Governor urges quick resolution on taxes

Murkowski: OK $100 million in taxes or come up with another solution for budget

Posted: Wednesday, February 04, 2004

Gov. Frank Murkowski is pressing GOP legislative leaders to either pass $100 million in taxes this year or come up with their own plan to close a gaping budget hole.

Top administration officials met behind closed doors with House Speaker Pete Kott on Tuesday following the governor's appeal.

No agreement was reached.

"I basically told the administration that most of their proposals are the equivalent of crack cocaine," said Kott, a Republican from Eagle River. "It gives you a quick high, but it has a long-term negative effect."

Earlier, Murkowski had outlined in a letter to GOP leaders a $217 million list of smaller tax proposals that have been floated so far in the two-year 23rd Legislature to chose from.

Murkowski has asked lawmakers for a $1 per-pack increase in the state's tobacco tax along with hikes in charitable gaming and motor fuel taxes.

He's also asking for a 5 percent bed tax on hotel patrons and cruise ship passengers and other tourism taxes to raise $49 million.

And for the first time this session, Murkowski proposed reviving a $100 per person employment tax which was repealed in 1980. Employers could pay double for out-of-state employees under a plan the administration is considering.

Murkowski wants lawmakers to act quickly on these proposals or offer their own plan for balancing the 2005 budget.

Despite high oil prices, the administration expects a $500 million deficit under a $2.25 billion budget that begins July 1. Like last year, Murkowski has already said he won't draw more than $400 million from the state's dwindling reserve account.

Some other proposals to fill the $100 hole include:

• Changes in the state corporate income tax such as an end to exemptions for about 3,000 state chartered corporations and a repeal of the special rate on capital gains. It would raise $23 million in 2005 and another $15 million the next year.

• A wildlife viewing pass, similar to legislation the governor proposed last year, would raise $12 million. A tax on shore-side tourism activities would generate $11 million.

• A $1 per pack increase in the tobacco tax would raise $36 million and make Alaska second highest in the nation behind New Jersey. The Centers for Disease Control ranked Alaska second highest in adult tobacco use in the nation.

Kott met with Murkowski chief of staff Jim Clark and Office of Management and Budget director Cheryl Frasca for about 30 minutes on Tuesday. Afterward, he said most of the proposals are "unpalatable" to the House Majority.

House GOP lawmakers haven't ruled out an employment tax - which the governor says will go toward K-12 education - or increases on pull tabs, Kott said.

But there is no support for tobacco or gasoline tax hikes and a cruise ship measure is "iffy," he said.

Faced with two looming issues that could affect Alaska's long-term fiscal health, the administration wants to dispense with its immediate budget problems early in the session.

"We have a lot of big issues on our palette here," said Murkowski spokesman John Manly. "If the legislature is not inclined to take up revenue measures we may need to shift gears and find another way to fill a $100 million hole."

Murkowski called a March 1 special session to consider the politically toxic question of using part of the $27.7 billion Alaska Permanent Fund to close the state's long-term budget problems.

A citizen panel formed by the governor will meet Feb. 10-12 in Fairbanks to consider whether to recommend such a move to the Legislature. If approved, it would become a ballot measure decided by voters in November.

Administration officials also expect to begin negotiations with oil producers and a consortium of companies interested in building a North Slope natural gas pipeline soon.

If financial terms are reached, the deal would have to be ratified by lawmakers. The governor hopes to have something in hand before the Legislature adjourns May 11, Manly said.

Many of Murkowski's revenue proposals haven't been introduced in the Legislature. With little time to consider the bills, the governor wants some assurances they have a chance, Clark said.

"Let's work on those and let's not have hearings on things that are going to be dead on arrival," Clark said.

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