A guest editorial, "A positive step forward for the state's finances," reprinted in the Empire from Alaska Newspapers Inc. on July 3, contained numerous misleading statements regarding state budgeting and legislation sponsored by the Senate Finance Committee. As co-chair of the Senate Finance Committee I am compelled to set the record straight.
The editorial disagreed with any attempt to make the North Slope Borough provide local funds for K-12 education the same as other local governments. The Senate Finance Committee sponsored legislation to revise the current education funding formula to have areas that can afford to contribute more to their children's education do so.
Under current law North Slope Borough (NSB) residents, with an enormous amount of valuable oil and gas property within their boundaries, contribute only $8 for every $10,000 of property value. In 30 other school districts, residents contribute an average of $40 for every $10,000 of property value. Even if NSB residents contributed 100 percent of their K-12 school costs, their contribution would be the equivalent of 1.8 mills or $18 per $10,000 of taxable property. That is less than half of what most other Alaskans pay in local taxes to educate their children.
Even worse, residents in 19 school districts contribute nothing toward their children's education. This is grossly unfair to Alaskans who do help pay the cost to educate our children.
The editorial accused the Legislature of trying to eliminate funds to nonprofit organizations. Those funds were assigned a competitive merit process giving all nonprofit organizations an equal opportunity for funding. Entities best able to provide services to Alaskans should receive the funds rather than arbitrarily giving them to specific organizations with political clout. Again, this is common sense and good government.
Finally, the editorial accused the Legislature of failing to try to solve the fiscal gap. To the contrary, the Senate Finance Committee introduced a package of legislation designed to be the first step in developing a new long-range fiscal plan for Alaska. These nine pieces of legislation potentially save over $12.5 million the first year and over $100 million annually within 10 years. Five proposals already have passed the Senate and are under consideration in the House. The remaining four are progressing through the Senate.
The most important components are two constitutional amendments to improve the budget process and encourage fiscal discipline.
SJR 23 reduces the existing constitutional spending limit and restricts increases to ensure future fiscal discipline. The existing spending limit has grown to $6 billion - twice the amount of total state spending in 2000. SJR 23 changes the limit to $3.1 billion and limits its growth to one-half of the annual cumulative change in population and inflation.
SJR 24 amends the process for withdrawing funds from the Constitutional Budget Reserve (CBR) and requires a three-quarter vote of the Legislature only when spending exceeds the prior year's level. Currently, a three-quarter vote is needed for any withdraw from the CBR.
Only three components of the fiscal package deal with rural Alaska. One bill allows, but does not require, local government contributions to the Village Safe Water Program. If local governments chose to contribute even just 5 percent, state savings of $2.7 million could be realized.
Another bill revises the Power Cost Equalization formula and adjusts the amount of electricity eligible for subsidy to more accurately reflect current power usage and encourage energy conservation. This legislation could save as much as $9 million annually.
The third bill limits a municipality's allowable bonded indebtedness to $15,000 per resident. This would increase state revenues by over $100 million a year within 10 years. State revenues will increase because some oil and gas property tax revenues, currently collected by one extremely high debt municipality, the North Slope Borough, will revert back to the state.
As a member of the Republican majority, I am proud of the way we have reduced state spending. However, after hundreds of millions of dollars in reductions in state spending over the past five years only challenging spending reductions still remain.
The editorial did a serious disservice to Alaskans by its misrepresentations. Alaskans deserve that such important issues are discussed accurately rather than putting forth misleading information designed to promote controversy or instill fear and anger.
Donley has represented Anchorage in the state Senate since 1992.
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