Finance Committee Report

I'm seeing cross-eyed as a result of all the spreadsheets we've been shown over the past week. The first full committee meeting was one week ago and consisted of responses by the Office of Management and Budget (OMB) and the Commissioner of Revenue, to the Governor's State of the Budget speech and the introduction of his budget bills. Following that meeting, we have been briefed daily by the Commissioner's and budget analysts of the various statewide departments.

In a nutshell, the Governor's new budget proposal looks like this.

1. Transfer $4 billion in Permanent Fund profits to the state's Constitutional Budget Reserve (CBR);
2. Use the increased annual earnings (approximately $550 million) from the CBR to fund state government; and
3. Raise $350 million annually with a state income tax.

I feel a key element is missing in this proposed balanced budget plan. With a $1.2 billion shortfall, we as a state have to take decisive action. I think any plan has to make further reductions in spending now! This includes an immediate hiring freeze, a net zero supplemental requests and no new spending for fiscal year 2000. Our budget emergency would be even more severe had the Majority not had the resolve to cut the budget by more than $150 million over the last 4 years.

The Governor's budget is $166 million greater than what was authorized by last session's budget process. The general fund portion of this increase is $73 million. Agency operation (non-formula driven costs) cuts alone do not significantly effect the deficit either. Formula programs including payments to municipalities, non-profits and individuals, drive the operating budget. These require increases proportionally to increases in Alaska's population.

Low oil prices have certainly fueled this latest crisis in Alaska's economy. But even if oil prices were substantially higher, our long-term budget woes are not going to go away. To demonstrate this, Annalee McConnell, the Governor's budget director, invited Finance Committee members for a preview of an interactive computer program which allowed us to plug in variable prices of oil and other factors to see the effect on the bottom line. Even when you plug in the price of oil at $18 a barrel, the state is still running a deficit. This demonstrates that we cannot rely on oil revenues alone to balance the state's budget. To try your own hand at balancing Alaska's budget, the interactive computer model is found at http://www.gov.state.ak.us/gov/akbudget.html

Having said all this, I have stated more than once that the budget cannot be balanced on cuts alone, and we have to find new revenue sources to meet costs for services we are obligated to provide. I do not believe that the time has come for an income or statewide sales tax as suggested by the Governor. The Finance Committee will examine further the Governor's request to capture $4.0 billion dollars from the gains of the permanent fund, and move them into the Constitutional Budget Reserve. Please let me know your thoughts and ideas about the budget. As promised, the "State of the Economy" Forum is planned for February 9th. Please call me or the LIO for more details.

I have been appointed to Chair three Finance Budget Subcommittees. These committees are the University of Alaska, the Department of Community and Regional Affairs, and the Department of Labor.

Fisheries Status

Since this is a new session, the start up of most of the committees is slow, thus, only one fisheries bill has been introduced so far. Senator Rick Halford, of Chugiak, introduced SB 13, a new version of last session's SB 40, relating to assessment and management of discrete salmon stocks. SB 13 requires the ADF&G to "prioritize a list of discrete salmon stock assessment (research) projects" in cooperation with the Board of Fisheries. His proposal draws upon the same funding sources as last year with commercial fishermen paying two-thirds of the cost. This bill has not been scheduled for a hearing. It's still too early to tell if it will get the support it needs. You may pick up a copy at the legislative offices at 112 Mill Bay Road.

My office received a call from a constituent concerning discrepancies with receiving his permit cards and vessel registration sticker in the mail from the Commercial Fisheries Entry Commission (CFEC). He was not alone in his complaints, as others hadn't received theirs either. Apparently the registration stickers were delayed from the manufacturer and, hence, sent in a later separate mailing from the permit cards, with no notice given to the recipients. The underlying problem is in the absence of a CFEC licensing office in Kodiak. It has been an inconvenience since they pulled it out in the early 90's. I am working on getting an office back into Kodiak, at least for the couple of months when most of the licenses are processed.

Representative Bill Hudson (R), from Juneau, chairs this Legislature's House Special Committee on Fisheries. He is the former Commissioner of Administration, during which time he worked on establishing statewide hatcheries. Additionally, he is a former Executive Director of ASMI and former Co-Chair of the House Resources Committee. Other members of the Fisheries Committee include Fred Dyson (R), of Eagle River, a Bristol Bay driftnetter; Mary Kapsner (D), of Bethel; Jim Whitaker (R), of Fairbanks; John Harris (R), of Valdez; Carl Morgan (R), of Aniak; and Harold Smalley (D), of Kenai. Their committee meetings are scheduled for Mondays at 5:00 pm. If you are interested in teleconferencing these meetings, contact the legislative offices in Kodiak.

Joanie Waller will be following fisheries issues closely, especially those issues that relate to Kodiak Island fisheries. She will be happy to speak with you about any of your fisheries concerns. Vacating my seat as chair of the House Fisheries Committee does not diminish my commitment and effectiveness to Kodiak's fisheries.

Utility Restructuring

The 20th Alaska Legislature's Joint Committee on Electric Utility Restructuring has submitted their final report. Generally, the committee felt that competition could benefit Alaskans. However, they noted that our unique circumstances compared with other states might require a different approach before electric utility restructuring takes place. The overall benefit to the consumer and acceptable standards of safety, economy, reliability, and universal availability must be considered as well. The committee remains split on whether or not the Legislature should provide additional guidance to the Alaska Public Utilities Commission. One reasonable approach is a pilot program of limited scope, which could yield solid data regarding the efficiency of restructuring. If approved, this pilot program would be conducted in Anchorage. As a member of that committee, we noted the lack of public awareness of and participation in the investigation of whether or not restructuring is in the state's best interests. The report cautions that some way must be found to involve the public more fully so consumers don't find themselves facing a changed system without knowing why or what impacts it might have. During the debates, I continually pushed the general concept of lower consumer cost and more efficient electric service.

Internet Long Distance Charges?

I have received quite a few emails and phone calls concerning opposing the per-minute usage charges on consumer access to Internet Service Providers (ISP's), that supposedly the Congress in Washington, D.C. is considering. Provided below is a response from U.S. Representative Don Young of Alaska.

"Unfortunately, there is some misinformation being circulated that is misleading many Internet users. Let me clarify what is actually taking place at the Federal Communications Commission (FCC) with regard to any additional charges. First of all, there is no legislation in the House of Representatives to assess usage charges on the Internet.

Secondly, the FCC has no intention of assessing per-minute charges on Internet traffic or of making any changes in the way consumers obtain and pay for access to the Internet. The source of the misunderstanding is as follows. The FCC has a proceeding underway regarding carrier-to-carrier payments, so-called "reciprocal compensation." These payments compensate a local telephone company for completing a local call that is placed by one of its competitor's customers.

A dispute has arisen in the telephone industry over whether local calls to ISP's are subject to reciprocal compensation, and this is the matter the FCC is considering. Every state regulatory commission has found that reciprocal compensation must be paid, but many phone companies are withholding payment while pursuing appeals."

Email and Website

Besides my legislative email address, I can also be contacted by emailing the following address: alanaust@ptialaska.net In addition to the majority website: http://www.akrepublicans.org, you can also access the minority website at: http://www.akdemocrats.org

I will be back in the district this weekend. You may call my Juneau office at 1-800-865-2487 to set up an appointment or you can call Lorna or Mary at the LIO for additional info regarding my visit. Their number is 486-8116.

Remember - my door is always open.