March 17, 2004
In an extremely unusual move, Governor Frank Murkowski testified Tuesday before a meeting of the Senate Finance committee, asking members to take action on a long-term solution to the state's fiscal problem. The text of his statement is as follows:
In my January State of the State message, I noted that Alaskans when confronted with challenges have shown the heartwarming ability and firm resolve to balance individual and shared needs. Our state faces one of those challenging situations today.
Now that we have the recommendations from the Conference of Alaskans that address the state's fiscal gap, it is time for the Legislature to act on them. Your responsiveness to date has been noteworthy. Thank you for agreeing to take up the recommendations of the Conference of Alaskans beginning today and working to resolve the issue by the end of the month. I am pleased a special session was unnecessary.
We all agree that the state needs a resolution this session of Alaska's long-term fiscal gap. It is irresponsible to pass on to a future Legislature or Governor the fiscal gap with which I was confronted on assuming office in December 2002 - some 800 million dollars deficit. The fiscal solution we need must cover the period between now and the time when revenue from the gas pipeline and other natural resource development starts to fill our treasury In short, Alaska needs a fiscal bridge.
With regard to the distance which the financial bridge will have to span - I can report that we are continuing to make great progress on the gasline -- which is the major pier on the other shore - as well as NPR-A.
First on the gasline: We have met, and will be meeting, with: The producers who have lease rights to the gas:
This administration intends to have firm commitments if at all possible and to get the line committed before the end of the year. These proposals will be referred to you for approval. Collectively they will help solve our budget shortfall. A prompt fiscal solution is necessary so that we are able to avoid the harms which would otherwise come to our citizens from the loss of public services between now and when we receive revenues from the gasline and other resource development.
We have done well in FY04 due to the high price of oil and by keeping our commitment to follow our plan to reduce government spending below the previous year and by limiting the CBR draw to under $400 million. We have been blessed by an increase in oil . But we cannot bet our children's future education, our families' public safety, or our social obligations on the continued high price of oil. It is our obligation to act now. Nor can we continue to count on the CBR to bail Alaska out every year.
What happens if the price of oil drops significantly over the next couple of years? This would result in a major draw on the CBR, and as you know, I will not allow the CBR to go below $1 billion. This minimum balance is necessary to provide a cushion against dramatic disruptions in state revenues. The CBR is not a permanent crutch for the state.
On the revenue side: We must look for new revenue. On February 2nd we provided you a list of $212 million in potential new revenues of which we need $150 million for FY05. Among other items, we have been discussing a $1 per pack increase in the tobacco tax, which would raise $36 million. I can't help reflect on the scourge of alcohol in our state. The cost of alcohol treatment is $453 million - more than half of what we spend on education. State revenue raised from alcohol tax is only $25 million.
We average the highest alcohol consumption in the nation - an average of 500 drinks per year for every man, woman, and child. And 30% of Alaskans don't drink. Think about it - it begs for a solution.
We must continue to increase state government efficiency and reduce waste. While we have cut spending by $245 million, our missions and measures process continues to allow us to identify lower priorities and less effective programs that can be eliminated. We have nearly completed our review of state departments - the first full review in 27 years. We received very good direction from the Conference of Alaskans. Among the recommendations:
I do not intend to propose a specific package for the Legislature today. You will want first to consider the results of the hearings you have underway this week, which I will be watching closely. As you put the fiscal package together, please be guided by the following criteria:
I know that members of the Legislature have a number of proposals on how best to proceed. I look forward to working with you in reviewing the package that you develop to build a consensus which meets these criteria.
Each step in this year-long process to secure Alaska's future is of critical importance. The first step was the Conference of Alaskans in Fairbanks last month. The 55 men and women from across the state did well. Now it is the Legislature's turn to consider their recommendation and get our state on sound fiscal footing.
In his simple life philosophy, Yogi Berra explains that tragedy lies in paralysis - not in choice. Doing nothing is not a solution!
I will now turn this over to Cheryl Frasca and others from our administration who will provide the context explaining why the state needs to resolve its fiscal gap this year. I look forward to working with you to meet the expectation of Alaskans that we resolve the issue and bridge the gap.
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