Everything is on the table for budget cuts, members of the Senate majority caucus said today, but the lawmakers will avoid introducing new taxes or encroaching on Alaskans’ Permanent Fund Dividends.
On the first day of the 29th Legislature, Sens. Kevin Meyer, R-Anchorage; Pete Kelly, R-Fairbanks; John Coghill, R-Fairbanks; Anna MacKinnon, R-Eagle River; Charlie Huggins, R-Wasilla; and Cathy Giessel, R-Anchorage, announced the Republican-led majority’s priorities, including their opinions on the state of Alaska’s budget.
Senate President Meyer said there’s no way the Legislature will be able to completely eliminate the estimated $3.5 billion shortfall, but lawmakers will “chip away” at it this year. The senators are waiting for Gov. Bill Walker’s Thursday State of the Budget speech before creating a specific budgetary path back to the black, they said.
An analysis of the state’s budget situation released Monday by the nonpartisan Department of Legislative Finance stated, “It is virtually impossible to cut our way out of a $3.5 billion structural deficit. ... That does not imply that cuts are useless tools to help close the fiscal gap. It simply means that cuts alone are unlikely to be sufficient. That places revenue enhancements firmly on the discussion table.”
It goes on to list implementing a personal income tax, statewide sales and property taxes and using Permanent Fund earnings as viable options.
These kinds of revenue boosters “are almost universally unpopular with citizens, who often have an entitlement mentality with regard to government services and to their (lack of) responsibility to pay for those services,” the Legislative Finance analysis stated. “(They) are topics that legislators are reluctant to propose, which is understandable given the prevalent attitude of citizens.”
Senate Finance Committee Co-Chair Kelly said government operations, which have grown over the past 10 years, will be the first to take a financial hit. As far as “revenue enhancements” go, he said he disagrees with the Legislative Finance report. Growing the state’s revenue, which he said he takes to mean increasing existing state taxes, implementing new ones and chipping away at the PFD, is off the table, he and other majority senators said.
“(Alaskans’) lives have not prospered at the same level state government has,” Kelly said. “Government has had a good run. ... (Now) government has to go through some pain.”
The best way to “grow our pie” is to get the Alaska Liquefied Natural Gas pipeline up and running, Resources Committee Chair Giessel said. Diversifying Alaska’s natural resources will lead to major money for the state, rather than little increases here and there from taxes, senators said. Some said they are worried Walker’s recent reorganization of the Alaska Gasline Development Corporation board — which manages aspects of the AKLNG project — could delay the project.
“(Walker) needs to tell us what he plans to do — all we’ve seen is disassembling,” Coghill said. “Disassembling looks scary to us.”
The administrative change from former Gov. Sean Parnell to Walker is “one of the dynamics we encourage you to keep an eye on,” Huggins said to the press.
If delays cause Alaska to miss its chance to sell natural gas to Asian countries, the state could be in even more dire straits financially, Kelly said.
“This state has problems like I don’t know how we’re going to fix,” he said. “If we don’t have gas, I don’t know what the future of this state is going to be.”
Senate Finance Co-Chair MacKinnon said after the meeting that municipal revenue sharing — a program that distributes a pot of money to Alaska communities — is a potential place to scale back. Some small, rural communities that can’t generate revenue of their own operate almost entirely on state revenue sharing funds.
MacKinnon has proposed three options: to keep the fund the same, to appropriate a lesser amount each year, or to restructure the program so larger communities that don’t rely completely on revenue sharing don’t get as much per capita as those who depend on it.
One-third of the state’s total revenue sharing fund is distributed each year. There is $172 million in the fund now.
House Finance Committee Co-Chair Rep. Mark Neuman, R-Big Lake, said the House is also mulling the future of revenue sharing. The options are reloading the fund or letting it run out, he said.
Revenue sharing was put in place when the state had more than enough money to go around, Neuman said. The fact of the matter is, there’s no money right now to share, he said.
He said House Finance will consider options for new revenue to help balance the budget, but it will still take at least five years for Alaska’s fiscal house to be back in order.
“(We’ll) try and present as many options as we can to reduce the deficit,” Neuman said, although he said the “PFD is safe.”
He said he’s made a commitment to work with the governor to make a “responsible reduction” to the budget that doesn’t cause a damaging economic backlash.
Most of all, Neuman wants to keep Alaskans in the loop on the budget and the methods the Legislature will use to reduce it.
“I feel very strongly on that,” he said.
Called to order
Lt. Gov. Byron Mallott swore in legislators in both chambers — including eight new members in the House — before the first session of the 29th Legislature was called to order.
“The grave and important responsibilities this group has” are “likely to be history-making,” Mallott said to the members of the House, referring to the state’s fiscal situation.
Rep. Mike Chenault, R-Kenai, said he is “honored and humbled to be selected for another term as the Speaker of the House.”
“Remember that we are in the eye of the public with every session and committee hearing we conduct,” he told the members. “This is our house and we will conduct the people’s business (with respect, pride and dignity).”
On the other side of the building, Meyer took over as Senate president from Huggins, who had the role during the last two-year legislature.
“This is a little different perspective up here,” Meyer said, thanking his family and God for the support that he said got him to that point. “I don’t think there’s anyone in the state of Alaska who can replace Sen. Huggins,” he said, calling Huggins a “great American hero” because of his 25 years in the Army.
He thanked all of the legislators’ family members in the galleries who came to see their loved ones sworn in.
“We’re really going to try to have your loved ones back to you in 90 days,” Meyer said.
• Contact reporter Katie Moritz at 586-1821 or at firstname.lastname@example.org. Follow her on Twitter @katecmoritz.