Knowles wants tax

MAT-SU -- Valley legislators were disturbed by the sustainable budget plan introduced by Gov. Tony Knowles during his State of the State address, but Knowles said Friday they have little reason to be shocked.

"It's fun to say 'How could the governor come forward with that,'" Knowles said, but added that more than $80 million of that money is a result of legislation passed last year.

In addition to proposing a higher budget than last year -- as much as $300 million higher -- Knowles' budget plan would incorporate approximately $400 million in new revenue through the institution of three taxes.

Knowles suggested instituting a $30 head tax on cruise ship passengers, which he projected would add $20 million to the state coffers. He also suggested bumping up the state alcohol tax by approximately 10 cents per drink, the first increase in Alaska's alcohol tax in 19 years. Lastly, Knowles proposed that Alaska resume its state income tax, at what he called a modest rate.

"Most economists will say that an income tax … has less of a burden on low-income families," Knowles told the Frontiersman. "A lot of states have both."

Thirty-eight states, Knowles said, have both income tax and sales tax.

But some Valley legislators don't believe instituting any tax is appropriate before addressing what they see as state spending problems.

"When you're in a hole, the first thing you do is stop digging," said Sen. President Rick Halford, R-Chugiak. "It simply doesn't make sense for the governor of a state facing a potential $1 billion budget deficit to dramatically increase state spending."

Ogan seconded Halford's opinion.

"The state has got to learn to lead a less-lavish lifestyle," Palmer Republican Rep. Scott Ogan said. "I think Alaskans realize that at some point they're going to have to pay taxes, but we can't tax ourselves enough to support our [current] lifestyle."

But Knowles said it's time for the Legislature stop stalling and find additional resources to support state needs.

"I think when you have a shortage -- when you have a budget gap, you do look at cuts," Knowles said. "We did. But at some point … that is no longer an answer. At some point, it becomes just an excuse."

Knowles reiterated that nearly a third of the money he added to last year's budget was added as a result of action the Legislature took during its last session.

Ten million dollars in school bonds to build new schools was added to the budget, more than $18 million was added to replace federal money that has been phased out of existing program, and a large chunk went to increased Medicaid costs, Knowles told the Frontiersman.

"By statute, we're required, if a person is eligible for Medicaid, that a person [must be] serviced by it," Knowles said. An increase in the number of Alaskans who are disabled or in their senior years means Alaska must pay out more in Medicaid costs.

Approximately $3 million will go for student transportation required by state statute, Knowles said, and $12 million will fund contracts for state workers that were approved by the Legislature last year. Nearly $2 million will go to provide operating funds for an Anchorage jail that sat empty last year because no operating funds were allocated.

Ogan expressed dissatisfaction that that legislation had passed.

"We're looking at being some $80 million in the hole this year for what they did last year," Ogan said, "and that's my own caucus."

But when asked whether his voting record reflected his current dissatisfaction with the legislation, Ogan wasn't sure.

"I remember having some serious heartburn with it," Ogan said, "but I don't remember my vote."

A look at the voting record for the 2001 passage of House Bill 90, relating to school bonds, revealed that all Valley legislators voted in favor of the bill, except Rep. Beverly Masek, who was absent at the time of the vote. When House Bill 250 passed, relating to the renewal of state workers' contracts, it was with all Valley legislators in favor of the bill, except Masek, who was excused.

Ogan said although the legislative majority, as far as he knew, did not share Knowles' view, the address has served a positive purpose.

"I guess I do have to thank the governor for one thing -- his speech rallied even the liberal members to hold the line," Ogan said.