Dear Neighbors,

I'm sure many of you are disappointed that the special session did not produce a plan to effectively address the state's fiscal gap. I continue to be disappointed that opinions on the various solutions vary so widely among Alaskans and their elected representatives that no one has the votes to get any of the ideas passed.

I want to thank those who contacted me before and during the special session to let me know your opinions on various fiscal issues. Residents of Senate District P provided 205 opinions on how to solve the fiscal gap, and I heard 25 opinions from non-constituents. The following are the opinions that were expressed by the majority of the constituents who contacted me. Please contact me if you would like to know some of your neighbors’ suggestions for other solutions.

• Support POMV - 79
• Support Income Tax - 32
• Support Tobacco Tax - 26
• Support Sales Tax - 23
• Support Spending Cap - 22
• Oppose Putting the PFD in the Constitution - 13

There was not sufficient interest in reviving POMV among legislators to get it passed. Rather than sending a "pure POMV" proposal to the voters, which would deal only with the fund management, POMV has become a vehicle for using the excess earning of the Permanent Fund (after PFDs are paid) for various uses. Those uses include education and community dividends. Various splits between those uses have been debated during both the regular and special sessions but there are not enough votes in the Senate to pass any of them.

The Worker's Compensation bill was given two substantive hearings in the Senate Judiciary Committee. However, despite being heavily involved in negotiations with the administration in crafting the bill, organized labor opposed the bill strenuously and it died in the House Labor and Commerce Committee, making further Senate action on the bill irrelevant.

The only bill that passed was the tobacco tax. As you likely know, I strongly supported the bill both in the regular and special sessions and voted for SB 1001 on the Senate floor. However, the House Finance Committee watered SB 1001 down to the point that it will now do little to benefit either public health or produce as much revenue. By phasing in the $1.00 per pack tax increase over four years (60 cents in 2005, no increase in 2006, and 20 cents in both 2007 and 2008) the "sticker shock" has been removed. Fewer smokers will decide to quit because these incremental price increases will be less of a shock. In addition, state tobacco cessation and prevention efforts will lose almost $40 million due to this phase-in. The House version also removed the restrictions on Internet sales and removed the tax increase from other tobacco products like snuff, chewing tobacco and mini cigars. I voted against concurring with the House changes when the amended bill came back to Senate. It did, however, pass and I expect the Governor will reluctantly sign it.

However, hopes for a rational fiscal plan are not ended. The Joint Legislative Budget and Audit Committee will be working over the interim to produce a package of bills to address the fiscal gap. As a member of that committee I will continue to advocate for my four-step plan: 1) continued resource development, 2) a cap on the growth of state spending, 3) use of a portion of the Permanent Fund Earnings (after PFDs are paid) for essential state services and 4) if necessary, a statewide sales tax. I'm also considering Senator Wilken’s viable option of using both the Constitutional Budget Reserve and the excess earnings of the Permanent Fund to help bridge the fiscal gap.

I hope you will continue to communicate with me during the interim on these and other important issues.

I'll keep you up to date on when the LB&A committee meetings will be.

# # #