State budget woes present opportunity to find viable solution

Posted: Sunday, October 14, 2001

Two events last week highlighted the in-congruent nature of Alaska's financial situation.

Tuesday evening, residents gathered for a town meeting hosted by Rep. Ken Lancaster, R-Soldotna, to get information and suggest ways to bridge the state's $1 billion budget gap.

Wednesday, most Alaskans saw their bank accounts grow by $1,850.28 as permanent fund dividend checks were distributed by direct-deposit. In total, this year's dividend program will distribute $1.09 billion to an estimated 590,423 eligible Alaskans.

On the one hand, the state is so poor that it is looking for ways to increase revenue (that means taxes) or cut services or some combination of the two to balance the budget. On the other hand, the state is so rich that it sends out almost $2,000 to every man, woman and child who has lived in the state for at least a year.

Just as the state seems to have a split personality when it comes to money, it should come as no surprise that Alaskans also are divided on the issue. Tuesday's meeting spotlighted the dichotomy:

Cut the budget -- government is still bloated.

Don't cut the budget -- those cuts are starting to hurt.

Don't touch my dividend check.

Go ahead, cap my dividend.

No new taxes -- at least until government is made more efficient.

Look at an income tax and other taxes, including a sales tax, as a viable part of the solution.

Don't send me a check and then ask me to pay taxes.

It's clear no matter what legislators do, they will not be able to please everyone. Still, Tuesday night's meeting showed that many Alaskans understand the problem and are willing to make adjustments in order to get the state's financial house in order.

Alaskans who believe they have no cause to worry -- after all, they have heard the sky-is-falling forecast before -- may be in for a rude awakening. Budget experts drive home the magnitude of the budget problem by showing a deficit of $1 billion without any cushion equals the cost of the entire permanent fund dividend program or a 14 percent sales tax. One billion dollars also could be achieved by eliminating schools and the University of Alaska system. This isn't something that is going to go away -- unless the price of oil should suddenly spike to $48 per barrel and stay there, which, of course, is highly unlikely.

Those who continue to insist state bureaucrats are only protecting their jobs and politicians are only wanting to get their hands in Alaskans' wallets are part of the problem. Consider this from the Office of Management and Budget: "In today's dollars, per capita state general fund spending for state services is $921 less than in FY 79 when the oil era began. Combined operating and capital general fund spending is $1,186 less. ... "But when permanent fund dividends are added to general fund spending, the total is $534 more per capita than FY 79."

Legislators have done a good job cutting. No doubt, government can be made still more efficient. Rep. Lancaster has proposed some common-sense steps to lead to more efficiencies and cost savings, including a shorter legislative session and changes to the budgeting process. Those recommendations certainly should be part of the solution and should be applauded.

However, before the quality of life Alaskans enjoy is completely cut from beneath them, the wisdom of some business adages should be considered. No business ever cut its way to prosperity; many have found that spending some money helps them make more money.

In a like manner, the state should invest in its future. That means funding a world-class education system -- from kindergarten through graduate school. The kind of education system that draws people to Alaska, the kind that reverses the current "brain drain" the state bemoans.

There is a link between education and economic opportunity that should be explored and developed. The state becomes more attractive to businesses looking to relocate if it can boast of a top-of-the-line education system. Educational opportunities look less bright elsewhere when one can get the finest education available at home. Improving Alaska's education system and its economy should go hand in hand.

The silver lining in the state's budget problems is that it provides the unique opportunity to rethink where Alaska is headed. It's commendable that legislators are asking all Alaskans to help chart the course. Staying in port should not be on the itinerary. No matter what the risks are, Alaskans need to move ahead quickly into those uncharted waters. The longer we wait, the fewer options we have and the more storms we're likely to encounter.

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