The continuing fiscal gap between state spending and income gets a lot of attention these days, and nowhere more so than in the Alaska Legislature. As the body responsible for passing a balanced budget, our days and nights have been consumed with the gap, and the corresponding need for a long-range budget plan.
By now most Alaskans know the facts: Despite our best efforts to restrain government spending in recent years, state spending is expected to exceed income by about $900 million this year and $1.2 billion the next. The Constitutional Budget Reserve used to fill the gap is projected to be depleted by 2004, and the cost of government keeps pushing higher.
But while many concerned with this challenge seem to fixate on what taxes to impose, and how much, and how soon, the House Republicans believe that a fiscal plan has many elements, and that new revenue, while essential, addresses only one side of the state's financial ledger.
Implementing a fiscal plan must mean more than just collecting taxes. To be meaningful and credible, a plan must include efforts to control expenditures, demonstrate budget discipline, make systematic changes to restrain budget growth, and expand our opportunities to generate more wealth for the state. Only after making sure these steps are underway should we take the next necessary step of adding new revenue.
When you're stuck in a hole, the first step is to stop digging: It's an appropriate description of our predicament, and of the first step in the House's fiscal plan. The budget just proposed by the House Finance Committee holds the line on state spending to slightly below last year's $2.286 billion general fund budget, $157 million less than the governor proposed. Reflecting the high priority we place on education, our budget fully funds both instruction and transportation costs for K-12 schools, and seeks to maintain the higher level of appropriations the University of Alaska has received over the past two years.
But this maintenance budget also includes reductions to almost every other department, reductions that Alaskans will undoubtedly feel. The Legislature is not exempt either, taking a 7.9 percent reduction that is the highest of any agency. In the absence of cooperation from state commissioners on how to reduce lower-priority state functions, we are necessarily relying on the departments' own judgment to decide how to allocate necessary reductions and absorb spending increases. These include not just federal mandates and formula-driven increases, but also the costs of a third year of pay raises for state employees. We intend to take public comment on this budget, debate and enact amendments, and put it up for a vote by the full House in the next two weeks.
We also believe that imposing a credible cap on state-government spending makes a lot of sense. Before asking Alaskans to give money from their pocket to government, we owe them some assurance that their money will not be taken for granted and used to unnecessarily expand government. Likewise, we will continue our successful missions and measures initiative and other management techniques to ensure state government provides the biggest bang for the buck.
We don't pretend these measures will come near to filling the fiscal gap. But with polls showing too many Alaskans still question the depth of our fiscal hole, and even some in government questioning the scope of our problem, we believe that the state must experience the reality of our financial crisis as a necessary step in building support for the revenue-raising measures that must certainly come.
What those measures will be is up to Alaskans and their elected representatives, working together. Many committed members of the public have shared their views with their legislators and many creative ideas have had hearings in various House committees, including: Taxes on income, retail sales or alcohol; head taxes on cruise ship passengers; converting the Permanent Fund to an endowment; using excess Permanent Fund earnings; and many others. The House Finance Committee has committed to begin work on revenue plans the day the budget has passed the House floor, and to have revenue measures to the House floor in as little as a week later, and I stand with them in this commitment.
As a Legislature, our most important responsibility is to safeguard the state's financial system that allows government to serve, protect and nurture the people of Alaska. We ask for your patience, understanding, cooperation and support as we make the difficult but necessary adjustments to both sides of our fiscal ledger books.