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Public gets chance for budget input

Posted: Tuesday, March 12, 2002

Kenai Peninsula residents get a chance to bend the ears of state lawmakers on spending Wednesday when the House Finance Committee begins hearings on the proposed fiscal year 2003 state operating budget.

On the table is everything from wholesale elimination of programs and across-the-board departmental cuts to taxes on income, sales, cruise-ship passengers, alcohol and tapping the earnings of the Alaska Permanent Fund.

Hearings on House Bill 403 will be by teleconference from local Legislative Information Offices. Testimony by peninsula residents will be taken between 1 and 2 p.m.

The budget bill is controversial to say the least. Minority Democrats and Gov. Tony Knowles have decried cuts proposed by the Republican-led House, saying they would shave spending on programs vital to economic stability and public safety. Knowles said the Republican budget plan "takes the wrong direction" and is "hurting Alaska's future." He warned that cuts would make children less safe, endanger public health and eliminate all state management of subsistence fish and game.

"We can't cut our way out of the fiscal gap," Knowles said at a children's symposium in Anchorage last week. "But we can solve the problem with a balanced revenue-raising approach in which everyone plays a part. And we can do this and still make important new investments, especially in children's programs and education."

Meanwhile, Republicans say they prefer to cut spending before instituting any taxes or other revenue schemes. They are looking to hold spending at slightly below last year's $2.86 billion. Their plan calls for $157 million less than Knowles recommended in his proposed 2003 operating budget.

The gap between expected revenues and state spending is predicted to be in excess of $865 million this year and about $1.1 billion next year. That could drain the Constitutional Budget Reserve -- the source of funds generally tapped to make up shortfalls -- by 2005, Republican leaders warned this week as the House spending plan was announced.

In recent weeks, discussion among House members has focused on the need for an overall fiscal plan that would close the fiscal gap. Such a plan could include a mix of spending cuts and new revenues, including possible income and sales taxes, as well as use of the permanent fund earnings reserve. But instituting taxes may be a hard political sell in an election year, lawmakers have acknowledged.

"Implementing a fiscal plan means more than just collecting taxes," Speaker of the House Brian Porter, R-Anchorage, said in a press release Thursday. "To be meaningful and credible, a plan must include efforts to control expenditures, demonstrate budget discipline, make systematic changes to restrain budget growth and expand our opportunities to generate more wealth for the state."

Porter said the Republican budget would make education a high priority, fully funding instruction and transportation costs for schools and seek to maintain a higher level of appropriations than the University of Alaska has received over the past two years.

Almost every other department, however, would see cuts, he said. How those departments divvy up their reduced funding would be up to them.

Porter acknowledged that the cuts aren't going to fill the fiscal gap, but with polls showing the public remains skeptical about the depth of the problem, taxes may have to wait until the public is assured increasing costs have been brought under control.

"We believe that the state must experience the reality of our financial crisis as a necessary step in building support for the revenue-raising measures that must certainly come," he said.

A cap on spending makes sense, Porter said.

"Before asking Alaskans to give money from their pocket to government, we owe them some assurance that their money will not be taken for granted and used to unnecessarily expand government."

Knowles, meanwhile, has proposed raising $400 million annually with three measures.

One would reestablish a state personal income tax equal to 20 percent of a taxpayer's federal income tax, which would fall to 10 percent when the budget reserve fund reaches $2 billion and to 5 percent if it tops $2.5 billion. Knowles estimated an income tax could bring in $350 million a year.

A second measure would impose a $30 tax on passengers on all cruise ships in Alaska waters, collecting $20 million annually.

A third measure would increase the tax on alcohol by 10 cents a drink, estimated to generate $30 million.



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