Ulmer, Murkowski campaigns focus on money

Posted: Sunday, November 03, 2002

ANCHORAGE (AP) -- Forget public education. Forget hunting and fishing rights. Forget more troopers on the road, or whether those roads will be plowed.

In the final days before the general election, the issue driving the 2002 gubernatorial campaign is the fiscal health of the state, and whether it's on life support or merely ailing.

Democrat Fran Ulmer and Republican Frank Murkowski couldn't be farther apart in their opinion of the state of the state budget. They don't even agree that there is a serious problem. Voters Tuesday will decide who has the better grasp of Alaska finances.

Ulmer has made a plan for the fiscal gap a focus of her campaign. She contends Murkowski is so off base on state income and spending, he's resorted to last-minute mudslinging to distract voters from his fiscal plans.

''The extent to which Sen. Murkowski is doing this is really to get the public's attention away from his lack of a realistic plan for the future of this state,'' Ulmer said.

Murkowski contends the gap can be filled by cuts in state spending and economic incentives. Ulmer wants to impose taxes ''whenever there's a speed bump in Alaska's economy'' and that hurts business, he said.

''Taxes simply transfer dollars out of your pocket and puts them in the pockets of government,'' he told the Associated General Contractors on Thursday. ''It's shown that every state that increased taxes, you get more government.''

What Murkowski calls an economic speed bump, Ulmer regards as a roadblock that frightens away potential businesses and retards the resource development Murkowski touts.

In minimizing the fiscal gap, Murkowski parts ways with most of the people who decide how much state government will spend, the 60 legislators, including fellow Republicans.

Gail Phillips, former House speaker, declared two years ago that a mixture of permanent fund earnings plus taxes on the public and industry was needed to close the gap.

Rep. Eldon Mulder, co-chairman of the House Finance Committee and architect of state operating budgets the last four years, voted against a House-approved tax plan this year -- in part because he thought permanent fund earnings should play a larger role to close the gap.

And the other elected Murkowski, Republican state Rep. Lisa Murkowski, early on joined the Legislature's Fiscal Policy Caucus, a group committed to find an answer to the shortfall.

In nine of the last 11 years, state government spent more than it earned. The gap has been filled by withdrawing money from the Constitutional Budget Reserve, an account created by voters in 1990 for future oil and gas tax and royalty settlements with oil companies.

Since it was set up, the reserve has taken in or earned $7 billion. State government has used up $4.8 billion. As of Friday, the account had $2.15 billion remaining.

To avoid drawing from the fund this year, Alaska oil would have to sell for $35 per barrel. In its spring revenue projection, the Department of Revenue estimated the gap between earnings and spending would be $860 million. If the price of Alaska crude, averaging $26.75 since July 1, remains high, the draw on the reserve this year may be closer to $500 million.

The spring Revenue Department projection estimated the reserve would run out in the fall 2004. Higher oil prices could make the reserve last until summer 2005.

In a speech announcing his fiscal plan, Murkowski said he detected no crisis. He said the reserve account can continue to fill the gap between earnings and spending until ''belt-tightening'' and new revenue from resource development comes on line.

Murkowski has been short on specifics for cutting state government, but he told the Associated General Contractors on Thursday that the task will start with an audit of all state agencies.

''We're going to go into our state government, we're going to review the state agencies, we're going to use the state employees that have numerous suggestions on how government can be more responsive and serve better and more effectively and more efficiently,'' he said.

Murkowski will be looking to slice up a pork roast that's already had fat trimmed off.

Republican legislators in 2000 session declared they had reached their goal in a five-year plan to cut spending by $250 million.

A study by the National Conference of State Legislatures indicated that between 1991 and 2001, Alaska's general fund budget declined by 15.5 percent. The study indicated that Alaska was the only state to have cut general fund spending during that decade.

The general fund budget this year is $2.2 billion, and much is politically untouchable.

Roughly one-third goes for education -- 29 percent for public schools and 8 percent on the University of Alaska.

Non-education formula programs -- based in state law and guaranteeing a specific level of benefits to qualified recipients -- accounts for 14 percent of the budget, or $328 million. Those costs include Medicaid, adult public assistance, longevity bonuses, revenue sharing to communities, elected officials retirement.

Of the remaining 49 percent of the budget, courts, cops and corrections account for $343 million, or 14 percent. Roads, airports and ferries cost $159 million, or 7 percent.

Health and Social Services account for $141 million, or 6 percent of the budget. Debt service, mostly reimbursement to municipalities for schools, is $104 million, or 4 percent.

Natural resource management -- the departments of Fish and Game, Natural Resources and Environmental Conservation -- is another 4 percent at $96 million.

Everything else -- the departments of Administration, Revenue, Labor, Military and Veterans Affairs, Community and Economic Development, the governor's office and the Legislature, was $331 million, or 14 percent. Cut them all, and state government would still have a fiscal gap.

The other half of Murkowski's plan is growing the economy.

On Thursday, he said two forces are at work for putting the brakes on Alaska resource development: national groups that have controlled the openings of Alaska resources, and the lack of a can-do attitude by the Knowles-Ulmer administration.

''We're going to change the attitude in Juneau,'' he said.

A change in administration policy, he claims, could make more land available and encourage more companies to invest in exploration. He said a goal would be to increase oil production by 3 percent starting in 2005. Murkowski also said he can develop mineral and timber strategies.

Ulmer said the number don't add up. Murkowski's petroleum goal would add $30 to $35 million. Doubling earnings from timber and minerals would add $5-7 million.

Ulmer laid out a three-part fiscal plan: A cap on state spending, with increases allowed for inflation and population growth; a promise to veto any budget that involves spending earnings of the Alaska Permanent Fund, unless such spending was approved by voters; and a ''parachute plan,'' in which tax measures, to be determined with legislators, will kick in if the Constitutional Budget Reserve falls below $1 billion.

Ulmer said she will continue a pro-business environment that has brought 30,000 new jobs in the last eight years, record low unemployment and the highest median household income in the United States.

But unless the budget gap is addressed, Ulmer said, it will put a stranglehold on progress and a chilling effect on business investment.

In the absence of a revenue plan, Ulmer said, the only pot of money Murkowski would have left to draw from would be permanent fund earnings.

''Even if he says he will protect the dividend, if he doesn't have a realistic fiscal plan, and he has said no income tax, no sales tax, no oil and gas tax, no tax, no tax, no tax -- you can't cut your way out of this problem,'' she said. ''That's why you are left with earnings, and only earnings, to fill the gap.''

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On the Net:

Ulmer campaign: http://www.franulmer.com/

Murkowski campaign: http://www.frankmurkowski.com/



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