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Ambitious plans for this session falling by the wayside

Posted: Tuesday, May 14, 2002

JUNEAU (AP) -- Ambitious plans touted by Republicans in the House and Senate are piling up as wrecked hulls along the road out of Juneau.

House Republicans, facing an estimated $963 million state budget shortfall, took the political risk of approving the first income tax in Alaska in more than 20 years.

They also approved a plan to use earnings from the popular Alaska Permanent Fund -- created from oil wealth to pay hundreds of dollars in dividends to residents each year -- before returning to their districts to seek re-election.

Now in the closing days of the session, they are watching Senate Republicans make good on their vow to kill the measure.

A Senate plan to put a constitutional amendment on the November ballot that caps state spending is on the brink of suffering the same fate.

''From our standpoint it was kind of assumed all the way along,'' said House Finance Co-Chairman Eldon Mulder, R-Anchorage. ''If they wanted us to take up spending limits they would need to take up a revenue package.''

Senate Republicans sought a plan to impose a 2 percent cap on increases in state spending that could rise to 4 percent with a three-fourths vote of the Legislature.

Senate Joint Resolution 23 would generally hold the growth in state spending between $66 million to $71 million annually with a simple majority vote of the Legislature.

House lawmakers who approved an income tax that raises about $250 million, and a new calculation in the permanent fund program that splits earnings equally between government and dividends, generally called the cap an ineffective response to the state's deficit.

The state Department of Revenue estimates Alaska will have an $826 million shortfall in the fiscal year that ends June 30 that will grow in the next fiscal year. The department estimates the state will have a $1 billion shortfall in 2004 if oil prices stay constant.

Alaska depends on North Slope oil for about 80 percent of its revenues. But oil production has declined by half since its peak production of 2 million barrels in 1988.

Meanwhile, the state's Constitutional Budget Reserve of $2.4 billion is anticipated to run dry in October 2004. The Legislature has used that fund to make up for past budget shortfalls.

The Legislature worked through the weekend to hash out agreement on several proposals. Much of the Senate's time Sunday was spent in private meetings as the end-of-session dealmaking kicks into high gear.

A proposal to increase the state's alcohol tax by 7 cents per drink passed the House and was greeted with general support in the Senate.

With only two days left in the session, and a plethora of pet bills touted by Senators sitting idle in the House, the popular alcohol tax appeared on the rocks.

But Republicans in the Senate brought the measure for a vote on Monday, approving the tax increase by a 13-7 vote.

Just before the vote, Sen. Jerry Ward, R-Anchorage, attempted to amend the bill to make it effective only when voters approve the constitutional spending limit. Ward complained that the state budget -- including federal spending -- will exceed $7 billion.

''We are about to take millions of dollars and put it into a bloated government,'' Ward said. The amendment failed 15-5.

Senate President Rick Halford, R-Chugiak, a consistent supporter of the measure, worked Sunday to muster enough votes to pass it.

In the end, seven Republicans voted along with seven Democrats to approve the measure.

Voting against it were Republican Sens. John Cowdery, of Anchorage; Lyda Green, of Wasilla; Pete Kelly, of Fairbanks; Robin Taylor, of Wrangell; Gene Therriault, of North Pole, and Jerry Ward, of Anchorage.

Sen. Lyman Hoffman, of Bethel, cast the lone Democrat vote.

Lawmakers are considering a general obligation bond package to fund numerous new schools around the state. But they need Democrats help to access the state's Constitutional Budget Reserve and balance the state budget.

Democrats in return want more money for the state's school funding formula, more rural schools on the new construction list and veterans bills pushed by Gov. Tony Knowles.

Democrats also want more money for the state's Power Cost Equalization program that sends subsidies to offset the high cost of power in rural communities.



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