Taxes are on the table for a long-range plan

Posted: Wednesday, November 07, 2001

Juneau residents worked on demystifying the state budget Tuesday night in an exercise aimed at developing a long-range fiscal plan.

About 40 people, many of them with some connection to state or local government, tossed around budget-balancing ideas during a meeting called by the Fiscal Policy Caucus, a bipartisan group of legislators that is expected to come up with a plan early next month.

The idea was to increase awareness of options for closing a budget gap that is projected to be $1 billion in the fall of 2005.

Five groups of eight people each worked on consensus recommendations for closing the gap. Some common themes emerged: Budget cuts generally have gone far enough; a state sales tax might be unfair to municipalities that depend on local sales taxes to provide basic services; alcohol taxes need boosting; education is the top spending priority.

"The values that Alaskans hold are more similar than people think," said Kevin Ritchie, executive director of the Alaska Municipal League.

Ritchie is working with Alaskans United, the group that defeated the proposed statewide property-tax cap on last year's election ballot, to raise public awareness of the coming budget crunch. He conceded this effort is tougher.

"Tax cap was 'no,' " he said. "This is much more difficult. It's not just 'yes.' It's 'yes, yes, no, yes.' "The deficit is projected because the Legislature has used savings to balance the state budget in all but two years since 1990. This year, $1 out of every $4 in basic state services will come from the account known as the Constitutional Budget Reserve. Even with no increase in state spending, that $2.8 billion reserve will run out within four years.

Noting that the vast majority of state general fund revenues come from the oil industry, Deputy Revenue Commissioner Larry Persily said: "We really don't have a tax system."

Aside from oil and gas, the total state revenue from the corporate income tax is just $55 million a year, Persily said. Meanwhile, there is no personal income tax or sales tax.

The budget gap is so large -- an estimated $631 million this year that popular taxes on alcohol and cruise ship passengers aren't going to get the job done, said Rep. Bill Hudson, a Juneau Republican and co-founder of the Fiscal Policy Caucus. A proposed "dime a drink" increase in the alcohol tax and a proposed new $50 head tax on cruise ship passengers would each bring in only about $30 million a year.

"You can't do it with $30 million, $30 million, $30 million," especially when interest groups complain about being singled out, Hudson said. A broad-based tax and some use of the "excess" earnings of the Alaska Permanent Fund will have to be part of the solution, he said.

Hudson has proposed an income tax at 15 percent of federal taxes, which would raise about $200 million annually. There also is expected to be from $125 million to $300 million available annually from permanent fund earnings.

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