Looming budget crunch gets another look

Posted: Sunday, October 06, 2002

ANCHORAGE (AP) -- Three panels made up mostly of former politicians agreed Saturday that the state does face a real fiscal crisis, and cutting government spending isn't going to cure it.

Trouble is, they agreed again, the public isn't convinced.

''Until a much higher percentage of the state's residents understand the problem, neither a tax or using permanent fund money is feasible,'' said Rep. Brian Porter, R-Anchorage, the retiring House speaker.

''When the public is faced with the choice: tax me or take my dividend, the answer is don't -- don't do either,'' agreed former House Speaker Gail Phillips, who ran unsuccessfully this year for the Republican nomination for lieutenant governor.

''Sooner or later we'll deal with the problem. My best guess, within three years,'' said Rep. Jim Whitaker, the sole participant in the panels who will be facing the issue head-on in Juneau come January.

Whitaker won the Republican nomination for a Fairbanks seat in the Legislature and faces no opposition in November.

Their remarks came at discussions Saturday sponsored by Alaska Common Ground and the League of Women Voters.

The daylong session in Anchorage also included remarks from economist Scott Goldsmith of the University of Alaska Anchorage. He's has been analyzing Alaska money issues for more than a quarter of a century.

Oil revenue is declining as the industry moves to smaller fields where the take for the state is smaller, he said, and developing Alaska's resources other than oil does not provide the money to plug the yawning gap.

Even in their best years, mining and timber have brought the state less than $10 million each. Fishing has contributed as much as $96 million, but that industry is in the doldrums now.

A cruise ship tax, a school tax or an increase in the fuel tax would generate only a few million dollars each, he said.

Aside from higher oil taxes, only an income tax, a sales tax or extraction of money from the permanent fund in some fashion have the horsepower to generate hundreds of millions of dollars each year.

That's the kind of gap state lawmakers have been plugging with the Constitutional Budget Reserve, which has been tapped for about $5 billion over the last decade.

This year, the draw from Alaska's savings is expected to be about $500 million, down a bit from around $700 million in the last fiscal year.

Depending on oil prices, the draw could be in the neighborhood of a billion dollars, and the $2 billion left in the reserve fund will last only a couple years or so, the UAA economist said.

''We lost time and years saying we're going to cut our way out of this,'' Goldsmith said. ''If we ignore the necessity of doing something until time runs out, that would have a dramatic negative effect on the state's economy.''

Some participants said the answer was encouraging oil companies to drill for more oil by reducing environmental restrictions.

''If you have a golden goose, you have to feed the goose,'' said Bob Bell, a former member of the Anchorage Assembly.

And taxing Alaskans would slow the economy, compared with the current spending of Alaska's savings.

''If we look at taxing ourselves,'' he said, ''we just move money from the private sector to the public sector.''

Former Republican Gov. Jay Hammond said a tax was far preferable to reducing the dividends paid out to Alaskans every year from the permanent fund.

''We should let the dividend grow, and then tax it back,'' Hammond said. That would provide a valuable check on politicians because they would have to answer back to voters for the tax dollars they spent.

Rep. Andrew Halcro, R-Anchorage, who's not seeking re-election, said the state's politicians need to come up with a tax package and tap the permanent fund as well.

''It's time to move past this age-old rhetoric of no new taxes and I'll protect your permanent fund dividend,'' he said.

But Phillips, the former House speaker, noted that ''political feasibility is totally different from reality.''

Hammond isn't optimistic that politicians will act before the state goes over a financial cliff.

''A crash. I think that's the most likely scenario,'' the former governor said. ''I hope I'm wrong.''

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