Legislature(1995 - 1996)
11/14/1995 01:15 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
JOINT HOUSE & SENATE FINANCE COMMITTEE
November 14, 1995
1:15 P.M.
TAPE HFC 95-121, Side 1, #000 - end.
TAPE HFC 95-121, Side 2, #000 - end.
TAPE HFC 95-122, Side 1, #000 - end.
CALL TO ORDER
Co-Chair Mark Hanley called the joint House and Senate
Finance Committee meeting to order at 1:15 p.m.
PRESENT
Co-Chair Hanley Co-Chair Frank
Co-Chair Foster Co-Chair Halford
Representative Brown Senator Donley
Representative Grussendorf Senator R. Phillips
Representative Kelly
Representative Kohring
Representative Martin
Representative Mulder
Representative Parnell
Representative Therriault
Senators Rieger, Sharp and Zarroff, and Representative
Navarre were absent from the meeting.
ALSO PRESENT
Representative Bill Williams; Representative Jeannette
James; Representative Ivan Ivan; Representative Jerry
Sanders; Representative Betty Davis; Speaker Gail Phillips;
Representative Ed Willis; Brian Rogers, Chairman, Long Range
Financial Planning Commission (LRFPC);
SUMMARY
OVERVIEW: Long Range Financial Planning Commission
Co-Chair Hanley observed that members of the Long Range
Financial Planning Commission (LRFPC) consisted of:
Brian Rogers, Chairman, Fairbanks;
Judy Brady, Vice Chairman, Anchorage;
Lee Gorsuch, Anchorage;
Senator Georgianna Lincoln, Rampart;
Robert Loescher, Juneau;
Bruce Ludwig, Juneau;
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Annalee McConnell, Juneau;
Hugh Motley, Cooper Landing;
Representative Mike Navarre, Kenai;
Mary Nordale, Fairbanks;
Mike O'Conner, Anchorage;
Representative Sean Parnell, Anchorage;
Pat Pourchot, Anchorage;
Senator Steve Rieger, Anchorage; and
Marie Westfall, Ketchikan.
Members were provided with copies of the Commission's report
(Attachment 1).
BRIAN ROGERS, CHAIRMAN, LONG RANGE PLANNING COMMISSION
summarized that the Commission was established in March
1995. The Commission consisted of 15 members: 5 members
appointed by the Governor, 5 members by the Senate
President, and 5 members by the Speaker of the House. The
Commission issued a preliminary report in August 1995,
detailing the size and growth of the State's fiscal gap, and
options the Commission would consider. He added that the
preliminary report contained four scenarios for reducing the
State's budget by $500.0 million dollars. He summarized
that the Commission examined the size of the fiscal gap,
looked for budget reductions and revenue increases, examined
the budget process, considered the relationship between the
State and local governments in providing services, and
recommended changes.
Mr. Rogers noted that the Commission found that the fiscal
gap for FY 96 is $524 million dollars. He observed that the
gap equals all the salaries and benefits paid to state
employees from the General Fund in FY 95.
Mr. Rogers explained that the Commission developed a "base
case" to show what would happen if there were no changes to
the State's taxation picture or the level of services being
provided. The Commission found that over 10 years the gap
would widen to nearly $1.4 billion dollars. He pointed out
that a flat dollar budget would result in a reduction in
services.
Mr. Rogers observed that the Commission identified funds
which affect the fiscal gap and funds which do not affect
the fiscal gap. He noted that general funds and general
fund program receipts are funds which are available for use
in closing the fiscal gap. He emphasized that the
Constitutional Budget Reserve Fund, Permanent Fund earnings,
some University of Alaska receipts and loan funds are all
available in closing the gap. He added that funds created
by an appropriation from the General Fund for a specific
purpose can also be recaptured and used to close the gap.
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He identified funds that are not available in closing the
gap: federal funds, trust funds, retirement funds,
transfers between agencies for contractual obligations
(including interagency receipts), and certain holding
accounts.
Mr. Rogers emphasized that the Commission's plan was adopted
by a super majority vote. He acknowledged that the Plan
represents concessions from all the members of the
Commission. He stressed that the Plan uses Permanent Fund
income to replace declining oil revenues. He maintained
that the Plan enhances the State's ability to save for
future generations and increases the size of the Permanent
Fund over time. He emphasized that the Plan imposes some
spending discipline on the State. The State will have to
curtail its spending over the next four years. He asserted
that the Plan defines a role for the Permanent Fund and
clears confusion regarding cash reserves. He summarized
that the Plan suggests some structural changes in state
government. He conceded that the Commission did not fully
pursue the role of state and local government and their
respective responsibilities. He asserted that the public
was involved in the development of the Plan. He observed
that the Plan requires two constitutional amendments: one
affecting the Constitutional Budget Reserve Fund and the
other affecting the Permanent Fund.
