Candidates stress need for long-term budget planning

Posted: Sunday, October 24, 2004

HAROLD V. 'HAL' SMALLEY (Democrat)

P.O. Box 1996

Kenai, AK 99611-1996

Phone: (907) 283-9171

Marital status: Married

Children: 3

Employment-business: Retired educator, part-time sales associate

Age: 57

Education: Master's degree in education from Century University in Albuquerque

KURT E. OLSON (Republican)

317 Diane Lane

Soldotna, AK 99669-7302

Phone: (907) 260-4822

Marital status: Married

Children: 2

Employment-business: Legislative aide to Sen. John Torgerson and Sen. Tom Wagoner, insurance broker, custom seafood processor, tourism

Age: 56

Education: Bachelor's degree in political science, California State University at Long Beach

What do you think are the most important issues facing your constituents and what would you intend to do about them?

HAL SMALLEY: To some folks these may not be major, but to others they are. The loss of the Longevity Bonus Program may not be affecting a lot of folks, but many seniors in the district have lost 30 to 35 percent of their incomes. That money needs to be put back in place and the Legislature must stand up to the governor and make sure it stays there.

The Denali Kid Care Program is another. There are 1,000 students on the Kenai Peninsula that lost their coverage. That has an impact. But it is a group that has very little voice.

There is the issue of jobs on the peninsula. With the potential for mining opening up on the Alaska Peninsula and the natural gas pipeline project, hopefully, jobs will come on line. That gas is important to ConocoPhillips and Agrium. If we lose those facilities it would be a significant impact on the economy.

KURT OLSON: For the last five months I've heard a lot of concern about jobs and education. A good portion of the concern over jobs is about the future of Agrium, which all ties into the availability of natural gas. All told, there are some 600 to 800 jobs at Agrium or in support services. Hopefully, we'll see the bullet (gas) line from the North Slope. We're seeing some movement on that. That would help Agrium and also ConocoPhillips.

Education even ties into the fortunes of Agrium because of the property tax. It's all interrelated. People are grateful for the significant increase in education funding last year (session) and, hopefully, education will be treated favorably again this coming year. The real issue is making sure the dollars going to education get down to the classroom level and relieve some of the overcrowding. Timing is also an issue. Getting the education budget out quickly is definitely a priority.

The fiscal gap facing the state has yet to meet a solution the Legislature couldn't kill. What new suggestions do you offer to the debate that might move lawmakers toward that solution?

SMALLEY: Obviously, this (the high oil price) is an ideal opportunity to put a long-range fiscal plan into place or get one under way. The mechanisms for a plan have been discussed for years, so I'm not sure there is something new to add to the whole list of suggestions. Everything has to be back on the table and fully discussed. Eleven of the last 14 years has seen deficit spending. But we can't cut our way out of this problem. Cuts so far have been pretty healthy. Oil at $50 barrel will give us a significant surplus, but that doesn't mean we should spend it.

OLSON: Let's put it into the proper perspective. At the start of the last session, we were expecting a $350 million deficit. We ended up with a $50 million surplus. The estimate for next year is a surplus of $700 million to as high as $1 billion. Of prime importance would be beginning a longrange fiscal plan and adopting a spending cap so we don't end up in the same place (facing a deficit). But we don't need to spend it just because we have it. Something should be put back into the Constitutional Budget Reserve account and the permanent fund.

What are the prospects for your district with regard to the Pebble mine project, and what are you prepared to propose to bring some of that business to the Kenai Peninsula?

SMALLEY: I haven't seen a lot of information on the mine, yet. I think they are still defining the scope. There obviously will be some construction jobs and jobs when it is completed new science, technology and skilled labor work will be available. It's kind of wait-and-see at this point. I don't think we have to offer solutions when we don't know what the problems are.

OLSON: I would like to see staging areas and infrastructure on this side of the inlet. There would be massive amounts of supplies going back and forth, as well as crew changes. I expect to be on the House Resources Committee and have some input.

