- Associated Press - Thursday, January 19, 2017

JUNEAU, Alaska (AP) - A panel of experts said Thursday that a plan for addressing Alaska’s multibillion-dollar budget deficit is critical to helping clear up uncertainty that has been hanging over the state’s economy.

Marcus Hartley, president and principal economist with the Northern Economics consulting firm, said that as a small business owner he won’t make an investment if it appears the state could do any number of things to address the situation but is failing to decide on anything.

Hartley was on a panel of economic, housing and banking experts that testified before a state Senate committee Thursday.

In a state that has long relied on oil revenue, lawmakers face tough decisions as to how the state will pay its bills amid chronically low oil prices. Issues expected to be debated as part of a fiscal plan this legislative session are taxes, a proposed use of earnings from Alaska’s oil-wealth fund and how much more deeply to continue cutting state spending.

In his State of the State speech Wednesday, Gov. Bill Walker called uncertainty the greatest threat to economic opportunity. He renewed his support for a personal income tax and for industry tax increases that stalled during last year’s gridlocked regular and special sessions. The state has been using savings to get by.

Ralph Townsend, director of the University of Alaska Anchorage’s Institute of Social and Economic Research, said going forward the question that will need to be answered is not whether government should be bigger or smaller but what services do Alaskans want?

In evaluating the state’s options, Joe Beedle, chairman of Northrim Bank, said his bank encourages reduced spending, increased taxes and use of Alaska Permanent Fund earnings, staggering implementation over three to five years.

Sen. Shelley Hughes, R-Palmer, said the body of work she’s seen indicates that reducing government is better for the economy than taxing.

“That’s kind of the opposite of what I’m hearing today,” she said, noting that when taxes were lowered under President Ronald Reagan it stimulated the economy.

Townsend said the Reagan tax cuts were financed by larger federal deficits.

Conceding that, Hughes asked the panelists how they could explain the growth that still occurred during that time.

Reagan created a stimulus by lowering taxes, but Alaska has no personal income or statewide sales tax, Beedle said. “We can’t lower something from zero,” he said.

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