Mr. Rogers stressed that the Commission's plan would balance
revenues and expenditures in FY 2000 by:
* Cutting spending;
* Increasing revenues;
* Establishing the Permanent Fund as an endowment;
and
* Capping the Permanent Fund dividend pool.
In the first three years the Commission proposes to cut
state spending by $100 million general fund dollars. State
general fund expenditures would be reduced by:
* $40 million dollars in FY 1996;
* $30 million dollars in FY 1997; and
* $30 million dollars in FY 1998.
Mr. Rogers noted that when adjusted to include the effects
of inflation these cuts represent a $300 million dollar or 5
percent reduction to services. He asserted that federal
action over the next few years would prohibit greater budget
reductions. He noted that the federal transfer of Medicaid
to the Medigrant program could impose significant costs on
the state of Alaska. In addition, changes are expected in
other federal block grant programs. The Long Range
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Financial Planning Commission recommends that another
commission be established in a few years, after federal
changes have been implemented, to determine if: other
spending cuts are recommended, additional taxes should be
implemented, or an income tax should be reinstated. Mr.
Rogers noted that the Commission did not make specific
recommendations for cuts. He outlined the Commission's
general recommendations for areas savings can be achieved:
* Enact a retirement incentive program for public
employees, and school districts and municipalities
that wish to participate;
* Enact a new Tier II retirement plan to be
implemented for new public employees entering
after the adoption of the Plan (Retirement
benefits would be lowered for new employees);
* Implement new geographic pay differentials for
non-covered state employees:
* Study geographic costs differentials in Alaska for
use during collective bargaining negotiations with
covered employees;
* Compare salaries and benefits of public employees
to appropriate public and private markets in
Alaska and the Pacific Northwest;
* Look at consolidation of administrative support
functions between state agencies;
* Look at consolidation of state departments; and
* Look for methods to reduce the growth of formula
programs with a focus on education and health and
social services. (The Commission recommends that
new formulas be adopted.)
Mr. Rogers noted that the Department of Corrections is the
fastest growing state department. The Department of
Corrections has grown 604 percent over the last 17 years.
Population when factored with inflation grew 150 percent.
The Commission counseled that health plans for the State,
school districts, municipalities, the University of Alaska,
and the Medicaid program be reviewed for opportunities to
increase the amount of self insurance.
Mr. Rogers acknowledged that the Commission did not reach a
consensus regarding the Longevity Bonus Program. He stated
that the Commission counsels that the program be
discontinued if the Court rejects the Legislature's plan to
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phase out the Longevity Bonus Program.
Mr. Rogers reviewed the Commission's recommendations
regarding local governments:
* Reappeal the Senior Citizen' Tax Exemption and
allow for a local option;
* Shift inspection functions to local governments
when possible;
* Eliminate state support for trooper road patrols
in communities of more than 2,500, but allow
communities to continue to retain such services if
they are willing to pay for them; and
* Look for opportunities to contract out for state
services.
Mr. Rogers summarized that per capita spending would be
significantly reduced over a 5 year period. General Fund
spending would decline slightly over a four year period.
Mr. Rogers examined the Commission's recommendations to
raise $150.0 million dollars in new taxes and user fees:
* Increase tobacco taxes to a dollar per pack on
cigarettes and enact comparable taxes on other
tobacco products;
(Mr. Rogers estimated that an additional $1.00
dollar tax would raise approximately $43.0 million
dollars. He emphasized that studies show that
price increases would lower youth consumption.)
* Increase taxes on alcohol to an average of .10
cents a drink;
* Increase the Marine Motor Fuel Tax to .08 cents a
gallon;
* Increase the Highway Motor Fuel Tax to .22 cents a
gallon;
(The Commission further recommends that this tax
be used to address deferred maintenance costs.)
* Double motor vehicle license fees and eliminate
exemptions in the second year of the Plan; and
* Increase taxes on fisheries and other resources by
$30.0 million dollars.
