Participants in fiscal forum say more revenue measures needed for state

Experts say variety of solutions is needed to solve state's fiscal woes

Posted: Friday, February 21, 2003

The budget deficit is the state's biggest problem and must be addressed before it is too late, Cliff Groh, who helped draft legislation creating the Alaska Permanent Fund dividend program, told an audience Thursday night at Centennial Hall.

Groh, a former aide to Ketchikan Rep. Terry Gardiner and former special assistant to the commissioner of the Department of Revenue under Gov. Steve Cowper's administration, assembled lawmakers and economists to discuss the state's fiscal gap. The forum was sponsored by the nonpartisan groups Alaska Common Ground and the League of Women Voters.

The meeting included Murkowski administration Budget Director Cheryl Frasca, House Majority Leader John Coghill of North Pole, former Gov. Jay Hammond, economist Gregg Erickson and a variety of longtime political observers.

Gov. Frank Murkowski has pledged to boost the state's economy through resource development. But many on the panel said closing the fiscal gap will take a variety of revenue measures such as instituting a sales or income tax, cutting the budget, raising taxes on oil revenues, or relying on the earnings of the $22.5 billion Alaska Permanent Fund.

State spending is highly subsidized by the Constitutional Budget Reserve, an auxiliary savings account used to balance the state budget. More than a third of the state budget have been covered in most recent years by the budget reserve.

And the Department of Revenue projects the budget reserve, which holds about $2 billion, will run dry by 2005 or 2006. This year the budget deficit is predicted to be between $500 million and $600 million.

"If it's so bad why hasn't it been fixed?" Groh asked the audience.

He said the inability to deal with the fiscal gap by politicians stems from a fear of proposing taxes or other revenue plans that are politically unpopular.

Sen. Con Bunde, an Anchorage Republican, noted that some Republican lawmakers would like to see the budget reserve depleted in order to weaken Democrats' negotiating power. It takes a three-quarters majority vote in the House and the Senate to tap the CBR, and Democrats often use this requirement to push for projects they support.

"One way to get rid of the CBR leverage that the minority has is to spend it all and then the majority can run the government however we want," Bunde said, not stating whether he supports such a plan.

Rep. Max Gruenberg, an Anchorage Democrat, said the Legislature would benefit from forming a Ways and Means Committee to address the issue of new revenues.

"This would provide a forum and an opportunity to make certain that we have the political will to do what we need to do," Gruenberg said.

He added that Finance, State Affairs and other legislative committees have other responsibilities that prevent them from focusing on a long-range fiscal plan.

Tim Bradner, a political analyst and journalist, said Murkowski's plan to grow the state to prosperity through development is a laudable goal, but questioned whether it would be enough to fill the fiscal gap in three or four years.

Bradner said a 1999 advisory vote by Alaskans on whether to use the earnings of the permanent fund to help pay for state government showed that people really don't understand the severity of the state's fiscal crisis. More than 80 percent of voters rejected the plan.

Former Gov. Hammond, though, said drawing from the earnings of the permanent fund would be the same as instituting a flat head tax on every man, woman and child in the state.

Hammond said some lawmakers want to see dividend payments decline or disappear completely so Alaskans won't object to lawmakers dipping into the fund.

"All it would take is one or two years of no dividend - people (would be) conditioned to accept the fact that they are not going to get one. The permanent fund (would be) the only means of funding government," Hammond said.

Timothy Inklebarger can be reached at

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