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State's fiscal future should be addressed

Posted: Tuesday, January 09, 2001

The following editorial appeared Jan. 4 in the Anchorage Daily News:

We need broad-based dialogue on Alaska's fiscal future.

Privately, many Alaska leaders would tell you that life in Never-Never Land - never pay taxes and never use Alaska Permanent Fund earnings for anything but inflation-proofing and dividends - some day will come to an end. The question is: How hard and how disruptive will that day be? At least part of the answer is: That depends how soon and how well we come to grips with our structural fiscal problems. And that depends on how widely Alaskans share the dialogue.

Various high-level commissions and study groups have been examining the state's budget gap for many years. The amount of the gap fluctuates with oil prices, but the state has had a shortfall six of the past seven years. In fiscal 1999, that shortfall topped $1 billion and led to several ill-fated proposals for change. Eventually, virtually everyone was scarred by the 84 percent public vote against the plan that emerged from the late hours of the 1999 legislative session.

But the issue won't go away because it was bungled before or because soaring oil prices saved us one more time. In just the past two weeks oil prices have plunged 40 percent - another warning for Alaska's finances and economy.

The sooner we deal with this question, the better the chance of avoiding a crash later. The sooner we put our fiscal house in order, the sooner we'll remove a big economic risk for businesses considering whether to invest here.

The policy solutions are workable if we figure them out in time. Some budget cuts, some broad and generally progressive taxes, and some use of Alaska Permanent Fund earnings would see us through and actually improve our economic prospects. So far we've tried only the first idea. A sensible balance of all three - plus sound investments in education and infrastructure would help a fourth solution emerge: economic growth.

If Alaska's citizens are skeptical of the schemes offered up so far in Juneau - and they should be - then the citizens should shape the solution.

Before Alaskans voted to create the Permanent Fund in the mid-1970s, legislative and civic leaders conducted two years of public meetings throughout the state to engage public sentiment. That's probably what it'll take again.

Chances are good that Gov. Tony Knowles or legislative leaders will propose some form of general taxes or user fees during the legislative session. When they do, rather than go into caucus to dicker over the details, they should go on the road to ask Alaskans for input or alternatives.

When the citizens of Alaska decide that a solution to the budget gap is better than life in Never-Never Land, the state's elected leaders will come along. For too long we've been trying to do the job the other way around.



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