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Mr. Rogers stressed that the Commission's recommendations,
if implemented, would result in stable revenues through the
year 2002. The Commission recommends that a state income
tax be implemented in the year 2002. He emphasized that the
Permanent Fund would be the corner stone of the Plan. The
Permanent Fund would be established as an endowment with a
payout rate of 4 percent of the market value of the
proceeding five years. He explained that the constitutional
dedication of mineral lease revenues, royalties and bonuses
to the Permanent Fund would be raised from the current 25
percent to 50 percent for all fields. This would take
$250.0 million dollars out of the annual revenue stream and
place it into the Permanent Fund. The Commission recommends
depositing the entire Earning Reserve Fund into the
principal of the Permanent Fund. In addition, the
Commission advises that everything over $1.5 billion dollars
in the Constitutional Budget Reserve Fund be added to the
Permanent Fund. He noted that the intent is to strengthen
the Permanent Fund. Oil revenues will not be completely
replaced by revenue from the Permanent Fund. He noted that
if ANWR is approved additional revenues would be realized.
Mr. Rogers recounted the Commission's recommendations for
the Permanent Fund Dividend Program:
* The dividend pool be dropped by $50.0 million
dollars for the next three years. The payment
level would then be held steady.
* Permanent Fund dividend payments would be $900.0
in 1997; $800 in 1998; and $700 every year
thereafter.
Mr. Rogers summarized that the Plan would result in a
deficit for three years and be balanced in the fourth year.
He noted that a state income tax would have to be reinstated
to prevent a deficit which would start in the fifth or sixth
year. The endowment plan would increase the Permanent Fund
by one-third over 10 years. He observed that the Commission
recommends that the sweep provision of the Constitutional
Budget Reserve Fund be repealed and that use of the Fund be
triggered by majority vote based on a decline in revenues
instead of expenditures. He noted that $1.5 billion
dollars, which would remain in the Constitutional Budget
Reserve Fund, is approximately equal to one year's oil
revenues.
The Commission recommends annual reports and program reviews
be completed to determine if each program is needed, cost
effective, and achieves the result it is intended to
achieve.
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Mr. Rogers summarized that the Plan:
* Makes the Permanent Fund the corner stone of
Alaska's future;
* Closes the fiscal gap by the year 2000;
* Ensures the growth of the Permanent Fund, to
offset declining oil revenues;
* Stabilizes and diversifies revenues;
* Controls state general fund spending;
* Maintains the Constitutional Budget Reserve Fund
as a reserve; and
* Decreases dependence on oil revenues.
Mr. Rogers observed that the Department of Revenue projects
that inaction would result in the depletion of the
Constitutional Budget Reserve Fund by August 31, 2000.
Senator R. Phillips asked if the Commission advocated the
dedication of any taxes to special funds. Mr. Rogers stated
that the Commission did not reach a consensus on that issue.
Representative Martin spoke in support of user fees. He
noted that the Commission did not strongly support user
fees. Mr. Rogers stated that the report acknowledged the
role of user fees.
Senator Halford questioned if the Commission reviewed
supplementals.
(Tape Change, HFC 95-121, Side 2)
Co-Chair Hanley stated that he had not seen a plan to cut
the eduction foundation formula. He acknowledged that it
will be difficult to cut education funding. He observed
that there is not much interest by public employees to see a
reduction to state employee salaries. He emphasized that it
is less difficult to tax tobacco. He stressed that the
hardest task will be to change what is currently given or
provided to people, as opposed to what would be taken from
the people in the future through new taxes or benefits.
Mr. Rogers noted that the Commission had the luxury to vote
the Plan up or down with a single vote. He observed that
there are people that would rather raise taxes than cut
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spending, and people that would rather cut spending than
raise taxes, but both were willing to except a package that
included both.
In response to a question by Co-Chair Hanley, Mr. Rogers
stated that the Commission has a time-frame for the
aggregate dollar amount of reductions in state spending. He
added that he believed the Commission would have been more
specific as to spending reductions if there had been more
time. He noted that the sooner a reduction in spending
occurs the greater the impact will be. He discussed the
implementation of a Tier II retirement system as an example
of a spending side reduction.
LEE GORSUCH, COMMISSION MEMBER, ANCHORAGE observed that if
the Commission's recommendations on the Constitutional
Budget Reserve Fund were enacted then the Legislature would
be forced to tax or cut spending because all the other money
would be off the table and put into the Permanent Fund.
Senator Halford questioned, if there is a $500 million
dollar gap, how much of the solution is in terms of new
dollars and how much of the solution is in terms of
reallocating existing dollars.
Mr. Rogers explained that the percentage changes overtime.
