Search for budget solutions goes on

House members say they're not ready to quit

Posted: Tuesday, April 23, 2002

Refusing to accept the growing view that Alaska's ominous fiscal gap won't be addressed this session, Kenai Peninsula members of the House of Representatives said Monday they won't quit searching for some combination of spending cuts and taxes that can pass.

But proposals such as sales taxes, an income tax and tapping the earnings of the Alaska Permanent Fund are beset by factional opposition -- within and across party lines -- leaving questionable the chances of any marked legislative movement before the end of the session.

Indeed, getting some lawmakers to agree to compromise may require a swift kick in the pants from Alaska's citizenry, one lawmaker warned.

"It's not over yet," Rep. Ken Lancaster, R-Soldotna, said. But, he added, "We need people to call the leadership if they believe we need a revenue plan. We need help from constituents."

Meanwhile, he added, revenue dreams abound.

One proposes to marry a 1.5-percent sales tax to a 1.5-percent income tax. Another would tack a nickel or a dime on each glass of booze, or add enough of a tax increase to bring existing alcohol taxes up to the equivalent of a dime. Beyond that, there's House Bill 20, which proposes to a Municipal Dividend Fund to channel money to communities from the permanent fund earnings reserve. That bill could make about $60 million available each year, Lancaster said.

"I think you will see movement on those," he said, adding he would attempt to add another $30 million to the measure specifically for education.

"There's support for different tax regimes at different levels," said Rep. Mike Chenault, R-Nikiski. "Currently, they're trying for a coalition that would allow them to tax something. I'm not sure if they will be successful or not. There are a myriad of proposals, but the devil is in the details. Where we are going, I don't know."

Chenault said he isn't ready to support HB 20 yet.

"HB 20 has some good potentials, but it still taps the permanent fund," he said. "We can talk about it all we want, but that vote a couple of years ago told you what the people thought."

Chenault acknowledged there is growing awareness that new revenue sources, including the fund earnings, may have to be considered.

"At this point, those ideas don't have the backing of the constituents," he said. "My constituents are telling me they don't want (fund earnings) touched."

Chenault said he wouldn't support an alcohol tax without some provisions to level the playing field for liquor dealers. He said a large-volume dealer could stockpile huge quantities before the tax goes into effect and therefore gain a distinct advantage over smaller outlets that cannot carry as much inventory.

He also said he opposes an income tax because it taxes the average worker.

"An income tax taxes the workingman," he said. "The less fortunate don't pay income taxes and the rich figure out how not to pay. Consequently, the workingman pays."

Chenault said finding a solution is a daunting task. It may be impossible to come up with a fiscal plan that is entirely fair to everyone.

Contacted early Monday on his way to meetings to discuss possible compromises, Rep. Drew Scalzi, R-Homer, agreed the search was not over. He was not available for later comment.

House Minority Leader Ethan Berkowitz, D-Anchorage, said while many are searching, there are some who want to do nothing. Those members pose the real risk to future permanent fund dividends, because lack of action now will increase pressure to spend the money meant for dividends later. The dividend program is an annual outlay roughly equal to the current budget gap, he said.

"Acting now actually saves the dividend," Berkowitz said.

The minority leader said he was hopeful but not optimistic that a compromise package still can be written. The question in the minds of some representatives is whether the Alaska Senate would agree with its terms. That doubt, he said, may well have contributed to the House's inability to reach a compromise.

"It's a defeatist mentality," he said. "It runs counter to the best Alaska qualities -- being aggressive in the face of adversity -- never say die, never quit."

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