As everyone knows by now, our State's financial situation is at a critical juncture, with historically low revenues coming in and an ever-widening gap between our income and expenditures. The Governor clearly outlined the problem during his annual speech to the Legislature and we will be working with him to find the best solution to keep Alaska's economy safe and healthy.

Today, we - all Alaskans - are facing a $1.2 billion dollar difference between general fund revenue and spending in the current fiscal year. This unprecedented gap has been caused by several different factors, primarily the devastatingly low price of oil this past year. No one in Alaska controls the price of oil; however, with about 80% of our general fund revenue coming from oil, we are extremely dependent upon that price. Another factor brought on by low prices is the reduced production that occurs as projects are put on hold that would otherwise serve to increase production.

Equally sobering is the fact that oil price projections for the long-term give us little relief from current low price levels. If no action is taken, the grim reality of billion dollar deficits each fiscal year will quickly wipe out the entire balance of our Constitutional Budget Reserve (CBR).

$1.2 billion is a difficult number for many of us to fathom. If you look at the attached visual you'll see how it equates this fiscal gap to a few items more familiar to many of us. Of particular note is the equation that if all Alaskans were personally held responsible for filling just the current year's fiscal gap, it would cost each man, women, and child $1,931.12. Since it is unrealistic to expect individual Alaskans to make up the deficit, the Legislature must consider a variety of alternatives.

The Governor has proposed transferring $4 billion worth of investment profit from the Permanent Fund to the CBR and the enactment of a hybrid income tax that would only affect a certain segment of our society. While there is much to learn about the details of the Governor's approach, his proposals are a welcome beginning to the debate.

Now it will be up to the Legislature to consider his proposals and many others. First and foremost, the Legislature will continue to reduce the overall operating expenses of our State. Now in the 4th year of a five-year plan that reduced the general fund budget by $190,000,000, we will continue to strive for more reductions this year. These actions have served to reduce the annual draws from the CBR necessary to balance our spending and preserved the balance of the fund itself.

We have many alternatives to consider that are viable, but simply "cutting the budget" to close the budget gap is not possible. Drastic cuts to State operations would send our economy into an irrevocable tailspin that would destroy us. With a general fund operating budget of about $2.3 billion, we cannot make a $1.2 billion dollar cut. The largest category of our budget is for K-12 Education and the University, almost one billion dollars. We cannot shut down our schools, nor can we delete funding for public safety, roads, senior programs, prisons, child protection programs, and so on.

Because we cannot "cut" our way out of our problems, we have to look at other alternatives. Should a statewide sales tax be implemented? If so, should it exempt those communities that already impose one? Should a one-time transfer of $4 billion worth of Permanent Fund investment profit be made to the CBR, or should we use the annual "left over balances" available in the earnings reserve to support government? Should all State revenues be placed in the Permanent Fund and a fixed amount be appropriated out annually to support government as needed? Should a statewide income tax that every citizen pays be implemented or should certain segments of the population be exempted from paying anything at all? Should the Governor freeze all new programs, new hiring, and any wage increases for State employees? What other alternatives do you think would be viable?

The Governor and the Legislature have scheduled an important forum on the state of our economy. The State of the Economy Forum will take place February 9th from 8:00 a.m. to 3:30 p.m. at Centennial Hall in Juneau. Leaders from various Alaskan industries will gather to present their best views of our economic future. You can learn more, along with us, about the strengths and weaknesses of our economy by watching this forum on public television's Gavel to Gavel coverage.

More than ever, the Governor and the Legislature need your valuable ideas and suggestions. We can no longer say no to all the tough alternatives necessary to put our fiscal house in order. Don't just tell us to cut the budget, implement no new taxes and leave the dividend alone. It is time for you to tell us what you think is a fair, realistic and equitable way to bridge this fiscal gap and move our State forward to the healthy economic future we all desire.