In the fourth year, $100 million nominal dollars and $300.0
million real dollars would be taken out of the spending
side. He further explained that the fiscal gap would be
filled by cutting 100.0 million dollars from the budget;
raising $150 million dollars in new revenues; placing $250
million dollars in existing revenues into the Permanent
Fund.
Mr. Gorsuch summarized that there would be $150 million
dollars out of new taxation and $250 million net increase in
money coming from the Permanent Fund, plus a $100 million
dollar reduction from state spending.
Senator Halford concluded that the majority of the money
would be achieved by a reallocation from what is currently
in the private sector. He argued that the size of the pie
is not changing. He acknowledged that income and tourism
taxes would be true increases.
Mr. Rogers estimated that the total state economy is
approximately $14.0 billion dollars with a $500.0 million
dollar hole to fill. He noted that an income tax would
bring in approximately $200.0 million dollars. Non-resident
workers who are working in Alaska would contribute
approximately $25.0 million of the $200.0 million dollars.
He estimated that the State would net another 20.0 million
dollars as a result of the deduction by Alaskan residents of
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their state income tax from their federal income tax.
Mr. Rogers noted that the Commission rejected the
institution of a sales tax. He explained that sale taxes
have traditionally been used to provide local government
support. He stated that there was strong support on the
Commission for a seasonal sales tax. He stressed that most
economic development, other than oil, does not bring in
additional revenues, absent an income or sales tax. He
observed that economic development which increases the
number of state residents, increases the State's cost.
Further oil development would bring more new dollars into
the State. He observed that the Oil and Gas Policy Council
is expected to have recommendations for encouraging oil
development.
Senator Donley asked how much more time the Commission would
need to comply with the mandate to identify further spending
reductions. Mr. Rogers noted that the Commission's
preliminary report outlined four scenarios that reached the
$500.0 million dollar reduction level. The majority of the
Commission felt that the $500.0 million dollar reduction
level was not realistic or appropriate. He stressed that
the scenarios for reduction contained in the interim report
do not provide for the level of services that Alaskans
desire.
Representative Therriault referred to the concept of forward
funding. He questioned why the Commission did not pursue a
stable long range revenue stream. Mr. Rogers replied that
the Commission was unable to find a scenario that allowed
the Cremo Plan to work. He noted that the Cremo plan works
well from the year 2005 and on. He stressed that the level
of budget reductions and additional taxes needed to
implement a complete endowment plan was not supportable. He
asserted that the Plan could reach a complete endowment if
another oil field comparable to Prudhoe Bay were discovered.
He emphasized that based on current revenues and the level
of budget reductions the Commission felt are feasible that
the fiscal gap could not be made up until the year 2005.
Representative Mulder observed that the House Finance
Committee Subcommittee on the Department of Corrections is
looking into the possibility of privatization within the
correctional industry. Mr. Rogers acknowledged that
privatization of the correction industry would be consistent
with the recommendations of the Commission.
Representative Martin stressed that formula programs
represent the biggest increase to the budget. He asked if
the public testified in favor of maintaining or increasing
the level of service provided by the State. He maintained
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that Alaska provides residents with a level of service which
is above the national norm. Mr. Rogers explained that his
comments were based on a budget reduction of $500.0 million
dollars. He concluded that the scenarios that reached the
$500.0 million dollar level quickly entailed more political
pain than the public is willing to accept, in the short run.
He agreed that formula programs are the most difficult area
of the budget to contain. He praised the Legislature for
maintaining the cost of formula programs in nominal dollars
over the past five years.
Representative Parnell noted that the Plan brings revenues
in line with current state spending. He suggested that
spending needs to be brought into line with current state
revenues. He questioned where the Commission would turn
after the recommended new revenues are implemented. Mr.
Rogers suggested that a new commission be implemented after
three years, prior to implementation of an income tax to
assess the level of spending and services that the public
wishes to maintain.
Senator R. Phillips asked if the Commission had complied a
list of services provided by the state of Alaska that are
not provided in other states. Mr. Rogers noted that the
Permanent Fund Dividend and Longevity Bonus Programs are the
biggest two services not provided by other states. He noted
that the Hickel Economic Summit compared services to other
states. He noted that almost every state has some form of
sharing with local governments.
In response to a question by Representative Kelly, Mr.
Rogers noted that out of a $157 million dollar decrease in
expenditures that $75 million is due to inflation, $30.0
million is due to spending reductions, and $50 million from
a cut to Permanent Fund dividends.
