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With conclusion of Fairbanks conference on Alaska fiscal future, what's next?

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  • Updated: September 28, 2016
  • Published June 7, 2015

FAIRBANKS -- Participants at the fiscal policy conference convened by Gov. Bill Walker here spent Sunday morning in small groups, contemplating the contents of Alaska's toolbox to raise more money to close a multibillion-dollar budget deficit.

Using the Walker administration's fiscal model, generating the cash was as simple as filling in boxes in a spreadsheet to signify new taxes on sales or income, or tapping billions of dollars sitting in an Alaska Permanent Fund account.

But in the middle of one of the discussions, one participant piped up with a question: Would any of the ideas be dead on arrival in the Alaska Legislature, which needs to sign off on virtually all the proposals under consideration?

"All of them," responded Rep. David Guttenberg, a Fairbanks Democrat observing the proceedings.

As the conference concluded with speeches in a University of Alaska Fairbanks ballroom Sunday afternoon, attention began turning toward the Legislature, where proposals to raise taxes or tap the Permanent Fund have gone to die over the last decade.

While lawmakers inside and outside the room acknowledged the need for a frank and tough conversation about Alaska's budget shortfall, they said there was unlikely to be much enthusiasm in Juneau for fiscal policy legislation in the next legislative session -- an election year, no less.

Randy Hoffbeck, the state's revenue commissioner, said lawmakers would need to vote for an income tax next year if they want it to be in effect in time to help stop Alaska from emptying its savings accounts by 2018, as the Walker administration currently predicts.

"That's when we're starting to run out of money," Hoffbeck said in an interview. "So you have to do it now."

Asked how likely that was, or whether the Legislature would put in place another broad-based levy like a sales tax, North Pole Sen. John Coghill, the Republican majority leader in the Senate, responded: "I'm not going to say never."

"But I'm going to say very difficult," he said.

Walker didn't shy away from political reality in his closing remarks at the conference Sunday.

"Some have advised me not to use the 'T-word,'" he said. "I've used the 'T-word:' There's going to be taxes."

New revenue

In an interview afterward, Walker said his administration ultimately plans to draft a fiscal plan to bring to the 2016 legislative session, after broadening the spending and taxation discussions that began over the weekend. And he promised to put political capital into an effort to pass legislation.

"I'll be all in on that, because I have to be all in on that as the governor," Walker said.

But Walker's muscle wasn't enough to get the Legislature to go along with some of his priorities this year that were opposed by the Republican-led majority caucuses in the Senate and House. Lawmakers thwarted Walker's campaign promise to expand the public Medicaid health-care program, and moved money out of an account his administration wanted to use for the governor's plans for a state-controlled natural gas pipeline.

Coghill has nonetheless said his majority in the Senate would have to give consideration to new sources of revenue next year, even as it would push to further restrain government spending after hundreds of millions of dollars in cuts to state agency budgets this year.

"We know that time is not on our side to look at a way to get more revenue into state government," he said.

Senate Republicans, however, would be less likely to consider new taxes and more likely to consider ways to divert money from the Permanent Fund to pay for services, while still trying to preserve Alaskans' dividend payments, Coghill said.

A House Republican leader, Rep. Steve Thompson, also said his chamber would have to consider legislation to raise more money for government next year unless it wanted to be blamed for inaction.

"We've got to come up with something, because we'll be broke the year after," Thompson, a Fairbanks Republican who co-chairs the House Finance Committee, said in a phone interview Sunday. "We've got to get serious. We've got to come back with some positive ideas to move forward."

He quickly added that tax measures would be tough to pass during an election year, saying lawmakers are "paranoid" their constituents will boot them from office if they vote for the legislation.

Asked if he'd hold a hearing on an income tax bill if one came to his committee next year, Thompson responded: "I definitely, probably would."

Hoffbeck, the revenue commissioner, said the only way to move forward on legislation to raise money is to "allow people to have an intellectually honest discussion" and refrain from political attacks.

'Summer tax camp'

But even as he made those comments, the state Republican Party -- whose candidate Walker unseated in last year's gubernatorial election -- was lampooning the weekend conference in a post from its Twitter account.

"Summer tax camp is over," read the post, which included a picture of Walker with green dollar signs pasted over his eyes. "Watch your wallets, Alaska!"

One thing that could get legislators to cooperate with Walker's fiscal plans, conference participants said, is pressure from the public.

"They have to be accountable to some degree to their constituents," said Karl Kassel, the presiding officer of the Fairbanks North Star Borough Assembly. And, he added: "They need a clear message from their constituents to be accountable."

Walker said the weekend's conference was convened, in large part, to "assist the Legislature," by engaging Alaskans in discussions about the state's finances so that they understand the impact if lawmakers don't act.

The Legislature's drawn-out war over spending cuts this year, which has left a budget package more than six weeks overdue, will only make constructive debate more difficult next year, said Guttenberg, the Fairbanks Democrat.

"People drew hard lines in the sand," Guttenberg said.

If there's any reason to be optimistic, he added, it's history: Each time the state has pulled together for deep discussions in tight fiscal circumstances, it's been bailed out by a spike in the price of oil. Taxes and royalties from oil make up the majority of the state's revenue.

"The only thing this conference guarantees," Guttenberg said, "is that the price of oil will go up."

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