The Ketchikan Daily News http://www.ketchikandailynews.com/ www.ketchikandailynews.com Ketchikan Daily News Headlines Copyright The Ketchikan Daily News 2008. All Rights Reserved. urn:publicid:ketchikandailynews.com:112178510 Town hall meeting looks at budget deficit 2017-04-22T18:58:50Z 2017-04-22T18:58:02Z Copyright Ketchikan Daily News 2008. All Rights Reserved. By SCOTT BOWLEN Daily News Staff Writer Proposed methods to close the State of Alaska’s $2.7 billion budget deficit were the topic at a town hall meeting organized by Rep. Dan Ortiz, I-Ketchikan, on Thursday evening at Ketchikan High School. More than 50 people attended the approximately 2.25-hour meeting, which included budget presentations by Ortiz and Pat Pitney, director of the state Office of Management and Budget, as well as questions and comments from audience members. A primary focus was the state income tax approved by the Alaska House. The income tax is a component of a four-part fiscal plan the House majority caucus has put forward, but it isn’t included in the budget plan that’s been approved by the Alaska Senate. Now, the two bodies will try to negotiate a final state budget package — which might or might not include a broad-based tax such as a state income or sales tax, or other components of the budget packages approved by the respective bodies. “Will the process work? I can’t stand here and guarantee that it’s going to work,” Ortiz said at the meeting’s end, adding that state income or sales taxes aren’t anyone’s favorite options. “But I do stand up here and say we do need a fiscal solution, folks,” he said. “I will continue to push for a fiscal solution, and If that means I don't get re-elected, OK, but I believe that that’s the right thing to do.” Thursday’s meeting at the Kayhi auditorium began with Ortiz outlining various legislation he’s worked on this legislative session, then shifted to his presentation on the state’s budget situation. The price of oil, which has produced about 90 percent of state revenues, began to slide precipitously in mid-2014. Prices have recovered a bit since bottoming out in early 2016, but remain at less than half the 2014 peak. Forecasters are not seeing any large rise in prices ahead, and Alaska production isn’t expected to increase significantly in the foreseeable future. The Legislature didn’t react strongly to improve its revenue situation during its 2015 or 2016 sessions, preferring to make some cuts to state operations and capital spending and drawing from the state’s saving accounts to balance the state’s budgets. Citing legislative inaction on a fiscal plan in 2016, Gov. Bill Walker acted unilaterally to divert some of the Alaska Permanent Fund earnings that would have been paid to Alaska residents as dividends to cover some government spending and slow the draw on state savings. Ortiz noted that Alaska had $16.3 billion in non-permanent fund savings accounts in fiscal year 2013, a number that has dropped to $4.2 billion in fiscal year 2017. “We continue to spend savings to make up the deficit, and you can only spend savings for so long before you run out of your savings,” he said, adding later that the state should be keeping a savings buffer to cover should some sort of catastrophic event occur. Ortiz said the Legislature has cut the state’s operating and capital budgets by a combined 44 percent since fiscal year 2013, with $1.1 billion of that amount coming from the operating side. He added that there now are 2,500 fewer state jobs than in 2014. “We have made cuts but still had a $2.7 billion deficit at the start of this year,” Ortiz said. After the November 2016 general election changed the Legislature’s makeup, Ortiz, who had caucused with the House Democratic minority during his first term, joined a new House majority coalition comprised of 17 Democrats, two independents and three Republicans. Ortiz said the coalition worked toward creating a stable, four-pillar fiscal plan that would bridge the deficit gap. The first component is continuing with “smart” cuts to the state budget. The second pillar is House Bill 111, which would end the taxable credits for the oil exploration portion of the Senate Bill 21 oil tax structure. Alaska, said Ortiz, is the only state that pays out cash to compensate companies for their oil exploration. At present, Alaska has built up an obligation to pay out $900 million in taxable credits, and will meet that obligation. However, “HB 111 says we cannot do that any longer,” he said. The third component is a restructuring of the Alaska Permanent Fund earnings reserve, using a percent of the funds’s market value to pay dividends, inflation-proof the fund, and help pay for some “essential” government services. The Senate also has approved a similar percent-of-market-value change. Those three pillars together still don’t fully close the deficit gap, according to Ortiz. “So, what are we going to do?” he said. “So the fourth part of our plan was to generate a broad-based tax that would generate at least $650 million, … once it was fully implemented.” The broad-based tax selected by the House majority coalition was a statewide income tax — in part because about $80 million of the $650 million it is expected to generate annually would come from out-of-state workers in Alaska. Ortiz and Pitney’s presentations provided some measures of state funding impacts in Ketchikan, and Pitney’s gave a relatively detailed comparison of the House and Senate budgets. As noted above, the House and Senate plans contain similar permanent fund measures, while the Senate plan has spending reductions specific to K-12 education, the University of Alaska, Department of