Representative Brown asked Mr. Rogers to reflect on the plan
proposed by Dave Rose, former Alaska Permanent Fund
Corporation executive director. She noted that Mr. Rose's
plan would transfer unrealized gains of the Permanent Fund
to the Constitutional Budget Reserve Fund. The
Constitutional Budget Reserve Fund would be reformed into an
endowment. Mr. Rogers expressed concerns that the Rose plan
would only fill half of the gap in the early years and less
in later years. He pointed out that the process of taking
unrealized gains would require the sell of the entire stock
portfolio. He noted that the Constitutional Budget Reserve
Fund would not provide a break on spending.
Representative Brown asked if Mr. Rogers is confident that
the current principal of the Permanent Fund will never be
spent. He stated that he is confident that the current
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principal would not be spent. He observed that a 4 percent
spending level would lessen the risk of reaching the
principal. He pointed out that today's principal would be
increased through appropriation of revenues into the
Permanent Fund.
Mr. Gorsuch added that the Commission was concerned with the
use of realized earnings, as opposed to the use of market
value, for accounting purposes. Representative Brown
summarized that "unrealized earnings could end up outside
the principal if they were realized." Mr. Rogers agreed
that they would flow into the Earnings Reserve Account into
the newly designated Constitutional Budget Reserve Fund that
could be invested.
In response to a question by Senator Halford, Mr. Rogers
explained that the total rate of return including dividends
would be 4 percent. He maintained that pressure to reduce
dividends would increase.
Senator Halford summarized that for every $100 million
dollars taken out of Permanent Fund dividends, $12 million
dollars would be take from the poor and $5.0 million would
be taken from retirees and senior citizens. He questioned
if the Commission "could have found a more regressive way to
generate the money".
Co-Chair Hanley stated that he agreed with the Commission's
approach to address the dividend program before
reinstituting an income tax. He stated that "it doesn't
make sense to take money from the private sector to pay for
the common good of people before we take money that is being
paid from the common good (Permanent Fund) to pay for the
common expenditures." He observed the lack of a connection
between people's pocketbooks and state spending. He
suggested that the "minute we have an income tax while we
still pay out dividends to every one, it is a social scheme
for redistribution of income rather than the other way
around." He acknowledged that there are differences of
opinion on the issue, even within parties.
Mr. Rogers pointed out that the Plan is a compromise of both
view points.
Representative Mulder observed that one of the Plan's
conclusions was to bring state salaries in line with
comparable private sector positions. He observed that the
State is currently negotiating new contracts. He asked if
it would be a logical conclusion to assume that the
Commission would find that the Legislature should reject the
contracts. Mr. Rogers stated that it would not be a logical
conclusion. He emphasized the need to compare salaries and
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market preference. He estimated that a true look to market
would raise salaries for some and lower salaries for others.
He estimated that there is more salary compression in state
government than in the private sector. He felt that the net
effect would be to lower the cost to the State. He stressed
that the Commission is not recommending an across the board
approach. He did not think a market evaluation could be
completed in time to make a decision on the current
contracts. He suggested that an evaluation be funded to arm
the Legislature for future negotiations.
Senator Donely referred to the assumption that the Permanent
Fund endowment would grow by 4 percent. He questioned if a
4 percent estimate is conservative. Mr. Rogers stated that
a national study of approximately 400 university endowments
shows that the range of endowment growth has been between 4
and 6 percent. The norm has dropped from 5 percent to 4.6
percent. Senator Donley noted that the Cremo plan was based
on a 6 percent growth rate. Mr. Rogers asserted that 6
percent is not sustainable. Senator Donley noted that the
Cremo plan assumed new revenues of $400.0 million dollars
would be created immediately. Mr. Rogers asserted that if
the gap is filled all at once that there would be a negative
economic impact on businesses and individuals around the
State. He maintained that by closing the gap slowly over
four years the natural growth in the economy should even
out. He stressed that a sudden $500.0 million dollar
reduction would result in a recession.
Representative Donley questioned if the political incentive
to insulate the corpus of the Permanent Fund will be removed
by capping dividends.
(Tape Change, HFC 95-122, Side 1)
Mr. Rogers stated that the Commission could not reach a
majority in support of a growing dividend. Mr. Gorsuch
maintained that the public will remain concerned since the
level of state services will be tied to the health of the
Fund. He maintained that eviscerating the Medicaid program
and cutting back on day assistance for welfare recipients
are extremely regressive measures. He added that cutting
back on school support is regarded as harmful to children.
He summarized that some members supported a reduction of
dividends as a trade-off to prevent a greater reduction of
services to those that are least able to provide for
themselves.
