Capital Notebook: Who will take the lead on budget gap?

Posted: Sunday, January 28, 2001

Still smarting from Sept. 14, 1999, the legislative and executive branches played a congenial game of chicken this week on a long-range fiscal plan.

When Annalee McConnell, director of the Office of Management and Budget for Democratic Gov. Tony Knowles, testified before the House Finance Committee, there was some sparring about how the delicate subject of "revenue enhancements" should be brought forward.

Both sides were mindful of the referendum in which 84 percent of Alaska voters rejected the idea of using Alaska Permanent Fund earnings to pay for government. Everyone at the Capitol remembers the date of the vote. If Social Security is "the third rail of American politics" - touch it and die - tapping the permanent fund is sometimes viewed in a similar light in Alaska.

At the same time, legislators know they're going to hit a wall on the state's deficit spending at some point. House Speaker Brian Porter, an Anchorage Republican, says there's a statewide tax looming.

So far this session, many legislators have been underwhelmed by the governor's proposal, in his State of the State speech, for a "trigger" mechanism to kick in new revenues when the Constitutional Budget Reserve drops to $1.5 billion. Although Knowles has called for an income tax and use of some permanent fund earnings in the past, this time he didn't specify what revenues he would raise with the trigger.

Rep. John Harris, a Republican from Valdez, asked McConnell if Knowles is "willing to lead."

"I think everybody recognizes that there's going to need to be a lot of discussion with the public about what sorts of revenue measures people feel are the right package," she said. "We do think that a combination is likely to be much more successful than relying on simply one."

"Somebody has to lead," Harris persisted. "Quite frankly, the Legislature led that the last time, and we kind of got our nose bloodied a little bit. ... Are we going to see a bill?"

McConnell said the correct process is to get out and listen to the public around the state before attempting to craft a specific package. And she added that Knowles, in fact, had been out front on the issue prior to any legislative movement.

Juneau Republican Rep. Bill Hudson also made the case for legislation that would spark debate.

"Even if the administration does not take the leadership in presenting specific budgetary items - revenue enhancement - there has to be some legislation and some public funding to bring this subject out before the public," Hudson said. "We can't just talk about it in generalities. The public, I think, has to see some hard figures."

He noted that the governor's budget request calls for more than $500 million in a drawdown of the Constitutional Budget Reserve, which is now about $3 billion.

"Any number of us are willing to get our nose bloodied again," Hudson said. "We know that we can't just keep draining our reserves. When we do that, when those reserves are gone or down to the point where they no longer fill the gap in the budget, then we're going to start eating up the people's permanent fund dividend money. ... We can't allow that to happen."

As far as new revenue, "I don't think it's going to be productive to try to figure out who's going to step across the line first," McConnell said. "We certainly are interested in working on that."

Rep. Con Bunde, an Anchorage Republican, noted that bills have been introduced to use some permanent fund reserve account earnings for capital projects, to reinstitute an income tax and to create a community dividend program. "I think all you have to do is schedule those and start a conversation."

Quote marks:

"If any community has too many tourists, please send them to Fairbanks." - Fairbanks Rep. Jim Whitaker, in reaction to tourism backlash in Juneau

"I guess no one wanted to belch in church and ask the question." - House Minority Leader Ethan Berkowitz, noting that an oil and gas forum for legislators focused on the industry's economic impact in Alaska but not on its profits

"It's the road less traveled." - Senate Minority Leader Johnny Ellis on the governor's constant gas pipeline refrain, "My way is the highway"

Bill McAllister can be reached at

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