Lawmakers plan public push for fiscal plan

Posted: Sunday, June 24, 2001

JUNEAU (AP) -- First they asked your children to pass a high school exit exam. Now a group of Alaska legislators wants you to solve a math problem.

It will look something like this: Using a combination of taxes, spending cuts, Permanent Fund earnings and any other ideas you can think of, come up with about a billion dollars a year to fill an expected hole in the state budget.

The 25- to 30-member bipartisan Fiscal Policy Caucus is trying once again to tackle the ''fiscal gap'' Alaskans have been hearing about for more than a decade.

They plan a series of town meetings, probably starting this fall, said Rep. Lisa Murkowski, R-Anchorage.

And they'll probably take with them workbooks intended to educate residents about the depth of the problem.

''We don't feel we have any relief of responsibility in not telling people the truth,'' said the caucus co-chairman, Bill Hudson, R-Juneau.

Caucus members point to state Department of Revenue projections that by the 2005 fiscal year the state will be spending about $1 billion a year more than it brings into the general fund. And by July 2005 the state will have drained the $2.9 billion Constitutional Budget Reserve -- a state savings account that has been used to balance the budget.

The gap doesn't exist if you take into account the $5.7 billion earnings reserve that is part of the $26 billion Permanent Fund, the state's oil-wealth savings account. The principal of the fund is protected by the constitution, and politicians have never used the earnings for anything but inflation-proofing and paying residents dividends.

But Hudson said if nothing else is done by 2005, the state will start chewing into the earnings reserve to pay for state government -- and that could endanger the dividend program.

Murkowski said people filling out the workbook will be asked to pick from a range of choices to fill the gap and can come up with solutions of their own.

Options may include: Taxes on income, sales, cruise ships, alcohol, gasoline and the oil and gas industry; hoped-for income from new resource development, such as North Slope gas reserves; budget cuts and efficiencies; and a portion of the earnings from the Permanent Fund.

The public will find it takes a combination of ideas to get to a billion dollars, Murkowski said.

''I think the point that needs to be driven home is there is no single magic bullet,'' she said.

The Fiscal Policy Caucus members have more than just a math problem to solve, however -- they also have a political problem.

The group formed out of frustration with the legislative leadership's failure to act on the issue. So far, lawmakers in key positions have shown little interest in their work.

Just one majority Republican senator has regularly participated, Sen. Alan Austerman of Kodiak. And although more than half of the House members have participated, key players, including House Speaker Brian Porter, R-Anchorage, and House Finance Committee Co-chairman Eldon Mulder, R-Anchorage, have not. Porter has sent staff to some meetings.

''There's an awful lot of my colleagues who are sitting back just waiting to see whether we sink or swim,'' Murkowski said.

Neither Porter nor Mulder returned recent phone calls about the caucus.

Senate Finance Committee Co-chairman Dave Donley has worked on his own approach to long-term fiscal planning and expresses irritation that the caucus has gone outside the normal committee process and has received more media attention.

''Most of them are not even members of the Finance Committees,'' said Donley, R-Anchorage.

Donley's fiscal package includes seven bills that would not raise enough money to fill the expected gap, and some of those bills probably are too contentious to pass because they take money from rural Alaska.

He acknowledges his package doesn't fix the budget problem, but said the ''streamlining'' it accomplishes must happen before the public will accept taxes or use of Permanent Fund earnings.

His plan also includes two constitutional amendments, one imposing a state spending limit and another changing the requirement for tapping the Constitutional Budget Reserve.

Murkowski sees merit in Donley's proposed spending limit, which passed the Senate this year.

''You get the public comfortable that you're not going to go hog wild with whatever tax dollars you're able to generate, and it's going to be a much more salable concept,'' she said.

Senate President Rick Halford, R-Chugiak, has said he also believes the constitutional spending limit is a key to public acceptance for taxes or other measures.

The proposed amendment would cap spending at $3.1 billion and limit future increase to no more than 50 percent of inflation and population increases. A couple of safety valves would allow more spending if needed, Donley said. He's encouraging public input on the proposal.

Halford said he might be willing to take part in the fiscal policy caucus's efforts ''if they recognize that the fiscal picture is built piece by piece, not with somebody's great plan.''

He believes insistence on an ''all-or-nothing package'' will lead to something as unpopular as the last idea for solving the fiscal gap -- a 1999 advisory vote on whether to spend Permanent Fund earnings on state government that voters rejected by 83 percent.

The gap, he believes, will be closed incrementally by each Legislature.

''It's too much to swallow in one bite,'' Halford said.

He's ready to start with a cruise ship head tax -- which at $50 a passenger would raise about $34 million.

Others argue there's no point in coming up with a long-term fiscal plan because circumstances will change and one Legislature can't bind another.

Hudson agrees that future Legislatures can change any plan the current one adopts, but said that doesn't mean it shouldn't be done.

''They can reverse or repeal or increase or reduce any aspect of public spending they want to do in their time,'' Hudson said, ''but it is our responsibility looking forward to try to eliminate the bad practice of exhausting our reserves when they're supposed to be reserves for opportunity and a rainy day.''



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