vote of the people,'' Murkowski said.

Democrats said many of the taxes proposed by the governor on Wednesday will impact ''working men and women,'' many of whom are their constituents. They also said something else was missing from the speech.

''What I didn't hear in the speech and what had been a resonate theme from the Murkowski administration ... was talk about resource development,'' said House Minority Leader Ethan Berkowitz. ''Show me the oil.''

The governor praised efforts by Republican lawmakers for trying to limit state spending but said in the last decade the state has added 173 new programs and created 2,125 state jobs.

He said he will reverse that trend over the next two years and that the fiscal 2005 budget will also include reductions. Murkowski cautioned lawmakers that if they add to the budget in one area, they should look for cuts in other areas.

''It is clear that we do not have the luxury of continuing to spend as we have in the past because to do so would require large draws on our savings account -- the Constitutional Budget Reserve -- that are simply not acceptable,'' Murkowski said.

Alaska has been balancing its budget on the state's Constitutional Budget Reserve, which is expected to be drained by June 2005. Earlier estimates had suggested the state would need at least $500 million to balance the state's spending plan.

Murkowski proposed a $2.2 billion general fund spending plan that would rely on only $393 million in the next fiscal year. The administration said it slashed more than $189 million from state government spending. But formula funding and entitlement programs rose by $134 million.

The governor's proposal to end to the Longevity Bonus would eliminate a program that spends $47 million annually to give up to $250 a month for 18,000 qualifying seniors.

Also on the chopping block is the $87 million Alaska Science and Technology Foundation's endowment and the Alyeska Central School.

His budget will reduce state funds distributed to municipalities 25 percent, cutting $7 million to local governments.

''Just as our belt tightening will reduce programs and ask individuals to be more self reliant, it also calls on municipalities to rely more on their own financial resources,'' Murkowski said.

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