Budget plan: New taxes, 402 fewer jobs

Governor's proposal taxes cigarettes, tourism, pulltabs

Posted: Tuesday, December 16, 2003

Gov. Frank Murkowski laid out his 2005 budget Monday, calling for new taxes on tourism, smoking and pulltabs, and the elimination of 402 state jobs.

Proposed new taxes

• $35.5 million tobacco tax: $1 per pack of cigarettes.

• $17 million cruise ship head tax: $5 per passenger per day.

• $15 million lodging tax: 5 percent tax on lodging at hotels.

• $5 million shore-side guided tours tax: 5 percent tax on guided tours.

• $3 million cruise ship gambling tax: $1 per person tax on cruise ships with casinos.

• $2 million pull tab gambling tax: 6 percent tax on pulltab gambling.

Murkowski released the proposed budget Monday in Anchorage at a meeting of the Alaska State Chamber of Commerce. During an afternoon press conference following the release of the budget, he answered few questions from reporters before leaving.

"A state budget is not just about managing state finances," Murkowski said in a prepared statement. "It is a plan for responding to the needs and hopes of all our people. It's about our education system, the needs of our citizens, our communities and the protection of our people."

The budget calls for the elimination of 263 full-time, 102 part-time and 37 non-permanent positions - but it still is unclear which jobs will be cut or how many of those positions are currently filled, said state Budget Director Cheryl Frasca.

A so-called transient accommodation tax would institute a $5 per night bed tax on cruise ship passengers and a 5 percent tax for independent travelers staying at a hotel or bed and breakfast. The plan would raise $17 million from cruise ship travelers and $15 million a year from independent travelers, according to state Budget Director Frasca.

But that's not the only fee cruise ship passengers will pay under the Murkowski plan. They'll also pay a $1 gambling tax on ships equipped with casinos, raising about $2 million a year.

Murkowski's Chief of Staff Jim Clark said the budget proposal creates 20 new state trooper positions and six criminal prosecutors. Investments in public services also include six new public defenders, nine civil attorneys, 14 social workers and seven associate social workers.

The proposals must be approved by the Alaska Legislature, which goes into session Jan. 12.

Smokers will be expected to cough up another $1 per pack for cigarettes, raising about $36 million a year and constituting the largest revenue proposal in the 2005 budget.

Department of Health and Social Services Commissioner Joel Gilbertson said the tax would give Alaska one of the highest tobacco taxes in the nation at $2 a pack.

"I think it's been demonstrated that the more you charge per pack the fewer people smoke," Clark said.

Clark noted that the development of the cruise ship industry in Alaska has affected transportation infrastructure and that the tax can be thought of as a user fee to improve ports and harbors. He said it is uncertain how the cruise ship tax proposal would affect a proposed cruise ship ballot initiative to tax the industry and require more stringent environmental regulations.

Initiative sponsors are racing against a Jan. 12 deadline to collect about 24,000 signatures to make it on the 2004 election ballot.

"It's encouraging and extremely gratifying that this administration recognizes that this is a large, robust industry that's not paying its fair share," said Joe Geldhof, a sponsor of the cruise ship ballot initiative and lawyer for maritime unions. "It's a good beginning but not as comprehensive as the initiative and it warrants additional work."

"It will be fascinating to see this wind its way through the legislative process. The question is whether the governor has the horsepower to make this happen."

Tourists and nature lovers will pay a 5 percent tax on guided tours. This plan would raise about $5 million a year, according to the state.

Frasca said the budget proposal also would raise about $4.8 million through state land sales, $100,000 in park fees and $1.5 million in increased traffic violations. The state also plans to capture $40 million by selling state property to the Alaska Housing Finance Corp.

The state must absorb $145 million in increased costs this year, including $34 million in employer costs such as retirement benefits, $7 million in merit increases for state employees, $62 million in formula programs such as Medicaid and $42 million in school debt and general obligation bonds, Frasca said.

If passed by the Legislature as proposed, the new taxes would raise about $78 million. With a projected fiscal gap of about $574 million for fiscal year 2005 - which runs from July 2004 to June 2005 - the state will need to find just less than $500 million to balance the budget.

Frasca noted, however, that several revenue proposals not passed last session, such as a state sales tax and the 12 cent increase on the state gas tax, are still on the table for debate.

Murkowski has promised to use no more than $400 million from the Constitutional Budget Reserve, the state's savings account. Eleven of the past 13 years Alaska has spent more than it earned, requiring lawmakers to tap into the $1.9 billion account.

• Timothy Inklebarger can be reached at timothyi@juneauempire.com.

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