Elton pitches plan to balance state's fiscal gap

Posted: Friday, January 21, 2000

Sen. Kim Elton took to the podium today to pitch his plan to help fill the state's nearly $800 million fiscal gap.

The Juneau Democrat presented a three-part proposal that would bring in about $570 million of new revenues to state coffers by increasing taxes on oil companies, upping the alcohol levy and tapping some of the earnings of the Alaska Permanent Fund.

``The more choices we have on the table, the better off we are,'' Elton said. ``The more ideas, the more discussion we'll have inside and outside the Legislature.''

He said that his plan would use Alaska Permanent Fund earnings, but in such a way that the fund would get more protection from the Legislature than it has now. During a special election in September, 84 percent of Alaska voters overwhelmingly rejected a plan to use those earnings as an exclusive method for filling the fiscal gap.

As it is, Elton said, the Legislature can use all of the earnings of the $28 billion fund if it wants to. Elton would include a statutory cap on state use of the earnings at 20 percent, which would be about $400 million. He said that percentage would only be available after dividends and inflation proofing were taken care of.

A second part of Elton's plan is to largely duplicate an initiative that may pop up on the 2002 ballot. That measure would raise alcohol taxes about 25 cents per drink. Elton's bill would bring in another $82 million, of which nearly $33 million would be shared with Alaska municipal governments.

The third piece of Elton's plan would raise $70 million to $160 million - depending on the price of oil - by raising taxes on large oil and gas companies and eliminating taxes on the first $10,000 earned by Alaska corporations.

The oil companies, under the measure, would go back to paying taxes based on a system that Alaska used before 1981, and which other oil producing state continue to use, he said.

``Oil companies are paying two-thirds of what other Alaska corporations in the state pay,'' Elton said. Rather than a close to 9.4 percent corporate tax, he said, big oil is paying closer to 6 percent. The difference has cost the state nearly $4.6 billion in lost revenue since 1981, he said.

The corporate tax measure, dubbed the Corporate Income Tax Reform Act of 2000, was introduced by Elton and Rep. Eric Croft, an Anchorage Democrat.

Croft said he sent a copy of the measure to BP Amoco Exploration two months ago. He hasn't heard back but presumes the company will fight the tax just like it did in the 1970s. ``Back then, they didn't want to pay more,'' he said.

``It should be simple . . . Corporate income has gone up, why not corporate income tax?'' Croft said.

Sen. Jerry Mackie, a Craig Republican, introduced a fiscal plan earlier this week that's caused quite a stir. Under his legislation, which would require two-thirds legislative approval and a vote by Alaskans, each Alaskan would receive one last dividend in 2001 - of $25,000. Then, the fund's remaining $12 billion to $14 billion would be used exclusively as an investment account to help pay for state government.

After hearing the two Democrats' ideas, Mackie said there would likely be resistance from GOP lawmakers, though he was pleased to have the discussion surrounding a long-term fiscal plan widening.

``I compliment them for putting something on the table,'' Mackie said. ``In terms of the details . . . I have not heard of this approach before.''

Sen. Sean Parnell, an Anchorage Republican and co-chairman of the Senate Finance Committee, said taxes aren't going to fly very high at the Capitol this year. He said the proposals from Elton and Croft underlined the different philosophies of the GOP majority and the minority Democrats.

Also, he said, any use of permanent fund earnings are pretty much off the table as far as he's concerned.

``They simply want to tax more and we want to spend less,'' Parnell said. ``Using the earnings reserve (of the permanent fund) without a vote of the people flies in the face of what the people voted Sept. 14.''

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