Knowles to ask for $180 million in increased spending

Posted: Sunday, December 16, 2001

JUNEAU (AP) -- Gov. Tony Knowles proposes spending at least $179.9 million more in his fiscal 2003 budget, calling for significant increases in education and anti-terrorism measures.

A plan to pay for the increases -- which Republican lawmakers called excessive -- will emerge later, Knowles said.

Knowles unveiled his fiscal 2003 budget on Friday, where he requests $31 million more in K-12 education spending and a two-year $200 million school construction plan to be paid for by bonds. Voters would have to approve the bonds.

The budget proposes sharp increases in social services spending under Knowles' $9.2 million Smart Start program and another $3.7 million for oversight of the state's oil and gas industry.

Another $99.6 million for homeland security will be part of a separate proposal put before the Legislature when it returns in January. Republican leaders vowed early consideration on the anti-terrorism proposal which calls for $43.6 million in state funds for more law enforcement officers and a permanent Office of Homeland Security.

The overall $7.3 billion budget -- which includes $2.6 billion in state funds with a large federal contribution -- represents a 7 percent increase in state spending.

''It addresses the vital services Alaskans expect -- economic development, public safety, child health and education,'' said Knowles, a Democrat.

Other spending requests include:

-- A $17 million request for the University of Alaska. State spending on new construction remained unchanged at $114 million.

-- A $135.6 million debt financing request to pay for past-due maintenance on state facilities such as prisons and state's Pioneer Homes. Another $4 million in bonds requested for Veteran's Homes.

-- A transportation package introduced earlier this year of $425 for accelerated bonds for highways and ferries.

The Legislature will take up the spending request when it returns to Juneau on Jan. 14. But GOP leaders already have visions of spending cuts in their heads, calling Knowles proposal unrealistic.

Alaska remains a state flush with money compared to many other states in the Lower 48, but analysts say tough fiscal times loom in the near future.

The state's Constitutional Budget Reserve -- established as a savings account for excess oil revenues -- will be down to $2.3 billion at the end of the fiscal year, the state Department of Revenue said.

Lawmakers have used the fund in the past to make up the shortfall between state spending and revenues. Lawmakers are expected to draw $915 million from it to fill a fiscal 2002 shortfall. Knowles budget calls for another $1.2 billion to pay for next year's shortfall.

The Department of Revenue predicts the fund will be empty in July 2004 if oil prices remain at about $19 per barrel.

''Until we have some certainty on the revenue side, this amount of extra spending is just not going to be looked at very positively,'' said House Speaker Brian Porter, R-Anchorage.

Porter said the Knowles plan would negate $250 million in cuts to state spending made by the GOP in the past six years.

Knowles said he will outline a specific plan to increase state revenues in his State of the Budget speech before the Legislature in late January. That plan will include broad based taxes and user fees, he said.

A group of 24 lawmakers meeting over the summer to consider closing the state's ''fiscal gap'' have floated a plan to generate $1 billion in new revenues annually by fiscal 2004.

The plan would impose a 3 percent income tax and a 2 percent sales tax to raise $460 million a year and cap Permanent Fund dividends at $1,250 for every Alaskan.

It would also impose a $25 head tax on cruise ship passengers and raise oil and gas taxes by $100 million. Additional money would be collected through a school head tax and increased levies on alcohol and gasoline.

Senate President Rick Halford, R-Chugiak, said a more incremental approach to filling the fiscal gap is needed. Other Senate Republicans said any increase in taxes would have to come with some form of cap on growth in state spending.

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