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Former Alaska lawmakers join ex-governors in urgent call for fiscal solution

  • Author: Alex DeMarban
  • Updated: September 28, 2016
  • Published March 29, 2016

About 40 former Alaska lawmakers of diverse political stripes and backgrounds convened in Anchorage on Tuesday for a meeting of the minds on how to solve Alaska's $4 billion budget deficit.

They agreed early on they would take no vote to reach a consensus. But meeting with reporters afterward, many said some themes emerged during more than three hours at a conference table, with some former lawmakers also phoning in. The ideas included support for a comprehensive budget solution involving taxes, cuts and some use of the Permanent Fund earnings. Many said such a solution is needed this legislative session to prevent the economy from crashing.

The participants are members of FOSSILS, an informal group of ex-lawmakers who meet occasionally as the Former Old Senior Statesmen in Legislative Service, with a wooly mammoth, the official state fossil, as their group symbol.

The group favored the creation of an individual income tax over a state sales tax and wanted to use some of the Permanent Fund earnings to help pay for state services while also continuing annual dividend checks of some size, participants said.

"We need a solution now," and one that is broad-based, said Gail Phillips, a Republican Speaker of the House from 1995 to 1998.

Oil prices were low and budget concerns were high when she served as well, she said. In the mid-1990s, she supported a plan to cap the dividend at $1,000, before such a large payout became commonplace. The measure wasn't approved by the Legislature.

"It was unfortunate we didn't do it then," said Phillips, because the dividend has grown much larger than that, and people are more resistant to efforts to reduce the check.

At Tuesday's meeting, Phillips said she heard general support from the ex-lawmakers for an income tax that was as at least as large as the one Gov. Bill Walker has proposed as part of his comprehensive solution.

Walker has proposed taxing total income at 6 percent of federal taxes, or an average of 1.5 percent of total income, raising about $200 million.

But Phillips said there wasn't a lot of support for Walker's proposal to retool how the Permanent Fund is structured. Walker's plan would use oil royalties to pay the dividend instead of the current form of using investment earnings of the fund. Participants wanted to leave the current structure alone, although there were varying views on how much the dividend should be cut, if at all, she said.

The effort was organized by the Rasmuson Foundation as part of its educational campaign called Plan4Alaska that seeks to raise public awareness about the state's options for addressing the fiscal crisis. The foundation wants legislators to approve a comprehensive solution this year involving budget cuts and new revenues.

The foundation also recently brought together several former Alaska governors and lieutenant governors — though ex-governors Sean Parnell, Sarah Palin and Steve Cowper did not attend.

That bipartisan gubernatorial group issued a statement saying everyone who uses state services should help pay for them, a comprehensive plan is needed immediately, and the dividend can be protected if a portion of the Permanent Fund earnings are used to help close the deficit.

Similar views were often expressed Tuesday.

Former Senate President Chancy Croft, a Democrat, said he introduced legislation along with others that helped lead to the creation of the Permanent Fund by Alaska voters in 1976.

He said the fund was originally intended to support state operations. The idea was to use the earnings to smooth out periods of "feast or famine" as the state generated income from unpredictable lease revenues to the oil and gas industry.

It's time to use the earnings to help pay for state operations, he said. But Croft said he also believes the dividends, which were not part of the original plan for the fund, should continue.

"It makes a lot of difference for a lot of people," he said.

Former Senate President Rick Halford, a Republican, doesn't support reducing the dividend. He said doing that will cause too much harm to the economy.

But after the dividends are paid and the fund is inflation-proofed, hundreds of millions of dollars in investment earnings would still be available to help pay for state government, he said.

The solution should also include an income tax and eliminating oil tax credits, including both cash credits as well as the per-barrel credits received by oil producers for every barrel of oil produced, he said.

Former Lt. Gov. and Rep. Fran Ulmer, a Democrat, served as moderator.

"We're all encouraging courage on the part of the Legislature and letting them know we support them making the hard decisions," she said.