Transportation and Department of Health and Social Services. The Senate has proposed no broad-based tax, and Senate President Pete Kelly has said the Senate is against a state income tax. The Senate plan would deplete the state’s Constitutional Budget Reserve savings account, according to OMB information. Don Westlund of Ketchikan was the first audience member to speak after the presentations. He noted that the actual number of people who would be paying an income tax could be down around 100,000 individuals. Southeast Alaska has about a million people coming on cruise ships, and implementing a sales tax for the summer season would probably net the state more revenue than an income tax. Another speaker supported a statewide sales tax, exempting items such as food, clothing and housing to lessen the impact on people with lower incomes. The relative fairness and-or revenue potentials of income and sales taxes was touched upon by several audience members. Audience member Chris Herby of Ketchikan opposed an income tax as the “absolute wrong approach. “The reason I believe that is because it hits one segment of our state — that’s employed wage earners,” he said. “I don’t think that one segment should support the whole problem with the state. ... If we need to impose more taxes, a statewide sales tax would spread the pain evenly across the state.” Herby added that a statewide sales tax would have to be applied to internet sales, too, or in-state retailers would be hurt.” In addition to the view that an income tax unfairly targets workers, other income-tax  comments included the concept that the tax would affect retired people’s incomes, making it more difficult for them to remain in the state. Opposition to a state sales taxes was voiced, as well. Ghert Abbott of Ketchikan, who said an “income tax is the fairest form of tax as it taxes higher incomes more than lower incomes and does not geographically discriminate,” also noted that a “sales tax, which taxes consumption rather than income, is inherently regressive. “Under a sales tax, a person making $250,000 a year in Anchorage  would pay a smaller percentage of their income in taxes than a person earning $50,000 in Ketchikan,” said Abbott. Abbott also mentioned that places like Anchorage don’t currently have local sales taxes, and adding a state sales tax would hit a community like Ketchikan that already has local sales taxes disproportionately harder. He requested Ortiz to oppose any attempt to substitute a sales tax for a income tax. Ortiz pointed to his House vote for the income tax as an indication that he supports the income tax over the sales tax, but he’s not “closing the door” on a state sales tax. “At this point, I'm in support of a fiscal solution, and if that solution favors a sales tax over an income tax, so be it,” Ortiz said. As part of his comments, Rodney Dial of Ketchikan asked about the number of rural communities that don’t have local tax structures to pay for government services. “Why are we the only state in the nation that allows half of our communities get all of their services paid for free by the State of Alaska,” Dial said. He said urban areas, including Ketchikan, pay a combined “billion and a half” in taxes, decreasing the state’s budget burden by that amount. “When the governor is telling us in this community that we’re going to take it in the shorts, we’re going to pay out of our income, we’re going to pay just so they can continue to have everything for free, that's not acceptable to us,” Dial said, adding that the state should institute something like an unincorporated service area tax. Dial also challenged the number of 2,500 fewer state jobs as an inflated number, and asked how many layoffs the state has made. Pitney responded, saying there had been 77 people laid off. Among other concepts voiced was a sunset clause for an income tax measure. There were a couple of comments from audience members about their willingness to pay taxes under the current circumstances; others said the state could be making more cuts. One person voiced opposition to cuts to the Department of Health and Social Services that affect the state’s most vulnerable citizens; another targeted the state’s foster care system as inefficient, incompetent and wasteful. Ortiz encouraged people to complete a brief survey that asks whether the respondents support the House or Senate proposed budgets or other solution. Information presented by Ortiz indicated that about 58.5 percent of the 155 respondents as of that time had favored the House proposal, while about 24 percent supported the Senate version. Southern Alaska Staff Writer Town hall meeting looks at budget deficit The Ketchikan Daily News urn:publicid:ketchikandailynews.com:13784332 Change 0 Usable urn:publicid:ketchikandailynews.com:112178516 Local marijuana business reports 2017-04-22T19:01:50Z 2017-04-22T19:01:14Z Copyright Ketchikan Daily News 2008. All Rights Reserved. By MATT ARMSTRONG Daily News Staff Writer Since opening almost two weeks ago, The Stoney Moose has experienced a high level of business. Ketchikan’s first retail marijuana store opened April 10 on Stedman Street and, through about 40 hours of business as of Thursday night, the store has brought in about $5,000 in local tax revenue, according to co-owner Mark Woodward, who spoke to the Ketchikan City Council at its Thursday night meeting. “We’ve just kind of started, but I want you guys to know who’s coming in,” Woodward said. “Everybody, on any type of socioeconomic scale, is coming in. Not only locals, but we’ve had a lot of out of town people come in. When the (U.S. Coast Guard cutter John McCormick) was commissioned, we