Last fall, the voters of Alaska overwhelmingly endorsed Frank Murkowski's vision for the future by electing him governor. Similarly his Republican counterparts in the House and Senate were voted into office because of broad support for the Republican platform, which sets a clear course to return Alaska to prosperity.
Those who support the vision are happy with the progress made during first session of the 23rd Legislature.
Gov. Murkowski and the majority leadership share three core strategies to solve the state's fiscal woes:
1) Reduce the size and cost of government while increasing efficiencies in how it operates.
2) Contain the size of government within the ability of its citizens and other revenue resources to sustain it. This key strategy will be accomplished by producing operating and capital budgets that are responsible.
3) Stabilize revenues and reserve the introduction of broad based taxes until all other options have been exhausted. This strategy has many facets. Murkowski has set a cap of $400 million to be drawn from the state's savings account, the Constitutional Budget Reserve (CBR).
With about $2 billion left in the account, this failsafe policy will prop up state spending for five years, which is about how long it will take to realize a return on ramped-up resource development.
On the revenue generation side, short-term needs must be balanced against long-term strategies. In the short term, new taxes and user fees combined with spending cuts will shore up the operating shortfall.
The goal in the long view is to grow resource development in a responsible, productive way, which will contribute a stable income source to fill the void left when the CBR is drained. The governor didn't create the practice of covering operating costs out of the state's savings account; he is only trying to slow the bleeding.
Somehow Democrats seem to have seized the idea that new revenues from timber, mining and oil would magically begin flowing the day Murkowski took office. No such claim was ever made.
The single most problematic factor in the budgeting process is the vast influence of oil revenues. The sheer unpredictability of the flow of oil revenues compounded by a steady decline in oil production has brought Alaska to the point where it can no longer afford the level of services it once supported.
So, do we fix the spending gap by taxing Alaskans heavily enough to make up for the loss of oil revenues or do we address the problem by reining in the size of government and renewing the will to invest in Alaska and develop its rich resources in an environmentally responsible way?
The Alaska state constitution directs the Legislature to "provide for the utilization, development, and conservation of all natural resources belonging to the State" The wealth of the state was built on that premise, but something changed over time.
Regulation and environmental oversight of resource development are critically essential to the long-term stewardship of our natural resources. However, the pendulum has swung too far in the direction of obstructionism and redundancy. Murkowski pledged to put common sense back into the regulatory process.
Stabilizing measures must be devised to buffer the turbulence in Alaska's budgeting process caused by swings in oil revenues.
Obviously, the quickest fix is to increase oil exploration and production, but to do that, the tide must be turned. Oil companies have been turning their backs on future investment in Alaska because the grass is greener elsewhere.
The proposed gas pipeline also may emerge as an important source of revenues if it can be cost justified.
Murkowski and the Legislature accomplished many of the things he promised in the first session. The Legislature passed 40 out of 47 bills sponsored by the administration.
The Legislature passed into law measures that will boost oil exploration and streamline the permitting process.
At the eleventh hour, with the help of the governor, an important compromise was reached resulting in the passage of a clean bill extending the Regulatory Commission of Alaska for four more years, thus protecting business consumers and ratepayers.
Although he was heavily criticized for the various tax and user fee proposals he outlined in his budget, he really had no choice but to present new short-term revenue sources to keep basic state services funded. He also proposed cuts in popular social programs such as the longevity bonus.
In the feeding frenzy that followed, it was clear the governor alone does not have the power or unilateral support to single handedly mandate the direction of new fiscal legislation. His peers in the majority certainly didn't rubber stamp his programs. His proposals set the stage for vibrant and healthy debate among the 60 other folks whose job it is to look after the people's interests. In the end, a proposal to levy a statewide sales tax gained traction, but the momentum stalled with the end of the session. The sales tax bill has merit but will require a lot more work.
The permanent fund received a boost with the transfer of $260 million from the earnings reserve into the principle.
Rep. Norman Rokeberg's HB 11 rolls back the royalty money contributed to the fund from 50 percent to the 25 percent level approved by voters years ago.
This measure is expected to raise about $54.1 million for the 2004 budget year and about $43.3 million annually for the next seven years. These two actions will have a negligible effect on dividend checks and go a long way toward insuring payouts in the future.
In order to stay under the $400 million draw from the CBR, another $133 million must be found or trimmed from the budget. The Legislature left this monumental responsibility up to the governor.
Murkowski has demonstrated the courage and resolve to follow through on his promise to reform state government and make it more accountable to the people. The most challenging work is yet to come. This administration is delivering on its promise to the electorate.
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