Legislators need to be encouraged on budget solution

Legislators last week focused their attention on ways to close the state's budget gap.

The variety of options discussed should be encouraging to all Alaskans. There was talk of a sales tax, income tax, a $100 "education" tax on all workers, a hike in production taxes on smaller and new oil fields on the North Slope, a change in how the permanent fund is managed, a constitutional spending limit. Even a suggestion to give Alaskans a "bonus" permanent fund dividend if they approve constitutional changes to how the fund is managed.

Legislators' creative juices are flowing. There are enough proposals to craft a solid financial plan for the state of Alaska.

The big question is: What, if any, of the proposed options will be palatable to a majority of legislators? A majority of Alaskans?

There's something in almost every suggestion to love or hate depending on how one views the state's budget problem.

For some people, taxes are not an option. Those who think taxes should be a part of the solution are split on the best tax, if there is such a thing. Some favor an income tax over a sales tax. Others favor a sales tax over an income tax. Some want to see more money brought in with oil taxes. Some see using a portion of the permanent fund earnings as the most responsible way to help close the budget gap. For others, any change in how the permanent fund is managed and dividends distributed is a definite no-no.

Still others don't care how the state does it, they just want to see more money go to public education from kindergarten through the university level.

Of course, there remains a group of Alaskans committed to the belief the state can cut its way out of the budget gap; they see any attempt to tax or use permanent fund earnings as just another example of government at its worst.

Who's right?

That's the dilemma legislators all Alaskans face. The evidence is Alaska cannot continue to cut and still provide essential state services for its residents without additional revenue. Beyond that, the revenue-generating ideas remains as diverse as Alaskans themselves.

Among the proposals is the committee substitute for Senate Joint Resolution 18. It deserves Alaskans' attention. The proposal would protect the principal of the Alaska Permanent Fund. It also would amend Article IX, section 15 of the state Constitution to establish the earnings reserve account as a separate account in the fund. It also would amend the Constitution to change the way the fund is managed to a percent of market value, or POMV, approach.

"Appropriations from the earnings reserve account could not exceed 5 percent of the market values of the fund on June 30 for the first five of the six fiscal years immediately preceding that fiscal year," according to the draft proposal. Under the proposal, appropriations from the earnings reserve account could be made only for dividends and public education.

The proposal covers several key concerns of Alaskans: It protects the principal of the fund. It offers a constitutional guarantee of the dividend, now sacrosanct among most Alaskans. It puts money into education. Most importantly, it provides a predictable stream of revenue to the state and Alaskans know where that money is going. Not only are they guaranteed, but dividend amounts also become more predictable and that's helpful for anyone planning a budget.

The proposal is not complete. Does "public education" include kindergarten through 12th grade and the university? Does it include capital construction and operating costs?

It does, however, offer the framework to help bridge the budget gap and satisfy other important concerns.

It also has been suggested that Alaskans be given a dividend "bonus" if they approve the necessary constitutional changes to how the permanent fund is managed. The idea is to show Alaskans there's a monetary benefit to switching to the POMV approach to managing the fund. The bonus is not needed. The percent of market value methodology stands on its own merits. It's worth supporting. No matter how well intentioned the "bonus" dividend is, it will be perceived as buying people's votes and give those opposed to the POMV proposal more ammunition in their arguments against it.

While no idea should be dismissed out of hand, there are some ideas that should be buried with the bonus dividend. Among them are the $100 worker tax intended for education. While the idea of generating more money for education is good, the idea that a minimum-wage earner and a business executive would pay exactly the same tax is unjust. Legislators also should tread carefully on a statewide sales tax since it would hurt those communities that already have local sales taxes.

Alaskans have an important job now. They need to encourage legislators to continue the tough work of balancing the state's budget in a bipartisan manner. The continued high price of oil should not lull anyone into the belief that there is yet more time to work on this issue. The only option that should not be before legislators is doing nothing.