We are the last Alaska Legislature to serve in the 20th Century and we find ourselves at an important crossroads in our state's history. A combination of record low oil prices, rapid production declines, and an unsustainable level of government general fund spending has resulted in at least a $1.1 billion annual budget deficit.

Faced with this immense gap between general fund revenues and spending, our top legislative priority this year will be developing a long-term plan for balancing Alaska's budget. Unfortunately, the problem appears to be too huge to solve without unpalatable components.

Governor Knowles recently unveiled elements of his proposed budget strategy in his State of the State address January 20, 1999. He is calling for implementing a state income tax and cashing in recent stock market earnings of the Permanent Fund. While we appreciate his suggestions for balancing Alaska's budget, Republican lawmakers feel his proposal is essentially a starting point that will stimulate difficult budget discussions. The time has come to gather proposals from all sources in an effort to explore all our options.

Beginning in early December, we made it clear that any balanced budget solution must include substantial state spending reductions. We also made it clear that the governor should address the state's immediate budget dilemma, the cap on Constitutional Budget Reserve (CBR) spending, by making reductions in this year's budget (fiscal year 1999).

At the administration's current rate of spending, the State will run out of money from the general fund reserves by late February or early March as we approach the authorized $700 million limit on the CBR draw.

To reiterate our commitment to a smaller, smarter government, we sent a letter to Governor Knowles on January 15, 1999. We suggested a few responsible actions he could take now to stem the deficit situation. Our suggestions include:

• An immediate hiring freeze of non-essential state employees
• A net zero supplemental request - additional fiscal year 1999 spending requests should be balanced by reductions in agency budgets resulting in no net increases in the fiscal year 1999 budget.
• Immediately eliminate all non-essential agency spending such as staff travel, supply and equipment purchases and contracts for the remainder of fiscal year 1999, and
• No new initiatives of program expansions in the current year.

Other states facing a much smaller fiscal gap than Alaska are taking immediate responsible actions. To address their revenue short falls, the governors from Nevada and Louisiana have both ordered a hiring and spending freeze. In contrast, our Governor has introduced a fiscal year 2000 budget that spends an additional $100 million on new state programs and adds almost 600 new state employees.

We followed our first letter with a second letter requesting a response from Governor Knowles to our suggestions. In a very productive and cooperative meeting on January 26, 1999, the Governor indicated he would provide the Legislature with proposed spending reductions for fiscal year 1999 by the first week in February. At that time he will also provide details regarding his supplemental spending plan and proposals for the fiscal year 2000 budget.

Alaska's budget solution is one of the greatest responsibilities each of us will ever face. We all have a stake in setting a new direction for the next century. On behalf of the 21st Legislature, we look forward to the challenge and stand ready for the work ahead.