Long-range budget plan on agenda

Posted: Wednesday, March 14, 2001

JUNEAU -- As lawmakers wrangle over how much money to spend this year, some legislators and Gov. Tony Knowles are trying to take baby steps toward a fix for Alaska's knotty long-term financial problems.

Knowles has invited more than a dozen lawmakers to the mansion tonight for an informal discussion on how to balance the state's budget in the long run.

''This is not a forgotten subject, either by myself or the legislators,'' Knowles said. The exact guest list for the coffee-and-dessert affair hadn't been set earlier this week, but a preliminary list includes nine Republican moderates from the Legislature's GOP majority -- one Senator and eight House members, and five Democrats from the House minority.

''A number of the legislators have some ideas that they would like to discuss,'' Knowles said. ''That's what this discussion is, just to hear some of their thoughts.''

The problem, which has defied solution for nearly a decade, is deceptively simple. A growing gap between the state's general revenue and its spending is expected to drain the Constitutional Budget Reserve within a few years. Meanwhile, Alaskans pay no state sales or income taxes while receiving an annual check from the Alaska Permanent Fund.

Low prices for the oil that provides much of the general fund revenue forced Knowles and the Legislature to seek a solution two years ago, when revenue forecasts predicted the reserve would run dry within three years.

That led to the Legislature's plan to use earnings of the permanent fund to balance the budget, a proposal that was resoundingly rejected in a statewide advisory vote on Sept. 14, 1999.

The memory of the Sept. 14 vote effectively tabled further proposals to bridge the budget gap. Meanwhile, high oil prices pushed the problem into the future. Still, some lawmakers and Knowles want to tackle the problem -- but carefully.

In his State of the State speech, Knowles proposed a financial plan with a trigger that would be activated as the reserve began to dwindle. Exactly what would be triggered he left up to the Legislature, although he has long advocated a mix of revenue from a broad-based tax along with money from the permanent fund's earnings.

In an interview with The Associated Press this week, Knowles laid out more goals. He said he wanted discussion on a long-range plan this year and action next year.

''Everybody thinks that it has to be grass-roots based and not government driven,'' Knowles said, raising the prospect that he might convene some sort of citizens' group to sound out the public about what they want.

He also said he would push for balance in any plan. Like many Democrats, Knowles argued that the 1999 plan failed in part because it leaned too heavily on the permanent fund.

''Everybody's got to pay a little bit,'' said Knowles, whose proposal for an income tax died in the Legislature that year. ''The gap is big enough that if you try and put it on any one particular source to bear all of the revenue burden, it kind of overloads it very quickly.''

The group Knowles invited will likely provide a mix of approaches. Rep. Bill Hudson, R-Juneau, has continued to push for a plan to use a significant chunk of the earnings of the permanent fund to pay for government. Others, like Rep. John Davies, D-Fairbanks, have called for an income tax to help balance the budget.

The House members on the list are drawn heavily from the House's newest members, who have few ties to the aggressive budget-cutting policies of the majority in recent years. Reps. Drew Scalzi, R-Homer; Ken Lancaster, R-Soldotna; and Hugh Fate, R-North Pole, and Gretchen Guess, D-Anchorage, are all freshmen.

Lisa Murkowski, R-Anchorage; Andrew Halcro, R-Anchorage; John Harris, R-Valdez; and Jim Whitaker, R-Fairbanks, are all beginning their second term in the House.

Also included on the guest list is former Sen. Alan Austerman, R-Kodiak, who just moved up from the House.

Other Democrats include House Minority Leader Ethan Berkowitz, D-Anchorage, Rep. Reggie Joule, D-Kotzebue, and Rep. Eric Croft, D-Anchorage.

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