Kenai Peninsula lawmakers differ on what solution will help state's budget problem

Posted: Sunday, March 21, 2004

A percent-of-market-value approach to managing the Alaska Permanent Fund and the proposed use of a portion of that value each year to help fund state government may have its supporters in Juneau and among the electorate, but lawmakers from the Kenai Peninsula said Friday they doubt the idea has enough votes in the Legislature to make it to the fall ballot.

"I don't think there will be a direction toward the POMV," Sen. Tom Wagoner, R-Kenai, said. "We will put out bills (to the Senate floor) for votes, but I doubt there are the votes there to pass it."

Sen. Gary Stevens, R-Kodiak, whose district includes House District 35 on the lower peninsula, supports the POMV approach, saying it protects the corpus of the fund, protects dividends while still providing needed funds to run state government programs.

But he isn't optimistic about its chances for success.

"The question is whether there are enough votes to pass the Legislature and go to a vote of the people," he said. "Right now, I don't see enough votes. I'm really concerned whether it will pass or not."

Among the concerns he's hearing expressed by his Senate colleagues are what happens if it goes to the ballot and the public turns the idea down? That easily could happen should enough voters say no simply because they don't understand the POMV approach, Stevens said.

"Does that preclude the Legislature from using the permanent fund ever?" he asked.

Lawmakers last week began intense discussions on various spending and revenue ideas in the wake of last month's Conference of Alaskans. Issues on the table run the gamut from a constitutional amendment setting a spending limit and further budget cuts to income and sales taxes and use of the permanent fund to cover government costs.

Stevens said there are Senate members, as well as members of the public, arguing against any kind of taxation or use of the fund.

"But we have to find some way to fund state government," he said.

Another initiative that may lack sufficient votes is a proposed constitutional spending limit, an idea he generally likes, Wagoner said. But it has some pitfalls, he noted, such as whether meeting such things as obligations toward workers' retirement and workers' compensation might require cutting other programs in future budgets just to meet a spending cap condition.

"Those things have to be addressed and may require reducing funding somewhere else," he said.

A draft Senate resolution proposing a spending limit includes clauses exempting certain appropriations from the calculations, such as appropriations to the permanent fund, or of dividends to be paid out of the fund, or of donations, gifts or grants, bond proceeds, money from the federal government, University of Alaska tuition and dedicated funds and trusts, Wagoner said.

Stevens said a spending cap might have a chance. The proposal would permit more gradual growth of government under what he called a complicated process.

"It puts a lid on how fast state government can grow in its bureaucracy," he said.

Stevens said his colleague, Sen. Ben Stevens, R-Anchorage, has introduced a bill proposing a statewide sales tax. Sen. Gary Stevens opposes that idea, saying it would have a negative impact on all communities that rely on local sales taxes for revenue.

"There will be a long fight," he predicted. "I don't believe it has a chance in the world. I'm opposed."

On the House side, Rep. Mike Chenault, R-Nikiski, said everything is open for discussion. He said the House members have been mulling over the POMV idea, but he sees little real movement.

"We're looking at tweaking it a bit," he said. "We're looking at dedicating part of that POMV money to education."

He said he liked that idea, but until discussion gets down "to the nuts and bolts," it is hard to say if it will result in a measure for the ballot. Then it depends on whether the public buys the idea as they head to the polls.

"We've taken up the spending cap idea," he continued, adding that discussion is centering on the details of the pros and cons.

Chenault also said there are members of the House who would vote for an income tax, but he doesn't see enough support for the measure to pass. In fact, he said there doesn't appear to be substantial support for any one particular measure yet.

He said high oil prices appear to have slowed the drive toward budget reductions.

"There are legislators here who will figure if prices stay high they can say, 'We have time,'" Chenault said. "They think something will bail us out."

Rep. Kelly Wolf, R-Kenai, said there appears to be some support in the House for a $100 annual tax on workers, sometimes called a head tax. Alaska once had one that tapped the first paycheck issued each year for $10 that went to education. Wolf said he could support the $100 tax as long as it was earmarked for schools.

"My question is can we specifically earmark that," he said.

The Alaska Constitution prohibits dedicated funds.

Lawmakers could and have in the past indicated their intentions to appropriate equivalent funds to one program or another. Wolf said he is concerned that promises might not be kept, and money intended for education might be used elsewhere in the budget.

"I don't want this to be a general fund revenue source, and we end up building a road to Nome," he said. "If we want to address our education needs and constitutionally mandated programs, that's what we need to do."

As for the POMV idea, Wolf remains opposed.

Rep. Paul Seaton, R-Homer, said the House is even discussing an income tax bill offered by Rep. Carl Moses, D-Unalaska, which would bring in an estimated $100 million per year. It is sometimes referred to in Juneau as "Income Tax Lite," because it proposes a credit for property taxpayers and would thus bring in less revenue overall than previous income tax proposals. The tax would apply to all income earners, whether residents or not.

"It's interesting because it has a credit against property taxes paid," Seaton said. "That means it decreases the amount of the proportion Alaska residents would pay."

Seaton also said he doesn't think Sen. Ben Stevens' sales tax idea has a prayer in the House.

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