- Associated Press - Monday, July 11, 2016

JUNEAU, Alaska (AP) - Gov. Bill Walker said Monday that the state is in a fiscal crisis as a result of legislative inaction in the face of a multibillion-dollar budget deficit.

Walker has long resisted referring to the situation as a crisis, calling it a challenge and saying it’s only a crisis if nothing is done. But his tone changed Monday, as lawmakers convened for their second special session this year to deal with the problem.

“We can stop this,” Walker told The Associated Press. Alaska has endured a number of disasters during its history, including the 1964 earthquake, but Walker said this will be a self-inflicted disaster if lawmakers don’t act.

“They’re going to drive Alaska from a recession to a depression as a result of not standing up and doing what’s best for Alaska rather than for a re-election,” he said.

Lawmakers have been attempting since January to address the deficit and some are skeptical about what can be achieved during a new special session, called on the heels of the last one and weeks before the primary election. A small rally urging action on a fiscal plan was held in Juneau Monday.



The session opened with a new proposal from Walker to institute a 3-percent statewide sales and use tax. Walker also called for further work in revamping the state’s oil and gas tax credit system and for increasing the minimum tax on oil producers when prices are above $55 per barrel.

An earlier special session ended last month with the centerpiece of Walker’s fiscal plan faltering in the House after passing the Senate. Walker has lauded the Senate for its work on that.

That proposal - to use Alaska Permanent Fund earnings to help pay for state government - is on the agenda for the new special session. The agenda also includes proposed sales and income taxes; higher taxes for motor fuels, tobacco and alcohol and the fishing and mining industries; the oil tax credit bill and legislation intended to address language in a previously passed crime bill that Walker says could hinder prosecution of sex traffickers. The sales tax is the only tax measure not previously considered.

Walker said he wants to give legislators every opportunity to “fix” Alaska and not leave any option off the table.

Walker called the sales and use tax an alternative option for lawmakers to consider in lieu of the proposed income tax, which, along with the other tax proposals, has garnered little traction. He said in a letter accompanying the bill that a broad-based tax is essential to a comprehensive fiscal plan. The Department of Revenue estimates the sales tax could generate $500 million annually.

Certain items would be exempted from the sales tax, including groceries, wages and real estate purchases or rentals.

Lawmakers for months struggled to pass a tax credit bill, finally settling last month on a plan that would phase out major credits for Cook Inlet and limit a tax break for oil produced from newer North Slope fields. It represented what Walker called “significant steps towards a sustainable fiscal future.” But that’s not enough, he said in a letter accompanying his tax credit bill.

In a Sunday editorial, the Fairbanks Daily News-Miner said Walker, in vetoing almost $1.3 billion from the budget, removed obstacles to a revenue compromise. “Now there are no excuses and Alaskans’ patience with delay is exhausted. It’s time to chart a course to a balanced budget,” the editorial stated.

Walker has said the state can’t just keep eating into its savings, which were built up during more prosperous times, and warns that the Alaska Permanent Fund Dividend program is in peril if changes aren’t made.

The deficit, which has been exacerbated by chronically low oil prices, stands at just over $3 billion for the current fiscal year and was even higher last year.

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Follow Becky Bohrer at https://twitter.com/beckybohrerap .

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