had a lot of people come into our store. (It was) the first time they’d ever purchased legal cannabis, and it was a very enjoyable experience for them. ... I said that this was going to be an economic engine, and you’re going to see part of it.” Woodward estimated that 30- to 40-percent of customers are seeking an alternative to prescription pain medication. One of the surprising statistics the store has seen so far has been that more women than men have come in. “We didn’t know why, so we just started asking, and we were told (it’s) because they don’t have to now rely on meeting up with somebody in a sketchy parking lot where it’s dangerous,” Woodward said. “And instead, they have control over what they do and what they purchase, and that’s big. I never thought about that, but that’s been a neat thing for us to be able to provide.” Once cruise ships start arriving in Ketchikan next month, Woodward said he thinks the retail marijuana industry could generate significantly more tax revenue than was previously anticipated. “In 40 hours, we’ve generated $5,000 in tax revenue, and that’s without any advertising and barely being open,” Woodward said. “We think that, when our store starts going full time and the cruise ship season starts and (Jason Kolanko’s planned Water Street store Rainforest Cannabis) gets going, you guys might be looking at half a million dollars in tax revenue. ... This might become a more important thing for you guys than you realize.” On-site consumption In addition to providing information on how the store has performed so far, Woodward asked that the council write a letter of support to the state’s Marijuana Control Board before its May 15 meeting for The Stoney Moose to have on-site consumption. “If only 5 percent of the cruise ship people want to consume, you’re still talking over 300 people a day,” Woodward said. “And, as I’ve asked (Alaska’s Alcohol and Marijuana Control Office), ‘Where are they going to go?’ “ ... What is the alternative?” Woodward added. “We can police our area, our alleyway, (but) that’s it. That’s as far as we can go. We’ll take care of that, we’ll make sure no one consumes there. But when someone walks out and they go on the street, I can’t stop them. I’m just saying you guys should be aware of this, because this is going to be a bigger problem than you realize.” Woodward added that he’s heard that as many as 15 percent of passengers might buy marijuana when they get to Ketchikan. Council questions Council Member Judy Zenge asked Woodward how many people could be inside the store at one time, because she had heard that only two customers could be inside at the same time. The business is preparing its on-site consumption area under the assumption that the state will allow it to happen. If on-site consumption isn’t allowed however, the store would add more retail space, according to Woodward. “We would have, essentially, a second room,” Woodward said. “ ... We can get four people in (the current space) pretty comfortably.” Council Member Dick Coose asked where the store’s products come from and where they’re tested. The Stoney Moose can only receive products tested at a state-licensed facility. There are two testing facilities in Anchorage — a planned facility in Juneau did not go into business — and the store is working with suppliers in Sitka, Anchorage and Fairbanks, according to Woodward. Coose also asked how the marijuana comes to Ketchikan, and Woodward directed him to ask the cultivators. Council Member Bob Sivertsen, after Woodward confirmed that products are coming in from out of town, said he “thought that wasn’t supposed to happen,” due to having to transport a controlled substance through federal waters and air space. “Through the discussions, I think we were led to believe that the cannabis growers would have to grow it on the island,” Sivertsen said. “ ... I feel like I was led to believe one thing, and other things are happening, so it makes me a little reluctant to jump out there and support something because I’m not entirely sure how (it) will look.” The “Cole memo” — an Aug. 29, 2013, memo from then U.S. Deputy Attorney General James M. Cole to all U.S. Attorneys — provides guidance to federal law enforcement officials in states that have legalized marijuana, and it’s what Alaska is following, according to Woodward. The four-page memo reads, in part, that “In jurisdictions that have enacted laws legalizing marijuana in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale, and possession of marijuana, conduct in compliance with those laws and regulations is less likely to threaten the federal priorities set forth above. “Indeed, a robust system may affirmatively address those priorities by, for example, implementing effective measures to prevent diversion of marijuana outside of the regulated system and to other states, prohibiting access to marijuana by minors, and replacing an illicit marijuana trade that funds criminal enterprises with a tightly regulated market in which revenues are tracked and accounted for.” The memo allows states to have jurisdiction over marijuana issues as long as there is an acceptable level of enforcement, according to Woodward. “We have manifests that we have to follow,” Woodward said. “If we don’t follow a manifest correctly, we can have our license pulled immediately. It behooves us to follow that manifest.” The council did not indicate if it will either write a letter of endorsement for on-site consumption or discuss it at a future meeting. Southern Alaska Staff Writer Local marijuana business reports The Ketchikan Daily News urn:publicid:ketchikandailynews.com:13784333 Change 0 Usable