Wage hike on Gov. Knowles list
JUNEAU -- Gov. Tony Knowles’ call for an increase in the minimum wage and for a trigger mechanism to raise new state revenue were unexpected parts of the State of the State address Jan. 10.
Knowles had spent a month highlighting different parts of his proposed budget and legislative priorities, a method Republican leaders have derided as management by press release.
But while the second-term Democratic governor clearly had signaled his intentions in some areas -- for example, to boost education spending and make veterans a priority in the state Pioneers’ Homes -- he kept the minimum wage and the trigger mechanism close to the vest.
As a result, Republican leaders weren’t specific in their responses to those proposals, saying only that they would consider them.
"Working for a minimum wage in Alaska shouldn’t mean a minimum quality of life," Knowles declared to a joint session of the Legislature, sparking scattered applause but not from some conservative Republicans like Rep. Vic Kohring of Wasilla.
Knowles said the minimum wage should increase from $5.65 an hour, the lowest on the West Coast, to $6.40. He said there should be another hike next year and inflationary adjustments thereafter. State law calls for the Alaska minimum wage to be 50 cents higher than the federal rate, and the last increase was in September 1997, according to officials at the state Department of Labor.
House Speaker Brian Porter, R-Anchorage, said his caucus would take a look at the plan. "... I think most people in this room would like an automatic inflation-accelerator in their wage incomes," he said at a press conference.
"It’s not dead on arrival," said Senate President Rick Halford, R-Chugiak.
Alaska Chamber of Commerce President Pam La Bolle said she guessed her board would not support inflation adjustments.
Knowles had said he would address the need for a long-range fiscal plan in his speech, but he hadn’t said how specific he would get. He highlighted a recent turn in the debate by calling for new unspecified revenues that would kick in when the Constitutional Budget Reserve, the state savings account that has been used to plug budget deficits, drops to $1.5 billion.
"This approach has long been discussed by many thoughtful Alaskans, most recently by former Governor Jay Hammond," Knowles said.
The reserve, which comes from settlements of tax and royalty litigation against the oil industry, is projected to be about $3 billion by the end of the current fiscal year on June 30. But the administration projects that a draw of more than $500 million will be needed in the next fiscal year to balance revenues and expenditures. Without some structural budget change, that means the account then could be depleted within a few years.
Knowles acknowledged previous doomsday scenarios haven’t come to pass because "higher oil prices once again saved the day."
His plan for a mix of budget cuts, income taxes and revenues from earnings of the Alaska Permanent Fund failed to win a single vote in the Legislature in 1999. The Legislature’s subsequent plan focusing on permanent fund earnings was rejected by 84 percent of voters in a ballot advisory question that year.
"I’m as relieved as anyone that drastic steps were unnecessary then," Knowles said. "But we also know it would be irresponsible to fail to plan for the possibility that oil and gas revenues someday will be insufficient to pay for essential services."
Republicans, while touting their own budget-cutting measures over the past five years, were noncommittal about a long-range fiscal plan including new revenues.
"Before we ever put that proposal out there, we have to engage the public," said House Finance Co-Chairman Eldon Mulder of Anchorage. "... While everybody supports a fiscal plan, the support diminishes or falls apart when you start talking about permanent fund earnings or income tax or sales tax or increased user fees."
But Sen. Alan Austerman, a Kodiak Republican who has pushed for a long-range plan, said his concern with the trigger concept is that it allows the Budget Reserve to be drawn down in the meantime. He said he’d prefer an endowment approach, with the existing reserve invested long-term to earn more money for government operations while new state revenue measures are enacted to plug the budget gap immediately.