Anchorage Daily News on Alaska's continuing fiscal problems:

Posted: Monday, March 19, 2001

$530 million.

That's the figure Gov. Tony Knowles used Tuesday noon in a wide-ranging address to the downtown Rotary in Anchorage. It's the amount he predicted Alaska will draw from its Constitutional Budget Reserve to cover the deficit built into this year's state budget.

It's also a measure of the state's failure, so far, to address one of its major looming problems.

For most of the past decade the state has suffered a budget gap of several hundred million dollars a year. The amount fluctuates with oil prices, but only when prices take a big upward spike -- as they did last year -- can the state balance its budget. After five years of determined budget cutting led by the Republican majority, we've still got a structural deficit of half a billion dollars.

The governor spent much of his talk Tuesday pleading for the issues and projects on his agenda: exit exam delay, school funding, public safety measures, victims' restitution, minimum wage hike, piggybacking veterans' care onto the Pioneers' Homes. ''Kick it up a notch,'' he said in asking support for these initiatives.

But most of the numbers he discussed were small change. In a growing state and a healthy economy, they represent a short horizon -- maintenance and operations more than new investment in the future. And they prompt the big question: How long are we going to keep running through our reserves without fixing the problem?

The governor tackled that issue too, though in a similarly minimalist way. Without giving any specifics, and only after the good news, he called for a plan to set Alaska's fiscal house in order for the long run.

The governor has proposed a progressive income tax (though he didn't mention it Tuesday) and a trigger in law that would kick in new revenue measures if the Constitutional Budget Reserve is depleted too far. This would have two advantages: First, it deals with the problem now, while we have time and reserves available, and second, it puts off the pain until the bottom of the budget reserve barrel is obvious to everyone.

The best available estimates show the state running through the Constitutional Budget Reserve in September of 2005. That seems a long way off, and oil prices may rescue us again. But oil prices could go south too, and if we get that far without a solution, Alaska will be in a self-imposed world of hurt. Soaking up a half-billion-dollar gap then, all at once, would be disastrous economically, socially and politically. The bottom line is: We should deal with the budget gap now, while it's manageable, rather than later, when it's a major crisis.

There's a hidden issue here too: Failing to deal with the fiscal gap not only clouds the future, it stunts our growth today. Businesses and families considering setting down roots here have got to look at the situation with some level of fear and loathing. Just what kind of jolt will they get later, when we all receive either a big new tax bill or massive service cuts all at once? What's that going to do to our quality of life, which is our biggest competitive advantage, or our future stability?

Few observers expect the Legislature to broach a real solution this year, and Gov. Knowles will have left office before the crisis hits. But he's right to stay with the issue. He held a widely noticed discussion at the Governor's Mansion on Wednesday with a dozen legislators who've shown some guts and willingness to tackle it. One idea is a wide-ranging public dialogue intended to put Alaskans at the center of shaping the solution. Given the history of political fumbling on this issue, it's an excellent idea.

Oil prices soared last year and saved us from a new bath of red ink. That bought us a little more time. Now, predictably, prices have softened again and we run the risk of squandering the time we were given.

Sooner or later, Alaskans are going to talk seriously about taxes, spending and revenues. Sooner is easier and a lot better.


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