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Anti-tax legislators strongarm local government for tax hikes

One of the bills revealed by the anti-tax leaders of the Senate Finance Committee this week would pressure local governments to raise taxes on senior citizens, disabled veterans and widows.

Give Sens. Pete Kelly and Anna MacKinnon time and maybe they can add orphans to the list.

The Kelly-MacKinnon package centers on shifting state costs for education and basic services to local government. This would allow legislators to claim a minor victory in reducing the cost of state government through a technique that is nearly painless for legislators, though it would leave local governments hurting.

The only people in Alaska who see this as "right-sizing government" are legislators who want to force mayors, schools boards, city councils and assemblies to raise taxes or cut services.

The indirect nature of the transaction gets lost on many voters as such issues are rarely presented to show cause and effect. But the legislative strategy is clear to local government leaders, who immediately opposed the Kelly-MacKinnon plan.

Anchorage School District Superintendent Ed Graff predicts the "net impact of these bills is equivalent to placing over 200 teachers in our district at risk by next fall — increasing to 300 teachers at risk in four years," mainly through what he called an alarming transfer of pension obligations. Fairbanks North Star Borough Mayor Karl Kassel estimated a cost to the borough of close to $10 million. He said it is particularly distressing that the state is "now trying to charge us for their past mismanagement of our retirement funds."

Kathie Wasserman, executive director of the Alaska Municipal League, said the Senate bills don't shrink the "footprint of government. This simply takes one of the shoes and passes it on to someone else."

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The cost statewide for school districts alone would be about $55 million in the next fiscal year, rising to $83 million a year by 2020, according to the Association of Alaska School Boards and the Alaska Council of School Administrators.

There is also Senate Bill 208, which would eliminate popular scholarship and grant programs for thousands of Alaska students, with Senate leaders saying they intend to use the money they don't spend on scholarships to offset costs for higher local teacher pension costs for the first five years. This is a legislative intention, which means it may be meaningless.

Then again, the claim that the scholarship and grant money would be the source of funds to offset local increased costs is a dodge, as these are not dedicated funds and the dollar transfer doesn't work that way.

Eliminating the scholarship program championed by former Gov. Sean Parnell is a separate decision from funding retirement costs. Not long ago Parnell portrayed the $400 million endowment, the earnings of which go to pay scholarships, as a self-sustaining plan for the long term. So much for the long term.

Announcing that scholarships and pensions are linked — when they are not — is an attempt to create a political dynamic in which supporters of school districts would either have to abandon their support of the scholarship program or accept cuts in state education funding. Kelly and MacKinnon should drop this ruse, as it fools no one.

The finance leaders, with the approval of the Senate, short-circuited the legislative process with their cost-shifting package, keeping it away from other committees in hopes of jamming it through the Legislature in the next few weeks.

Had Kelly and MacKinnon shown any inclination to take difficult actions on state tax and revenue questions, some version of a plan to force higher local taxes or service cuts would be defensible.

In the near future, local tax increases and reductions in services are unavoidable, given the collapse in the state financial structure. Local governments have to bear some of the new burden, but they will rightly object if there is no sense of shared responsibility with state government.

A consensus can be built by enacting some statewide taxes and using the Alaska Permanent Fund. Make everyone a little unhappy and you might move the various interest groups in Alaska toward grudging acceptance.

The Kelly-MacKinnon plans fail that test because the Legislature refuses to spread the pain or deal with statewide taxes. "It is not anticipated at this point that we're going to have any taxes," Kelly announced March 15.

"I'm not getting into the tax business while I know government is still too big," said Kelly, a Fairbanks Republican and former lobbyist for the University of Alaska.

According to Kelly, the state needs a "smaller, smarter government." It's disingenuous to refuse to adopt state taxes, while claiming that a smaller, smarter government means forcing local governments to raise taxes.

Some legislators are fond of saying that "everything's on the table" when it comes to solving the state's fiscal crisis, though their imaginary table somehow isn't big enough for taxes. In this case they see a local government table with plenty of room for higher taxes.

Dermot Cole has been writing about Alaska politics since 1976. The views expressed here are his and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.

Dermot Cole

Former ADN columnist Dermot Cole is a longtime reporter, editor and author.

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