In response to a question by Senator Frank, Mr. Rogers
stated that the Commission discussed the likelihood that the
Plan would be politically acceptable. He stressed that the
likely alternative is to allow the economy to crash. He
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acknowledged that the public may not have a clear
understanding that an economic crash is the alternative to
action.
Senator Halford asked who would fund the campaign to adopt
the Plan if it were put on the ballot. Mr. Rogers estimated
that there is strong support for some plan within the
business community due to the stability a plan would
provide.
Senator Halford observed that the recession which occurred
in the mid 1980's was the result of a reduction in the total
size of the economic pie in the state of Alaska. He
asserted that the Commission is proposing a reallocation of
service within the existing pie. He summarized the effect
to the economy will not be as detrimental as those
experienced in the mid 1980's. Mr. Rogers agreed that the
situation is different than in the mid 1980's. He added
that the natural growth of Alaska's economy will mask the
economic dislocation and that there should not be a huge
negative impact. He noted that an income tax, sales tax or
employment tax would bring in outside dollars to the state
of Alaska. He observed that 15 percent of the dividend cut
would come from the federal treasury. Senator Halford
maintained if funding is taken from the dividend pool and
put into the general category of state spending, more would
be lost in federal income tax because of the percentage of
payroll. Mr. Rogers agreed with Senator Halford's
conclusion.
In response to a question by Representative Therriault, Mr.
Rogers reiterated that approximately 10 percent of an income
tax would be derived from non-residents. Senator Halford
observed that the ratio of tax paid by non-residents could
be changed by allowing exemptions for local property tax and
other credits.
Representative Martin pointed out that a lot of jobs taken
by out-of-state workers are less desireable. He suggested
that the Governor can take $20.0 million dollars out of the
budget by not taking a supplemental. He added that $16.0
million could be take out of capital projects improvements,
$23.0 million out of debt service, and $29.0 million dollars
out of the Permanent Fund Dividend Hold Harmless Program.
Representative Martin asked if the Commission studied level
of services in relationship to population growth. He
asserted that school population has grown by 14 percent over
the past ten years. The school budget increased by 33
percent in ten years. Mr. Rogers noted that the Commission
studied a 17 year period. He stated that, over the
seventeen year period the Commission studied, the growth in
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population with inflation was 166 percent. School funding
increased by 175 percent during the same period. He noted
that grants to individuals grew by 500 percent and
correction funding grew by 600 percent.
Senator Donley observed that a Legislative Finance Division
report on the Cremo Plan stated that the Cremo Plan assumes
that the dividend program would be eliminated or a reduction
in state spending equal to the dividend program would be
made. He noted that the Long Range Financial Planning
Commission Plan would not make as big a reduction in state
spending and the dividend program would be continued. Mr.
Rogers agreed that there is a significant dollar difference
between the two plans in the years 1997 & 1998. He stressed
that the Cremo Plan would be ideal once the optimum level is
reached. He stressed that if there is another windfall
payment to the State that the Cremo Plan would be
attractive.
Co-Chair Hanley noted that the real rate of withdraw for the
Cremo Plan would be less than 6 percent since all of the
State's oil revenue would be deposited in the principal of
the Fund every year. He stressed that the real rate of
reduction would be 3 to 4.5 percent. He pointed out that
there is only a certain amount of money to be spent. He
observed that under the Commission's plan the state of
Alaska would still be spending more money than revenue until
a balance is reached. He emphasized that actual dollars
start growing again after FY 99. By the year 2005 the
budget would be up to $3.3 billion dollars. By the year
2010 there would be a $136.0 million dollar fiscal gap. He
pointed out that the Commission's plan assumes that state
government has to grow at a certain rate, not that the State
has to live within revenue projections. He noted that the
Cremo endowment, once the transition period is passed, spins
off a greater increase, which would allow for more growth
over time. He noted that without further measures, the Long
Range Financial Planning Commission Plan would result in
growing deficits of $400 - $500 million dollars.
Mr. Rogers observed that the addition of unforseen new
revenues would make the years 2005 and on more attractive.
Representative Brown commented that a Department of Labor
study estimates the non-resident work-force to be 25
percent. Mr. Rogers explained that estimations were based
on the Department of Revenue's 1980 income tax figures.
Senator Halford acknowledged the Commission's efforts in
defining the problem and recommending solutions. Mr. Rogers
urged members to give a little more on issues in order to
achieve a compromise that will appeal to a majority. He
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stressed that any plan that survives needs to be bi-
partisan.
ADJOURNMENT
The meeting adjourned at 3:30 p.m.
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