Knowles releases '02 budget

Posted: Friday, December 14, 2001

In releasing his proposed state budget this morning, Gov. Tony Knowles said he will ask the Legislature to pass a broad-based tax and other revenue-raising measures during the 2002 session.

But a key Republican immediately took the governor to task for a budget proposal that would increase general purpose spending by at least $179 million in fiscal year 2003, thus accelerating the depletion of a reserve account that has been used to cover deficits.

Knowles' budget request is for $2.597 billion to cover basic state services, including education. That's an increase of $179 million, or 7.4 percent.

Most of the increased spending has been laid out in recent gubernatorial announcements, including $31 million for K-12 education and $17 million for the University of Alaska.

Separately, the governor is asking for a $200 million school construction package that voters would have to approve next November, and $135 million in a debt-financing mechanism called "certificates of participation" to take care of deferred maintenance, particularly in correctional facilities and Pioneers' Homes. That's on top of the $425 million transportation package he unveiled in the 2001 session.

For general operations, Republican staffers have noted additional spending that the administration isn't counting in its bottom line, said Senate Finance Co-Chairman Dave Donley of Anchorage.

"What we kind of concluded at the end of it was, ballpark, $300 million more," Donley said. "There's a bunch of money that appears in fiscal notes on their new legislation; that money they didn't count toward their $179 million."

At $179 million, the increased spending means a budget deficit of $1.2 billion in the next fiscal year, which begins July 1. The money would come out of the $2.8 billion Constitutional Budget Reserve, which already was forecast for depletion in 2004.

Knowles acknowledged his obligation to provide revenue for the expenditures he wants.

"For my two terms, we have attempted to do that in a responsible way; it has not been addressed" by lawmakers, the governor said. "We no longer have any option. ... Safe landings are just about over."

While oil prices previously have gone up when he has proposed new taxes or using permanent fund earnings to pay for government, that's not likely to happen again, he suggested.

Knowles applauded the work of the Fiscal Policy Caucus, a bipartisan, bicameral group of legislators that is encouraging Republican leadership to move on a long-range plan for balancing the budget. And he said he will provide his own recommendations in his annual State of the Budget address next month.

Donley said the Senate Republican caucus still must meet to decide on budget priorities.

But he said his advice to colleagues will be for an actual cut in the general fund, not an increase. He called it "very disappointing" that Knowles is seeking more.

"If the governor believes these are items that are new higher priorities than existing items, the governor should identify existing items in the budget we could reduce to make room for new spending," Donley said.

Governors in other states typically have asked state agencies to identify potential spending cuts in their budgets, but the Knowles administration hasn't done that, he said.

As for a long-range plan, Donley remains adamant that constitutional amendments for spending restraints must be in place before major revenue-raising measures are enacted.

"They are absolutely the fundamental first step," he said. The amendments would lower the cap on general fund spending and require fewer votes to draw from the Constitutional Budget Reserve, thus averting what Donley calls blackmail by Democrats who drive up spending in exchange for those votes. The Senate passed the amendments this year.

If the House moves quickly on those amendments and puts them on the general election ballot, then additional belt-tightening legislation also needs to advance before there's talk of a broad-based tax, Donley said.

After that, "I think we'd be willing to look at new revenue sources the public supports," he said. "They're certainly not going to support it unless the government has done everything it can to reduce spending."



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