 May 03, 2002
"I commend the House leadership and all members for their tireless efforts to craft a responsible solution to our state's most pressing challenge," said Speaker of the House Brian Porter (R). "Everyone can probably find something to love, and something to hate, somewhere inside these four bills, which probably means we hit things just about right." According to the Alaska Republicans, the four bills that passed the House would, when fully implemented in fiscal year 2004, together provide approximately $900 million toward filling the state's projected $963 million budget gap, while preserving the Constitutional Budget Reserve as a $2 billion budget shock-absorbe. These four bills are now headed to the Senate for consideration in that body.
The Alaska Fair Tax is an income tax based on an economic model that shows how much individuals would normally spend on a sales tax, by income bracket. Essentially, this is a sales tax that is paid once per year as an income tax, which does not limit local government's ability to impose sales taxes. In addition, this form of a tax is estimated by the House to have the lowest impact on job loss due to tax measures, and is seen as the least disruptive to Alaska's economy. Everyone who works in the state of Alaska will pay their share of this tax, capturing income from those who come to work in Alaska on a seasonal basis, and then take their earnings outside. Success is not punished in this tax, and some allowance is made for those in the lowest income brackets. In addition, there are automatic "triggers" built in to the bill, which would raise and lower the tax based upon the amount of money in the Constitutional Budget Reserve (CBR). When the balance of the CBR falls below $2 billion, this tax will raise $250,234,000. If the CBR balance is between $2 - $3 billion, the revenue raised will drop to $175,164,000 and if the CBR balance increases to over $3 billion the tax will be lowered to raise a total of $100,093,000. The tax passed the House floor on a 24-15 vote, and is now headed to the Senate.
HB 225 is said to be a way to help offset the immense cost to the state related to alcohol abuse. The current state excise tax on alcohol is between 3 to 4 cents per drink for beer, wine or distilled spirits. This rate hasn't been adjusted in 19 years. HB 225 increases the excise tax to 10 cents per drink. This tax will increase annual state alcohol tax revenue to approximately $30 million from the current $12.1 million.
The establishment of a Municipal Dividend program is said would provide Alaskan municipalities with a more predictable level of funding with which to address basic community services. This plan would provide approximately $59.3 million to municipalities in the next fiscal year, FY03, by accessing surplus earnings of the Permanent Fund. The bill would use surpluses of the Earnings Reserve Account (ERA) of the Permanent Fund at a rate of $100 per eligible individual PFD recipient, only after inflation proofing and only after payment of individual dividends. The bill as now written would not impact individual PFD's for at least ten years. There would be a total increase of $10 million for Revenue Sharing and Safe Communities combined, over last year's funding level. The breakdown of the $59.3 million funding provision for FY03 is as follows:
The Municipal Services portion of Revenue Sharing would be diluted somewhat with the addition of about 30 newly-eligible communities since the bill adds unincorporated communities which are within boroughs to the benefits stream. These 30 or so potentially new grantees would be eligible for both programs as long as they provide at least three services from a list of seven. Overall, the average Revenue Sharing benefit would go from $3,681 in FY02, to an estimated $4,900 in FY03. The bill also added incentives for unorganized communities to organize by providing grants for the first three years of operations as a new municipality. Amounts of $100,000, $50,000, and $25,000, respectively, would be provided upon incorporation. Likewise, it provided a similar grant schedule for second-class municipalities outside of boroughs to upgrade their status to first-class or home rule, with $200,000, $100,000, and $50,000 respectively in the first three years after official reclassification. Use of Permanent Fund Earnings - HB 304 The Alaska Permanent Fund Dividend has, in the past, been based upon earnings. This bill changes the payout structure to model that of an endowment, in which no more than 5 percent of the fund's average year-end market value for the last five fiscal years, including the fiscal year just ended can be distributed. In general, the fund is expected to earn a total of 8 percent per year. Under this plan roughly 3 percent is retained for inflation proofing (although it is not calculated as a percent of earnings, but rather a percent of market value). Of the 5 percent of market value available for distribution, 50 percent will go to dividends (of an estimated $1,282 in the first year) and 50 percent will go into the General Fund to pay for government programs. On the floor of the House Representative Gretchen Guess (D) submitted an amendment to account for the 50 percent deposited into the General Fund separately, and to use that money to fund education. The amendment passed. A letter of intent was passed along with this bill, which essentially stated that it is the intent of the Legislature that no more than 5 percent of the market value of the fund (as described above) be distributed for dividends and government uses. This letter of intent was passed to ensure that both HB 20 and HB 304 not go into effect, having a dramatic effect on the dividend program. Additionally, the letter states that it is the "intent of the Legislature to fully fund the dividend distribution" According to the Alaska Demoncrats they the Legislature is working hard to find answers to the fiscal problems of the state, while preserving the Alaska Permanent Fund Dividend program for future generations.
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