- Associated Press - Wednesday, January 22, 2014

JUNEAU, Alaska (AP) - House Finance Committee co-chair Alan Austerman said the state can’t cut its way to prosperity, and legislators will have to make tough decisions in the next few years.

In a sit-down interview with The Associated Press, the Kodiak Republican said Alaska is in a somewhat different situation than when oil prices were low in years past because there is less oil flowing through the trans-Alaska pipeline.

Alaska relies heavily on oil revenues to pay for state government operations, but production has been on a downward trend for years. The Legislature last year passed a cut in oil taxes in a bid to spur new production and investment. Critics called the tax cut a giveaway to industry with no guarantee for what the state will get in return. Voters later this year will decide whether to keep the tax change.

Gov. Sean Parnell has called for the state to restrain spending and use savings to get by, though he also has said the state is not in dire financial straits.

Austerman said he thinks the best the state can hope for is for oil production to stabilize, given the aging legacy fields.

Legislators this year should take a hard look at projects, like the proposed Susitna-Watana dam, and decide if they are the best places for continued investment, he said.

Legislative leaders in the past didn’t want to “cry wolf” about Alaska’s fiscal outlook, and he said he’s hesitant to do that now other than “the fact that we just don’t see the possibility of increase in production in a time period that will dig us out of this hole on any near-term basis.”

Austerman said he doesn’t expect the state to “fall flat on our face” in the next three or four years, but he said things will be tough if the revenue picture doesn’t improve.

There isn’t a vision for where the state should be, in terms of schools, roads or other infrastructure, making it tough to know where to focus spending, Austerman said.

A House subcommittee on fiscal policy tried to look at these issues, but it fizzled out for lack of interest among other lawmakers and fears some had that it was a tax committee, he said.

Options like imposing state sales or income taxes are seen as politically unpopular. But lawmakers may need to have a discussion on taxes in the years to come if the oil tax cut doesn’t result in hoped-for production increases, Austerman said.

Senate Finance Committee co-chair Kevin Meyer, R-Anchorage, said it doesn’t improve the economy “when you start talking the ‘t’ word, and that’s what we are all about is growing our economy and letting our Alaskans keep their money instead of taking it through taxation.” He said he hopes the oil tax cut will lead to more oil production.

Sen. Pete Kelly, Meyer’s co-chair on finance, said one of the problems with other sources of revenue besides oil is that Alaska doesn’t have a large population.

Kelly, R-Fairbanks, said one thing people think of as a possible revenue stream is a personal income tax. But that wouldn’t make much of a difference in the revenue picture because of the state’s small population, he said.

But Kelly said it’s important for the state to plan long-term and get a handle on its spending.

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