Elected officials ponder fiscal woes

As cash goes out, less may come in

Posted: Friday, September 22, 2000

The good news for some 585,800 Alaskans is that the checks are almost in the mail. Alaska Permanent Fund dividend checks, that is.

The bad news is that Alaskans need to remember that the record amount of $1,963.86 can decrease in the future.

"I guess my point is that the dividend has dipped in the past and will again. It's as inevitable as rain in Juneau, snow in Anchorage and cold in Fairbanks," said state Department of Revenue Commis-sioner Wilson Condon in a press release issued Thursday morning.

"It's good to remember that fact as we look around and see how important the dividend cash has become to Alaska.

"The state as a whole needs to get its financial house in order," Condon said. "Oil prices are up this year, and all is well for the time being for the state budget. But prices will fall again and we need to face that day with honesty and a plan."

That plan has been hard to come by. A legislative proposition in 1999, endorsed by the Knowles administration, sought to tap earnings from the permanent fund to help offset the cost of government. However, voters overwhelmingly rejected the plan at the polls last September.

A rise in oil prices from below $9 a barrel in late 1998 to more than $30 this year bailed the state out of its deficit situation. But another roadblock to funding the operation of government -- this time at the municipal level -- could lie ahead.

A month after Alaskans receive their dividend checks, they will go to the polls and cast votes on a ballot initiative that could cap property taxes at 10 mills and effectively siphon off additional operating revenue from local governments.

Sen. John Torgerson, R-Kasilof and co-chair of the Senate Finance Committee, said a long-range financial plan for the state, one that is not dependent on the price of oil, is overdue.

"We operate off the price of oil, and right now, for the first 90 days of this year, the price averaged $29.30 a barrel," he said. "But in order for us to have a lot of money, it has to sustain itself. We need about $32 a barrel at the current production level to balance the budget."

But, Torgerson said, with current prices, don't expect any rush in the Legislature to find new sources of revenue.

"If the deficit is down, there isn't going to be a big drive to find additional funding sources," he said. "As long as money is set aside and it appears to be enough to balance the gaps, there might be discussions. But you probably won't see any legislation to bring in any additional revenue."

However, like Condon, Torgerson said the scenario can change quickly.

"I'm reading in the papers that the price is probably going to stabilize around $30, but who knows how long that will be," Torgerson said. "We all know that $8 (a barrel) can happen quickly, which is what got us in 1998."

Torgerson said the effects of a tax cap would not end at the municipal level.

"If the tax cap passes, the first line of defense to keep programs going is to come to the state and say, 'I need to have money to do this or that,'" he said. "It stands to reason that we'll be lobbied pretty hard to plug the gap."

The controversial proposition began as a petition drive by Anchorage restaurateur Uwe Kalenka.

"This is really an Anchorage fight," Torgerson said. "They have chosen in years past not to subsidize their budget with other revenues, where the (Kenai Peninsula) borough has. We have a sales tax coming in.

"If Anchorage decides they want to do something, we don't have a whole lot to do about it in a statewide initiative, with half the voters being in Anchorage. If they all vote in favor of any particular initiative, it's going to pass and the rest of the state will be brought into the loop on what to do about it based upon their actions."

Kenai Mayor John Williams, a tax cap foe, said passage of the initiative could nullify the PFD.

"If fire services are cut and insurance rates go up because of (the tax cap), you're going to be spending your dividend check to pay for (those services).

"If Kenai decides it can no longer contract for street lights with Homer Electric, then Homer Electric is going to raise electrical bills, and you'll be using your dividend check to pay for it," Williams said.

"In the end, when you add it all up, it'll be more than your taxes."

Soldotna Mayor Ken Lancaster said knowing how to plan ahead without knowing what the voters will decide in November is not easy, he said.

"If oil stays at $35 a barrel, we might get through next year with no problem. But if it goes back to $20? There's just so many 'what if's,'" he said. "We're going to have to take them as they come."

For now, though, Alaskans are just taking their $1,963.86.

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