Dear Neighbors,

My first objective for the second session of the 23rd Legislature was to have substantive discussions of proposals about the Percent of Market Value (POMV) proposal, using earnings of the Permanent Fund to help pay for essential state services, placing a reasonable cap on state spending, and instituting statewide revenue measures. Those discussions took place in the Senate Finance Committee, in other legislative committees, and on the Senate floor.

However, as I have said before, each legislator comes to Juneau to represent his or her constituents’ views. Therefore, some legislators had views similar to mine. Other legislators represented their constituents who believe the state needs no new revenue, who see massive budget cuts as the only answer, and still others who refuse to discuss any proposal that includes the words “Permanent Fund.”

Given that broad spectrum of views, the Legislature did make a choice about the fiscal future. Disappointingly, that decision was to do nothing but rely on high oil prices. Hopefully, the special session will provide additional time for a package to be approved that addresses both the hopes and concerns of enough citizens and legislators to pass.

As I see it, a successful package must have the following elements to get public support and to get support in the House and Senate, between the Majority and Minority, and to get the Governor's signature:

• A spending cap is the first necessary building block. A cap will have to be adopted by a three-quarter’s vote in each house so that those legislators determined to contain and/or cut government agencies will support some revenue measure. Such a spending cap can only include reasonable allowances for inflation, population growth and unexpected crises and cannot exempt any department or state function. To exempt some functions would be to deny a future legislature's ability to ensure efficiency and prioritize state spending fairly.
• A POMV bill that changes how the Fund is managed and distributes the resulting 5% of available earnings also requires a three-quarter’s vote in each house. To get it, the bill may have to specify that some of the earnings of the Permanent Fund be split between state government services, municipalities and education. If the Minority requires placing the PFD in the Constitution for their support, other legislators and I will oppose them. It is not logical for the state to pay PFDs if we cannot educate Alaskans or keep them safe and healthy.
• If POMV fails and a tax is the only option left, the decision will be between an income and a sales tax. Some Alaskans, and therefore some legislators say, "I’ll support it as long as it doesn't tax me." As you know, I’ll support any measure that requires the greatest number and broadest cross-section of Alaskans to contribute something for the services they use. Several sales tax bills were debated thoroughly in committee and on the Senate floor but did not have the votes to pass because 1) a spending cap had failed to pass, 2) some wished to rely on high oil prices, and 3) some believed state government had not been cut dramatically enough. An income tax proposal was then offered on the Senate floor as an amendment in order to keep the discussion moving. It was the proposal introduced by Governor Knowles two years ago. The amendment likely failed for two reasons: 1) the Minority -- who is the main champion of the income tax -- chose not to take it seriously and 2) there is little general support in the Legislature for an income tax.
• A restructuring of oil and gas taxes is a very complicated proposition. However, joint meetings by the Legislative Budget & Audit Committee and the House & Senate Resources Committees have begun and will continue throughout the interim.
• The tobacco tax is viewed as both a revenue generator and as a health benefit. Over $300 million in Medicaid expenses are paid by the state due to tobacco related illnesses. After the last increase in the state tobacco tax, there was a reduction in youth smoking.

I cannot predict whether a package can be crafted that will satisfy those who believe there is no problem, those who want to eliminate entire state departments, those who risk losing their legislative seats, and those who want to expand state spending for those causes they support. But beginning on June 22, I'm hoping all legislators will give it another serious try.

I hope you will send me your suggestions and advice.

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