Fiscal plan must be top priority -- period

Sad, while waiting out this dreary election season, to hear that Alaska's Republicans were planning a meeting, two days after, to head off any coalition leakages and to divide legislative power into the customary fiefdoms. Maybe better news, the House organized in a coalition, but with the same assignment of fiefdoms. With Alaskans' attention now leaving behind the election (thank heavens!), you might have thought it was time to get back to the business of solving Alaska's financial crisis. A somewhat new Legislature is ginning up for the process, each legislator with his or her own ideas, each party with its own vaguely put program now formalizing its power relationships. How did that work out for us in the last couple of sessions?

It's time for a new start. First, every other legislative subject on hold. Until a budget outline is agreed to, no other business, period — for anyone. Since nobody should be twiddling their thumbs, the first big meetings can best include participation by all legislators, starting now with prelegislative conferencing, including both House and Senate members.

Let's see if we can get at least the beginnings of a common track on the budget with nobody strangled by caucus commands.

[Myths and mistrust distort Alaska budget debate, but we need to heed call of reality]

Don't pick on only one revenue subject. Sure, everyone is eyeing the Permanent Fund, its dividend and the reserves but start with a full schedule of topics, that is, revenue topics, since that is the part of the budget problem that hasn't been touched. Include consideration of the level of increased oil industry contribution. Sure, you can fool with more cuts, but a conservative approach has done that in the last three years. What's left to cut is nickel-dime stuff. Just make an assumption that the budget will go down another 5 percent and use that as the marker against which revenues must be raised or applied.

The No. 1 state issue by a fare-thee-well is revenue but looking at election politics, the No. 1 issue is re-election. "Of course" you might say, "why not?" One answer: because a legislator's job is to do what's best for Alaska, not to kowtow to the marginal, uninformed voters, many of whom are planning on leaving Alaska shortly, who will vote against anyone supporting the necessary revenue increases. The ideal legislator plans the next campaign around the proposition that he or she did the right thing for Alaska and hopes for the best. If that means a loss, the legislator should be content with clarity of conscience; the Legislature is not supposed to be a permanent job.

There are also budget strategies that can work to save your, err, seat. First of all, not every Alaskan's first priority is avoidance of taxes. Check it out. Knowledgeable Alaskans all know that the economy cannot survive without major revenue increases and most understand you can't get it all out of the oil industry or from the Permanent Fund.

Many legislators, and maybe the governor, have missed the point that the Permanent Fund dividend is both a family or child support program and a guaranteed minimum income, both common programs in Western Europe. The PFD's only problem is that it is not accompanied by a solid income tax that would take back payments from those who don't need it.

Why not just limit dividends to a "needs" base? By taxing back, the paperwork and checkup of qualification is gone. We rely on the federal income tax as a measure and the "loss" in state income tax is deductible on the federal income tax.

[Video: Alaska's budget crisis, explained]

For example, those with over $80,000 in net income (very roughly the European measure) do not need the PFD as an essential part of their income, so set the state income tax to make sure that those making a net $80,000 pay at least the usual PFD amount in state income tax. At that percent of federal rate, of course those who make more will pay a larger income tax, as is normal. Graduated percentages can be considered.

Nothing is that complicated; there are maybe a dozen taxation points. The only issue is the rate figure to be applied to each item to be taxed. As has been pointed out before, the alcohol number should bear a better relation to the public costs associated with its consumption. Some numbers may be small but don't let any of the normal items of state taxation used nationally escape because it produces only a small amount. Pain must be shared.

There is at least one approach that will provide protection on the re-election issue. Pass each item with an effective date as the date of adoption of a constitutional amendment. That constitutional amendment then guarantees the preservation of the PFD at, at least, $1,500 plus inflation leaving the balance of Permanent Fund income to address budgetary needs. So the people decide on the whole package.

John Havelock is a former Alaska attorney general. He lives in Anchorage.

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