Knowles to take more active role in fiscal plan

Posted: Wednesday, April 24, 2002

JUNEAU (AP) -- Gov. Tony Knowles met with a dozen House members on Tuesday in hopes of breaking an impasse over tax proposals to close a state budget deficit.

Democrats and Republicans will now take competing proposals back to their caucuses in an attempt to win support for a broad-based plan to begin closing a $963 million budget deficit.

Democrats will try to collect votes for a sales tax plan that they had previously dismissed as falling more heavily on the poor than upper income consumers, said Minority Leader Ethan Berkowitz, D-Anchorage.

In return, Republicans will consider a sliding scale income tax proposal that caps taxes on upper income Alaskans, Berkowitz said. Rep. John Davies, D-Fairbanks, offered the plan as a compromise to Republicans.

House Speaker Brian Porter said he will take the proposal back to his caucus, which has already been unable to muster enough votes for a tax plan.

Beyond that, Porter would not speculate on whether an agreement can be worked out before the end of the session.

''It could be we're getting down to making it or breaking it,'' Porter said.

Knowles offered to mediate talks with the two sides this week after they stalled last week when majority Republicans were unable to gain support for any new tax measures.

Berkowitz said the two groups are expected to meet again with Knowles on Thursday.

House members have been at odds over several revenue-raising proposals aimed at closing a chronic budget shortfall and breaking the state's dependence on oil income for state government.

Earlier, the House rejected an income tax proposal supported by Democrats and some moderate Republicans. Instead, House lawmakers are considering a 3 percent sales tax.

Davies' income tax proposal would raise $185 million to $250 million in new revenues and would require anyone who files a federal income tax return to pay a state tax.

Davies' plan raises about the same as the sales tax plan before the House now. ''This is clearly offered in the spirit of compromise,'' Davies said.

A compromise on new revenues has taken on added importance this year as the state's savings account begins to run dry.

The state Department of Revenue estimates the state will have a $826.7 million budget shortfall in July that will grow to $963.4 million by fiscal 2003.

Past shortfalls have been filled with the state's $2.4 billion Constitutional Budget Reserve. But that fund is expected to be drained by 2004, the state Department of Revenue said.

Alaska counts on oil revenues for about 80 percent of state government's revenue stream. But oil production has been on the decline, falling to about half of its 2 million barrels per day peak in 1988.

Knowles asked to meet with House leaders on Monday after it appeared a compromise on a tax plan was in peril, said David Ramseur, Knowles' chief of staff.

The aim is to get a plan to the House floor for a vote by next week, Ramseur said.

Also included in the meeting were Reps. Eldon Mulder, R-Anchorage; Jim Whitaker, R-Fairbanks; Ken Lancaster, R-Soldotna; Bill Hudson, R-Juneau; and Lisa Murkowski, R-Anchorage.

Democrats included Reps. Eric Croft, of Anchorage; Beth Kerttula, of Juneau; Mary Kapsner, of Bethel; Gretchen Guess, of Anchorage; Davies and Berkowitz.

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