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Austerman: State facing tough budget questions

Posted: January 23, 2014 - 12:15am

JUNEAU — House Finance Committee co-chair Alan Austerman said the state can’t cut its way to prosperity, and legislators will have to make some tough decisions in the next few years.

In a sit-down interview with The Associated Press, the Kodiak Republican said Alaska is in a somewhat different situation than when oil prices were low in years past because there is less oil flowing through the trans-Alaska pipeline.

Alaska relies heavily on oil revenues to fund state government operations, but production has been on a downward trend for years. The Legislature last year passed a cut in oil taxes in a bid to spur new production and investment. Critics called the tax cut a giveaway to industry with no guarantee for what the state will get in return. Voters later this year will decide whether to keep the tax change.

Gov. Sean Parnell has called for the state to restrain spending and use savings to get by, though he also has said the state is not in dire financial straits.

Austerman said he thinks the best the state can hope for is for oil production to stabilize, given the aging legacy fields.

He said legislators this year should take a hard look at projects, like the proposed Susitna-Watana dam, and decide if they are the best places for continued investment.

Legislative leaders in the past didn’t want to “cry wolf” about Alaska’s fiscal outlook, and he said he’s real nervous to do that now other than “the fact that, we just don’t see the possibility of increase in production in a time period that will dig us out of this hole on any near-term basis.”

He said he doesn’t expect the state to “fall flat on our face” in the next three or four years, but he said things will be tough if the revenue picture doesn’t change.

He said there isn’t a vision for where the state should be, in terms of schools, roads or other infrastructure, making it tough to know where to focus spending.

A House subcommittee on fiscal policy tried to look at some of those things but fizzled out for lack of interest among other lawmakers and fears some had that it was a tax committee, he said.

Options like imposing state sales or income taxes are seen as politically unpopular. He said lawmakers may need to have a discussion on taxes in the years to come if the oil tax cut doesn’t result in hoped-for production increases.

Sen. Bill Wielechowski, D-Anchorage, said Wednesday that the oil tax cut is a “debacle of epic proportions” that will exacerbate the state’s financial situation. He doesn’t believe the tax cut will deliver on the hopes for new production.

“I’ve always said, as long as we’re getting our fair share for our resources, we don’t need an income tax, we don’t need a sales tax, we don’t need to raid the Permanent Fund,” he said.

He said the state doesn’t need new taxes for additional revenue. Instead, he said the tax cut needs to be repealed, the state needs to enforce development of leases and the state should work with industry and look at taking an equity stake in the oil fields.

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