House members propose vague financial plan

Posted: Tuesday, March 21, 2000

JUNEAU (AP) -- A small group of state lawmakers proposed a plan Tuesday to fill the state's budget gap with a mixture of Permanent Fund earnings and taxes on the public and industry.

However, they did not propose any specific taxes, saying they want discussion on the general outline of the proposal first.

''We can do an income tax, we can do a sales tax,'' said Rep. Gail Phillips, R-Homer. ''We're saying that in order to balance the budget, everybody in Alaska's got to be involved.''

The group includes six Republicans and one Democrat, but none of the House's GOP leadership. The Legislature's Republican majority has not offered a long-range financial plan since the public rejected last year's proposal to balance the budget solely with the earnings of the Permanent Fund.

The sponsors of the new plan plugged it as a more balanced approach akin to a three-legged stool, and urged their colleagues not to hesitate because of the results of that election.

''You've got most of this building creeping around like a bunch of teenagers trying to sneak out of the house at night,'' said Rep. Andrew Halcro, R-Anchorage.

Besides Phillips and Halcro, Reps. Bill Hudson, R-Juneau; Alan Austerman, R-Kodiak; Lisa Murkowski, R-Anchorage; Gary Davis, R-Soldotna; and John Davies, D-Fairbanks, supported the proposal.

The budget gap is expected to increase from about $700 million in the coming fiscal year to $1.4 billion in fiscal 2010, mostly because of declining oil production. That deficit is expected to drain the Constitutional Budget Reserve in about five years, which could prompt uncontrolled spending from the Permanent Fund's earnings and eventually eliminate the fund's dividend.

However, high oil prices have removed some of the urgency that drove last year's financial plan onto the ballot, and many lawmakers are reluctant to try again in an election year.

House Finance Committee Co-Chairman Eldon Mulder said he doubted the public would accept the plan.

''People are interested in hearing what's out there,'' said Mulder, R-Anchorage, ''But they're certainly not ready to accept any of the pain.''

The new plan would spread the pain around. The centerpiece is House Bill 411, which changes the way the Permanent Fund's earnings and dividends are calculated.

The bill would dedicate 25 percent of the fund's earnings after inflation-proofing to the general fund, a share that would grow from $373 million in 2001 to more than $920 million by 2010, according to the plan's backers.

''We could be living on the income of our accounts as opposed to the assets of our accounts,'' said Hudson.

Meanwhile, the dividend would be about $100 smaller in 2001 and 2002 than it would under the current system, but it would be larger in future years because less of the fund's earnings would be dedicated to inflation-proofing the principal.

The plan does not call for a public vote, which could provoke opposition from Democratic Gov. Tony Knowles.

''The governor would continue to insist that there be no tinkering with the fund or the dividend without a vote of the people,'' said Bob King, Knowles' press secretary.

New or increased taxes would add another $350 million to the general fund -- $250 million from the public and $100 million from industry.

Those taxes aren't spelled out in the plan, although either a sales tax or an income tax would almost certainly be necessary to raise $250 million from the public.

An income tax bill is pending in the House State Affairs Committee, but the plan's backers indicated Tuesday that a sales tax was more likely because it would take money from nonresident workers and tourists as well as Alaskans.

''I think a majority of us overwhelmingly support a sales tax or a seasonal sales tax,'' Halcro said.

The tax increase on industry was also not spelled out, although a measure to change the way the corporate income tax is assessed against the oil industry is pending in the House.

With only seven members currently on board, the plan could be as many as 14 votes short of the 21 necessary to pass the House.

''We have not counted votes on this,'' said Rep. Alan Austerman, R-Kodiak. ''We're hoping that as we go through this process and the public hopefully comes on board, that the majority will join us.''

The support of minority Democrats is also uncertain, although Davies said most of the caucus supports the general idea.

''The package offers a starting point for further discussions,'' a cautious House Minority Leader Ethan Berkowitz said.

The governor's office praised the seven lawmakers for putting the plan forward, but expressed some reservations.

''We'll want to see some of the specifics and how they pencil out, specifically what kind of taxes they're proposing,'' King said.

One group solidly against the plan was the House's four dissident Republicans, who attacked it as another attempt to raid the Permanent Fund and ridiculed the three-legged stool metaphor.

''Its a three-legged dunce stool that people sit on that don't know what 'No' means,'' said Rep. Jerry Sanders, R-Anchorage.

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