Parnell should say how he would have plugged 1 billion budget hole

Fairbanks Daily News Miner - September 30, 2010

FAIRBANKS — It's fine for Gov. Sean Parnell to go after Democratic challenger Ethan Berkowitz on his 2002 vote in favor of an income tax.

"In 2002, Ethan Berkowitz voted to implement a state income tax, which failed to become law. Separately, Governor Parnell has voted against creating such a tax," a press release from Parnell said last week.

Instead of just saying he would oppose the "tax lever," however, the governor should identify programs he would have eliminated or reduced to plug the $1 billion budget hole the state was facing in 2002.

Parnell says that in the future he will cut spending before seeking tax increases.

Looking back at that debate eight years ago, there was a lot of talk about how great it would be to cut the budget, but it was not specific.

The tax Berkowitz backed would have brought in from $185 million to $250 million, depending upon how it was structured. It was approved 24-15, with the backing of Democrats and several Republicans.

In addition, the House voted to raise alcohol taxes and spend about $650 million a year in Permanent Fund earnings on education. The latter measure was approved 30-9.

At the time, the Constitutional Budget Reserve was expected to be empty by 2004, which would have left the state in a financial crisis.

Republican Rep. Eldon Mulder, who had been co-chairman of the House Finance Committee for four years, opposed the income tax, but said legislators were unable to cut the budget to fill the fiscal gap, even though they had tried.

The Senate refused to act that year, ending the session with the prospect that the state would go off a financial cliff within a year or two.

But oil prices rose and then the state raised oil taxes, ending that episode of the Alaska budget cliffhanger series.