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Lawmakers: Hike oil taxes

Juneau delegation is of one voice: New tax mustn't hurt development

Posted: Sunday, May 16, 2004

Record-high oil prices will go a long way toward helping the state balance the budget this year, but some lawmakers say the oil industry is not doing enough to help solve long-term budget problems.

The Legislature, which ended its session on Tuesday, passed a budget of about $2.3 billion for fiscal year 2005.

In recent years the state has had to supplement the state budget by $400 million or more with money from the state savings account, the Constitutional Budget Reserve. But due to high oil prices, lawmakers this year will have to draw only about $60 million to $85 million.

Lawmakers in the Juneau delegation say the oil industry should contribute more to help fill the budget gap.

Gov. Frank Murkowski pushed hard this session for a plan to dip into the Alaska Permanent Fund to help pay for state government. He said if the Legislature did not find a fiscal fix this year, he would call a special session for them to solve the problem.

But by the end of the session lawmakers were no closer to finding new revenues, and Murkowski said he'll leave it up to them to determine whether to call themselves back to look at permanent-fund use, a $1 tobacco tax hike and worker's-compensation laws.

Sen. Kim Elton, D-Juneau, said he would support a special session but noted that a long-range fiscal plan should focus on more than the permanent fund.

"There are earnings that we can use from the permanent fund while still inflation-proofing the fund and while still paying dividends," Elton said. "That ought to be part of the solution, along with a broad-based tax and along with a comprehensive review in restructuring the oil industry taxes."

He said the state's oil industry taxes are antiquated and prevent the government from cashing in on shareholders' windfall profits.

"It doesn't address the situation where British Petroleum pays bonuses to shareholders and we're still collecting the same amount of money as if oil were $15 a barrel," Elton said.

Rep. Bruce Weyhrauch, R-Juneau, supported the governor's failed permanent-fund plan but said he does not support calling a special session.

"If we couldn't get it done through the regular session of 120 days, what are we going to do in an undefined period of time within a political election year?" he said, adding that a special session would cost thousands of dollars a day.

Weyhrauch agreed that lawmakers should look at reforming oil taxes in the state.

"We've set up a task force to look at it," he said. "We're going to hire an independent expert because it has to be done in a nonpartisan manner. ... The state loses billions of dollars when we have oil prices at $40 a barrel."

Elton, Weyhrauch and Rep. Beth Kerttula, D-Juneau, agreed that the tax must be structured so as not to hinder development.

"You want to attract business investment, and our biggest revenue generator is oil, so you don't want to have a huge tax bill on oil companies and drive them out so they don't invest in the state," Weyhrauch said. "On the other hand, since it is the biggest generator you want to optimize the revenue you get from it through an appropriate taxation policy."

Kerttula said she's concerned that a special session would allow lawmakers to resurrect their own personal legislation that died during the regular session.

"We can have an agreement, but the fear then, especially after the end of session, is what pops up out of nowhere, which I don't want to go through," Kerttula said.

She said that at the end of the regular session some lawmakers tried with varying degrees of success to sneak in their own personal proposals into an appropriations bill.

"There was no open process on that. None," she said. "Come to find out there was discretionary money to the Republicans. The Democrats didn't get any of that. They got their little pet projects, while the state dumped thousands of dollars, even millions, into moving the ferry system."

Elton said if lawmakers don't call themselves back this summer, it might be years before the permanent-fund plan resurfaces. He said adoption of a percent-of-market-value methodology for managing the fund would require a constitutional amendment and voter approval.

If the question is not taken to voters this November it will be two more years before another statewide election.

"I think the governor has spent so much political capital trying to get POMV that he may not be able to expend any more at that point and he may be a lame-duck governor by that point," said Rep. Weyhrauch. "And what's the political will to adopt it?"

Weyhrauch said it might take a financial collapse before lawmakers and the public agree to use the fund and adopt new taxes.

"That would be a terrible thing, but that may be what it takes because you have people running for governor and distinguishing themselves and trying to pander to a popular vote," he said.

The local delegation agreed that an $82 million increase for K-12 education, worth about $3 million to Juneau schools, was the biggest success of the session.

Weyhrauch pointed to his provisional-driver's-license bill, which requires teens to spend more time behind the wheel before getting an unrestricted license, as a personal achievement. He also said he was pleased to receive bipartisan support for his Health Care Decisions Act, which incorporates provisions of end-of-life care such as advance health care directives, mental health treatment, and durable power-of-attorney laws into one place in state statutes.

Kerttula was successful in passing resolutions supporting labeling beef by country of origin and distinguishing between farmed and fresh salmon.

"The session was an interesting one in the things that didn't happen were almost as important as the ones that did - both good and bad," Kerttula said. "No oil tax - bad. No gambling - good. No tobacco tax - bad. You know, it was kind of back and forth like that. No fiscal plan - very bad, you know, but education - good."



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