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Portrait of Senate President, 
		Senator Drue Pearce Session:
State Capitol, Room 107
Juneau, AK 99801-1182
Phone: (907) 465-4993
Fax: (907) 465-3872
Send E-Mail

Interim:
716 West 4th Avenue, Suite 500
Anchorage, AK 99501-2133
Phone: (907) 269-0200
Fax: (907) 269-0204

The Long-Range Balanced Budget Plan

For Immediate Release: May 15, 1999
Contact: Senator Drue Pearce at (907) 465-4993

The Senate Finance Committee has taken the position that Alaskans should be involved in setting the state's financial course for the future. Therefore, the committee proposes a long-range balanced-budget plan to close the fiscal gap, and calls for an advisory vote in the fall of 1999.

While crafting its Balanced Budget plan, the Committee kept its focus on several "Guiding Principles." Any long-term plan must:

  • Preserve and protect the Permanent Fund for future generations, while guaranteeing a healthy dividend;
  • Produce a balanced budget, while closing the fiscal gap, limiting government spending and prioritizing essential services;
  • Impose no income tax on Alaska families;
  • Require a vote of Alaskans.

The Balanced Budget Plan addresses Alaska's revenue shortfall caused by declining oil production and unstable oil prices, which have created a $1.1 billion gap between annual state spending and income. While the state has been able to cover this shortfall in recent years by borrowing from its savings accounts, that strategy drains the Constitutional Budget Reserve by 2003. It also empties the Permanent Fund Earnings Reserve Account by 2013, eliminating the dividend and threatening the Permanent Fund's principal.

Stated simply, Alaska's natural resources no longer provide enough revenue to pay for government services. And while the Legislature has been making responsible budget reductions, it is clear that we cannot cut our way to a long-term solution. Alaska could lay off every state employee, end state aid to communities and stop building essential public facilities, and still be $100 million in the hole.

Various proposals have been put on the table to fill the fiscal gap. The Governor's proposed income tax could raise an estimated $350 million, but administering it would require a whole new bureaucracy. A 5 percent sales tax might raise $300 million -- far short of filling the gap -- but would take a basic funding tool away from local governments. It is clear we need a new approach.

The Balanced Budget Plan proposes to combine the Permanent Fund Earnings Reserve and the Constitutional Budget Reserve into a single account. This account would earn a projected 8.25 percent return each year. Part of this new revenue stream would guarantee eligible Alaskans a dividend of at least $1,700 in 1999 and 2000. Thereafter, 2.75 percent of the account's market value would be available to pay a growing dividend that would start at approximately $1,258 in 2001.

The remainder of the revenue stream would protect the fund from inflation and pay for essential state services, allowing for 1.4 percent growth in education, public safety and transportation. Other agencies would see no spending increases.

Spending limits and reductions are another core element of the Balanced Budget Plan. The Plan calls for at least $100 million in spending reductions by 2003 and assumes that new oil development and other state sources will contribute $100 million in new revenues each year. The plan does not call for personal income taxes or for any other broad-based statewide taxes.

Please refer to the charts and graphs for more details about the Senate's Long-range Balanced Budget plan.

Alaskans can no longer depend on unreliable oil revenues for long-term security. We must make the decisions now that will provide economic health, stability and opportunity for every Alaskan. This plan continues our ongoing commitment to protect and preserve our Permanent Fund. It ensures a growing dividend for future Alaskans. It limits government growth without new taxes. And it will take effect only with the approval of Alaska voters.

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