Next year it is likely that, despite the price of oil, there will be calls for cuts in state expenditures. Where would you cut the budget? Explain your understanding of the effects of those cuts on the people dependent on programs losing funding.

SMALLEY: The Constitution says fund education, transportation, public safety and public health. We have to make sure that is done. But that leaves the so-called "nonessentials," and it's easy to say if it doesn't affect me, it could be a nonessential. But every dollar in there and every dollar cut has a constituency that suffers a loss.

Administration costs are exorbitant. We need to get a handle on the administrative budget. We should review travel budgets not just in administration, but all departments and agencies. Also, take a serious look at the Legislature's budget.

More than likely, we will have a surplus of revenue. As part of the long-range plan, we should have some direction identified and work our way toward that. I don't see any significant cuts to budget, but maybe some consolidating.

OLSON: We have seen impacts every time we cut the budget. An example is the longevity bonus phase-out. People came down or called Juneau.

I don't see any major cuts coming. But we have some major inefficiency in the delivery of education. There are 55 school districts and 38 have less than 1,000 students. Twenty-eight have less than 500. Prince of Wales Island has four school districts. We have a layer of bureaucracy there that could be streamlined by consolidation. That would help focus dollars at the classroom level.

Where do you stand with regards to state involvement in a future gas pipeline? Royalties? Percent ownership?

SMALLEY: One thing is we need to know all the risks. I think it is a good idea to have some involvement. There could be royalties in-kind. The old saying is, "The devil is in the details." Today we have about 1 percent of the Alaska Permanent Fund invested in Alaska. There has been discussion by the fund board to look at investing some in the pipeline. That has some merit, and we should take a look at it. Obviously, we don't give up the farm. Bonds are a possibility.

OLSON: We need to be an owner. I would like us to own 25 percent of the pipeline. That would show industry that we are serious about it and willing to share in both the risks and potential gains. The issue of whether we become shippers and-or owners is being debated in Regulatory Commission of Alaska right now. That's the proper place for it. There is no easy answer.

New federal laws providing loan guarantees and tax incentives will help (for a North Slope to Lower 48 line). The state should consider similar inducements for a bullet line (direct from the North Slope to Cook Inlet).

What would you propose for protecting the environment of Alaska?

SMALLEY: We don't need to change the mixing zone rules. There is the potential for destruction of the Kenai and Kasilof rivers. It could have long-term effects.

Self-reporting by industry went into effect about three years ago. I don't think that is working that well. I would work to tighten those rules up.

As stewards of our environment, we need to participate in the best form of management possible but still allow industry to produce its product. I'm not supportive of weakening regulations.

OLSON: In this district, (the governor's proposed) mixing zone changes are an issue. I don't believe we should relax the current standards.

Drinking water quality is always an issue. The permitting process (for industry) needs to be streamlined, but I don't believe we need to do it to the point where it impacts water quality. We don't need to do it at the expense of the environment.

What would you propose to expand business opportunities and jobs in Alaska?

SMALLEY: One thing I was able to do when I served in the Legislature from 1999 to 2001 was to work with BP when they brought the gas-to-liquids facility here. That was an $87 million project.

We can look at working with our other resources in programs like the Kenai Wild program.

A lot of it ties into the state's position for a long-range fiscal plan. I believe we do a better job of encouraging industry to come here when we have our house in order. We are not there yet.

OLSON: Getting a large supply of natural gas as feedstock could increase the ability to produce value-added products. We need value-added products in our fisheries, such as Kenai Wild program, that provide higher prices to fishermen.

We need to figure out how to make money off dead spruce.

Other concerns?

Smalley: My opponent has said he would be a better choice because he would be a member of the majority party. We don't know what the makeup of the Legislature is going to be.

I do say that when you allow a caucus to set the rules and regulations and control how an individual votes on an issue rather than your constituency, you are basically representing your caucus.

The fact is about 78 percent of the residents of District 33 are not Republicans. They are Democrats, independents, nonpartisans, greens and the others. When partisan politics is at its best, a host of people become disenfranchised.

Olson: My biggest concern is overspending the windfall we will see with the high oil prices. I would prefer that we save it.



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