- Associated Press - Wednesday, January 18, 2017

JUNEAU, Alaska (AP) - Alaska Gov. Bill Walker on Wednesday urged lawmakers to end the bickering and get down to the serious business of resolving the state’s budget crisis, challenging them to put forth a plan if they don’t like what he’s proposed.

Walker said compromise and leadership will be critical in efforts to pass a complete fiscal package this year.

“Now is not the time to see who will blink first,” Walker told House and Senate members gathered at the state Capitol for his annual State of the State address. “Now is the time to open our eyes wide to the kind of future Alaskans want and deserve.”

“We are so much stronger when we pool our might for the good of our state,” he said later.

The Legislative Finance Division has said Alaska is in the midst of its gravest fiscal crisis in state history and in its fifth straight year of large deficits despite four years of steady budget cuts. The current-year deficit is estimated at $3.1 billion.

The state has slumped into a recession, shedding jobs across most industries last year, and has seen its once-sterling credit rating downgraded. The state has long relied heavily on oil revenue but prices, which began nose-diving in 2014, have remained low.

Legislators began a new session Tuesday with a sense of urgency amid the continued draw-down of savings. Gridlock marred last year’s regular and special sessions, and the issues hotly debated then remain the same - taxes, use of earnings from Alaska’s oil-wealth nest egg to help pay for state government, the degree of ongoing budget cuts and where those cuts might be made.

Oil won’t save Alaska from the current conundrum: while oil prices today are double what they were this time last year, it would take a prolonged period of prices of more than $100 a barrel to solve the fiscal problem, Walker said. That isn’t expected any time soon, he said. The price for North Slope crude earlier this week was around $54 a barrel.

Walker reiterated his support for reinstituting a personal income tax and industry tax increases that stalled last year. The state has responded to Alaskans who wanted major cuts before accepting new revenues, he said, noting, among other things, that by year’s end, the state will have shuttered seven Alaska State Trooper posts, youth detention and correctional facilities and six public health centers.

The state can’t keep cutting the budget and expect the situation to improve, because it’s not just public services that suffer, Walker said. The economy also is at risk, he said.

So far this year, Walker has proposed using Alaska Permanent Fund earnings, tripling the state’s long-untouched motor fuel taxes and freezing pay increases for state employees. He said he wants to work with lawmakers to fill the gap that would remain.

The permanent fund’s principal is constitutionally protected, but the fund’s earnings can be spent, if lawmakers choose. The yearly checks most Alaskans receive come from fund earnings.

The Republican-led Senate majority has proposed an additional $750 million in cuts over three years, with plans to scrutinize education, health and social services, the university system and transportation. Senate President Pete Kelly, R-Fairbanks, said the Senate plans to evaluate use of Alaska Permanent Fund earnings as part of a plan to address the deficit but it won’t act on that issue until there is a spending limit in place and proven budget reductions.

House Finance Committee co-chair Paul Seaton, R-Homer, one of three Republicans in the House’s new majority coalition, said the intent of a spending cap is to limit future Legislatures from addressing problems that may occur in the future. That’s different than what his caucus is proposing, he said.

House Speaker Bryce Edgmon, D-Dillingham, said Wednesday that a fiscal plan, from his caucus’ perspective, would include “judiciously applied,” targeted cuts and looking at new revenue measures and oil and gas tax credit changes.

The House majority also plans to look at some use of permanent fund earnings. Edgmon said protecting a permanent fund dividend into the future will be an important piece of the majority’s plan.

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