Caucus marches on toward taxes

Bipartisan group feels pressure because of the clock

Posted: Friday, March 01, 2002

Members of the bipartisan Fiscal Policy Caucus remained resolute about a long-range budget-balancing plan this morning despite a new public opinion poll showing a majority of Alaskans opposing most broad-based taxes or use of permanent fund earnings.

Fiscal caucus founder Bill Hudson, a veteran Republican representative from Juneau, said the poll commissioned by Senate Republicans asked only "half the question" when it found that 60 percent strongly opposed any reduction of permanent fund dividends to pay for government operations, a 5-1 edge over those who felt strongly the other way.

"Compared to what?" Hudson asked. "The loss of 50 percent of the educational money?"

Hudson and other members of the fiscal caucus, including Republicans Peggy Wilson of Wrangell and Lisa Murkowski of Anchorage, made the point that doing nothing probably guarantees the end of the dividend program toward the end of the decade, with a resulting hit to the state economy, as well.

When the state's budget-balancing reserve runs out, which is projected to happen late in 2004, the only immediately available source of cash to fill a billion-dollar hole is the earnings reserve of the permanent fund, which is used to pay dividends.

"We think the status quo is a sheer disaster for the people of Alaska," Hudson said.

But Senate President Rick Halford of Chugiak and Finance Co-Chairman Dave Donley of Anchorage are arguing strenuously for budget and tax restraint, rather than major growth in revenues. That's because they say the public lacks confidence in the Legislature to spend new money wisely.

And the House Finance Committee on Thursday released its budget blueprint for 2003, which has no increase in state general fund spending and apparently would trim $157 million from the budget proposal introduced by Gov. Tony Knowles.

Hudson told members of the state and local chambers of commerce Thursday that upcoming budget cuts will set off "alarms" statewide within a week or two.

Hudson said his finance subcommittee has been directed by the House Republican leadership to cut the natural resources budget so severely that the likely result is some park closures.

In the new poll, taken Feb. 22-24, a plurality of respondents - 37 percent said they thought the state budget has increased over the "past several years." The total state budget, including federal funds and fee-supported funds, has increased. But the general fund that provides basic services in education, public safety, and health and welfare from state taxes was cut from 1996 to 2000. There was a slight increase approved last year.

By 48 percent to 38 percent, respondents favored more budget cuts.

Meanwhile, among broad-based taxes, a seasonal sales tax fared the best in the poll, supported by 49 percent. Respondents rejected an income tax by 55-39. By a narrower margin, 51-44, they also rejected Knowles' tax package, which includes popular alcohol and cruise ship taxes along with the unpopular income tax.

The fiscal caucus this morning gave tentative approval to a plan that would raise an estimated $213 million in the next state budget, which begins July 1, and then about $1.37 billion once fully implemented for fiscal 2004. The package drops to about $1.12 billion by 2006.

The bipartisan plan includes a 4 percent personal income tax, a large but sliding payout from permanent fund earnings, a cruise ship head tax of $30, an alcohol excise tax increase of 10 cents a drink, and an increase in the amount of oil money from newer fields that goes to the general fund, rather than the permanent fund.

However, the fiscal caucus isn't done with its own deliberations, let alone the debate that must follow in the House Finance Committee and then on the House floor.

Republican Reps. Andrew Halcro of Anchorage and Hugh Fate of Fairbanks said they don't like using personal income for the broad-based tax they acknowledge is necessary to close the gap. Fate championed a sales tax instead. Halcro said he would "turn over every rock in this state" to find other revenue to replace as much as possible of the $360 million the income tax would raise annually.

Halford said public opinion on taxes can change if there is spending restraint, which is why the Senate is pushing a constitutional limit on increases.

But the projected deficit is merely a guess, he said. "I don't think you can budget into yesterday's projected price of oil."

Looming ever larger is the issue of whether a long-range fiscal plan can pass off the House floor soon enough to foreclose any complaint by the Senate that it doesn't have sufficient time to consider it before the May 14 adjournment of the Legislature.

Members of the Fiscal Policy Caucus are pushing for House action by mid-to-late March. But the House leadership has broached the idea of passing out the state budget for the 2003 fiscal year first, which would have the effect of delaying a revenue package and possibly weakening the leverage of the fiscal caucus.

So far, the House leadership is saying that a majority of the 28-member Republican caucus - 15 representatives - is required to schedule floor votes.

"Fourteen people saying 'no' kills a fiscal plan for the state," fumed Democratic Rep. Eric Croft of Anchorage. "That's outrageous."

Halcro said he would prefer to honor the normal legislative process.

"But at what point in time do we say, 'All right, we've waited too long'?" he asked. "I think we need to get there pretty quick because I see a lot of foot-dragging and behind-the-scenes political pressure."

Bill McAllister can be reached at

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