Taxing legislation likely to stumble

A four-bill package passed the House recently, but it didn't gather much support from local legislators and doesn't seem likely to make it through the Senate before the end of session.

The House's long range fiscal plan would institute four new or increased taxes and legislators say it would generate approximately $900 million when fully implemented in 2004. The bills are as follows:

House Bill 303 -- income tax for Alaskans. The tax has a varying range of per-income percent for each income bracket and would generate approximately $225 million per year.

House Bill 304 -- converting Alaska Permanent Fund payouts to an endowment. The endowment model would allow up to five percent of the Permanent Fund's five-year average market value to be spent. Half would go to pay for Permanent Fund dividends and the other half would pay for public education, while money for inflation-proofing the fund would be retained.

House Bill 225 -- alcohol tax increase. The bill would raise Alaska's alcohol tax to a 10 cents per drink and raise revenue from $12.1 million yearly to nearly $30 million each year, according to House estimates.

House Bill 20 -- using Permanent Fund earnings for municipal revenue sharing. The bill would use approximately $59.5 million in Permanent Fund earnings each year to provide communities with municipal dividends as a stable source of revenue that would fund revenue sharing, capital matching grants, community jails and community safety programs.

Although House Speaker Brian Porter, in a press release from the House Majority, spoke highly of the plan, Valley legislators didn't share his views.

Rep. Vic Kohring, R-Wasilla, voted no on all four of the bills, which he said were preemptive measures.

"I just don't believe that we should be … moving in the direction of new revenues," Kohring said, "With government as large as it is, without going down the road of prioritizing."

Kohring continued to tout his 10-point plan that would reduce government spending.

"My emphasis continues to be reforms," Kohring said. "I'm not talking about cutting everything. There's a perception out there … that I want to cut everything, and that's not true. [We should] cut back to the bare essentials."

Kohring's 10-point plan suggests merging half of all state agencies, cutting non-essential government workers by one quarter, instituting a hiring freeze, capping state salaries at $70,000, selling off state land to spur private-sector, small-business growth, among other things.

"I think people are really ticked off and they're just crying out for an alternative," Kohring said.

Kohring said he believes the plan is not likely to be accepted in its entirety and would likely take several years to institute. But although Kohring has already filed his intent to run, he said he is unsure whether he will run next year to continue pushing his plan.

"I'm in the middle right now of deciding," Kohring said. "There are still more people I need to talk to before I make that decision. It could go either way."

Palmer Representative Scott Ogan was not present for the fiscal plan deliberations, as he was still recuperating from a heart attack he suffered last month, but he returned to Juneau Monday. Ogan said he was glad to have missed the discussions -- for his health.

"I wasn't ready to come back down for that discussion," Ogan said. "It would have been pretty stressful for me. I've come up with a proverb … only a fool throws himself in front of a runaway train."

Ogan said the fiscal policy caucus and the House majority seem like runaway trains -- they're blindly speeding forward without considering other alternatives. But he was confident the package would not make it through the Senate.

"It's very acrimonious between the House and the Senate right now," Ogan said.

Sen. Lyda Green, R-Mat-Su, said she felt it was likely the fiscal package would make it to the Senate floor, but passing it may prove difficult. She discussed a Senate State Affairs Committee meeting that took place Thursday in which there was some discussion about a perceived problem with the income tax bill.

"It looks like the guy who makes more than $100,000 a year … pays less taxes than the guy who makes $38,000," Green said. "They're having a little bit of trouble explaining the stress on medium income folks [who seem to be] hit the hardest."

Green said her view -- and the view of several Senators -- is that a fiscal package is a bit preemptive.

"Is it the time to raise more revenue if you still have millions of dollars sitting there in both the constitutional budget reserve and … other budgets around the state … off of which we get a dividend each year?" Green asked. "And why would you raise money from people to protect an account that is still in existence if you're only intent is to raise spending?"

Green said she feels as if the "fiscal crisis" card has been overplayed. Since she entered the Senate in 1995 -- and even since she began visiting the Legislature in 1988 -- she has heard that the constitutional budget reserve will likely disappear in a matter of two years. She disagreed with arguments that pending lawsuits and settlements will stop coming in, she said, because that argument, too, has been overused.

"As long as the price of oil continues to stay in the mid-20's or above," Green said, "things are going to go pretty well. If we stay at $25 or $26 or have some spikes … it quickly infuses the system."

Instead of instituting new taxes, she said, the Senate has passed a hold-the-line budget, making use of unexpected sources of money Green said are somehow always around.

"What interests me about this is how little pockets of money show up … and you wonder where they have been," Green said. "But that's the way government always is -- there will always be things that you can reappropriate."

Green said other methods of reducing spending, such as reducing debt service or instituting a constitutional amendment to reduce spending limits can also be addressed. She added that the Senate is in the process of approving, for schools, the ability to use Medicaid funds to pay for certain services schools provide. That could mean an infusion of up to $1 million for Mat-Su schools, she said. Similar attempts are being made to use Temporary Assistance to Needy Families funds in a less-restrictive manner.

Another effort being made, she said, could reduce spending significantly statewide. Entitlement programs, she said, require maintenance of effort funds, even if the need for spending may have disappeared. For example, if the state spends $10 on a program in its first year of operation, it is required to spend at least $10 on that program throughout the duration of the program in order to help the program meet its goals and objectives. But some programs are found to be ineffective early on and further spending could be considered unnecessary.

"We're trying to get the feds to back off that … with a two-year moratorium," Green said, "so states can kind of ratchet down."

As for any acrimony between the House and Senate -- or within the Senate, as some have indicated there may be, Green chalked it up to end-of-session stress.

"I would say that, at this time of year, there tends to be a lot of anxiety because you've got lots of balls bouncing," Green said, "and [you're wondering] is this bill as important as that capital project?"