Frustrated Democrats call for more spending, financial plan

Posted: Friday, March 16, 2001

JUNEAU (AP) -- Frustrated by the Republican majority's refusal to increase the state's operating budget, minority Democrats called again Thursday for a long-term solution to the state's financial plan -- but offered no specific solution for the troublesome gap between Alaska's revenue and its spending.

Much of this week's debate in the House has centered on the gap and the lack of a plan to fix it, with lawmakers from both parties bemoaning a situation they believe puts artificial limits on the state's spending.

''Every debate that we're involved in, every expenditure, is controlled by the lack of a fiscal plan,'' said House Minority Leader Ethan Berkowitz, D-Anchorage.

Democrats criticized the Republicans for rejecting most of Gov. Tony Knowles' requests for more spending on public safety, education, public health, child protection and alcohol abuse prevention. Republicans argued the budget that passed the House pays for critical services in a fiscally responsible manner.

Attempts to close the budget gap in recent years have been unsuccessful, most notably in 1999, when voters rejected a plan to balance the budget with some of the earnings of the Alaska Permanent Fund. The lopsided nature of the defeat drove the issue into the background, with help from high oil prices that helped narrow the gap.

Lawmakers currently balance the budget with money from the Constitutional Budget Reserve. This year's budget is expected to require about $500 million from the reserve, and bigger shortfalls in the future are expected to drain the reserve within a few years.

''Getting us out of a high-centered situation where we're not even talking about this out loud is a high priority,'' Berkowitz said.

To that end, more than a dozen lawmakers from both parties met with Knowles on Wednesday night to discuss long-term planning. While those who attended described the meeting as a full and frank discussion, they conceded that there was little progress.

''There certainly weren't any decisions made,'' said House Speaker Brian Porter, R-Anchorage. ''I'm very hopeful that some strategy may be forthcoming, a specific plan may not be forthcoming. It may not even be advisable.''

Many lawmakers and Knowles agree that a plan would likely involve some form of sales or income tax and some use of the Permanent Fund's earnings. Beyond that, there is little agreement on the details.

''There were a few feints toward what might actually be in that plan,'' Berkowitz said.

Republicans are wary of an income tax like the one Knowles proposed in 1999, which would have fallen heavily on the wealthy. Many Democrats, meanwhile, don't want a plan that relies too heavily on the Permanent Fund like the 1999 plan rejected by voters. And a faction of the Republican majority will be unreceptive to either a tax or using the fund's earnings.

''Fortunately at the moment, the state does have the luxury of high oil prices and a healthy CBR that will support the state while we craft a plan,'' said Bob King, a spokesman for Knowles, who wants discussion of a proposal this year, followed by action next year.

However, any plan using the earnings of the Permanent Fund faces a significant hurdle -- Knowles' pledge that the fund will not be changed without a vote of the people.

''He made that commitment during re-election and he'll stick to it,'' King said.

That frustrates some lawmakers, particularly in the House, where a bipartisan majority approved an early version of a 1999 plan that didn't require a vote.

Porter said the problem will be convincing Alaskans that the needs of state government merit a tax or money from the Permanent Fund.

''It's pretty hard to fix a problem that nobody thinks we have,'' Porter said.

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