Fiscal gap is the issue of the era

Capitol Notebook

Posted: Sunday, March 03, 2002

Bill McAllister can be reached at

"What kind of a state do we want to live in?"

As expressed Thursday by Rep. Andrew Halcro, that is the question of the day, week, month, year and decade.

Halcro, a Republican member of the bipartisan Fiscal Policy Caucus, posed the question in the context of the House majority's proposed $8 million cut in health care coverage for women and children who are among the working poor.

But it also serves as an overarching theme for the historic discussions under way on spending, taxes and the permanent fund.

This would seem to be one of the pivotal times in Alaska history. Key events since statehood Prudhoe Bay, ANCSA, ANILCA, establishment of the permanent fund, the Exxon Valdez have resonated for decades. The $1 billion-plus fiscal gap has that feel to it.

It's moments like these when thoughtful people look to a longer history and a wider experience than they have themselves.

That is, how might others view our plight?

For more than 20 years, Alaskans have had a vacation from broad-based state taxes, enjoyed the fruits of the former bull stock market through permanent fund dividend checks and consumed a record amount of federal largesse, thanks to the phenomenal clout of our congressional delegation, pound-for-pound the most awesome revenue vacuum machine on Capitol Hill.

But as painful solutions are proposed for closing the fiscal gap, the resentment would lead you to believe that the Legislature's five-year budget-cutting plan had never taken place or that the heavy hand of state government had oppressed Alaskans along the lines of the protagonist in the Beatles' "Taxman": "One for you/Nineteen for me."

There's talk that an alcohol tax increase will cause bankruptcies in the hospitality industry. A cruise ship head tax will depress bookings and shoreside excursions. State sales taxes will enrich and cripple local governments who already depend upon them. Income taxes will scare off investment and cost jobs. The oil and gas industry has been paying plenty for years, thank you.

And as for permanent fund dividends: Which part of "no" don't you understand?

This general antipathy toward sacrificing anything in exchange for government services was underscored in the poll released by Senate Republicans Thursday. While almost nobody not facing psychiatric commitment proceedings believes that $1 billion can be cut out of a $2.5 billion general fund without irreparable harm, reduced spending is often the reflexive response when people are asked what should be done.

But are these reasonable reactions? What would a reasonable American say? After all, as hard as it is to believe sometimes, Alaska is part of the United States.

Corey Davison of Chicago might not be a typical American.

But as Midwest region director of the Concord Coalition, a bipartisan, nonprofit group advocating for a balanced federal budget, he has seen more government budget breakdowns than all but the most masochistic policy wonks.

So I gave Davison this scenario:

Imagine a state the only state where residents pay no state sales or income taxes. Imagine, further, that a savings account built up by revenue solely from the state's largest industry has grown to three and a half times the size of the entire state budget, including federal funds and university tuition.

Now really go way out there and say that earnings on this savings account paid every resident man, woman and child $1,850 in 2001, thereby perpetuating apparently the only situation in history in which people have experienced negative taxes as part of their personal income. Meanwhile, let's say the state simultaneously imposes the lowest gas tax and reaps disproportionate federal highway funds, contributing to its No. 1 ranking as the state that gets the most back compared to its federal tax contribution.

How bad can you feel that this state might face a tax increase?

"There is nothing unique in Alaska's dilemma except perhaps its novelty to Alaskans," Davison said recently, with admirable restraint. "State governments and federal officials grapple with these tough choices all the time. ...

"Our children and grandchildren will judge us on whether we deal with the challenges of 2002 courageously, or whether we merely decide to do what's politically expedient and pass the burden and challenges on to them."

People here talk about the perils of "doing nothing." But just as the U.S. Supreme Court has ruled that atheism is a religion, so it can be said that doing nothing about revenue is a long-range plan, although maybe one with catastrophic results.

So, what is our long-range plan, and what kind of a state do we want to live in?

That's a question all Alaskans need to answer in coming weeks.

Bill McAllister, who knows he's going to be asked how long he has lived in Alaska and therefore is pre-emptively saying five non-consecutive years, can be reached at


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