Posted Tuesday, March 06, 2018 - 5:43 pm
Here’s the question: should Alaskans who receive Medicaid be required to work or volunteer as a condition of their benefits?
I believe so, and two weeks ago I introduced SB 193 which would require Medicaid recipients to engage with their community through employment, volunteerism or subsistence activities.
First, the facts: SB193 does not require new mothers, the elderly or the disabled to seek employment. We reviewed proposed Medicaid work requirements from other states and crafted our exemptions to ensure that the Medicaid safety net continues to work for those who need it most.
In pursuing a work requirement, Alaska would join 10 other states already moving forward with similar efforts. SB193 carefully carves out exceptions for our most vulnerable and provides exemptions for job training, serious students, caregivers and more. With Alaska’s uniqueness in mind, we included a work credit for subsistence activities as well.
Many of the 196,000 Alaskans on Medicaid already work, and some of those who do not are covered by one of the bill’s exemptions for education or caregiver activities. Senate Bill 193 is crafted to apply to a narrow band of Medicaid users: those who could work, but choose not to.
Like all of us, Alaskans on Medicaid have dreams for a better life. When plans don’t work out and setbacks occur, it’s easy to lose heart and stay where it is most comfortable – receiving government benefits.
But a life of government dependency can be isolating and unfulfilling. People grow when they plug into a larger community – they need to belong. Beyond the dignity of productivity, work opens doors to a larger community of friends and associates. Work provides us with a reason to step out the door in the morning and stand side by side with our fellow Alaskans making our state a better place.
Detractors say the idea that work has inherent dignity is old-fashioned and has no place in modern public policy debate. I disagree. American public discourse has always held certain truths to be self-evident. The value and dignity of work as one of these truths is foundational to our nation’s success.
Engaging in the workplace or volunteering for a non-profit allows everyone the opportunity to earn a reputation for reliability, gain new skills and develop valuable networks.
Some observers will assume that a work requirement for Medicaid is about saving money. While savings would be welcome, they are not the primary motivation nor are they likely to materialize in a meaningful way. In fact, I anticipate modest costs to implement and enforce the work requirement.
That’s right, I am willing to spend some money if that’s what it takes to help Alaskans move away from the debilitating effects of dependency and forward towards self-sufficiency. We’ve spent billions on dependency – I’m willing to spend a small fraction of that to encourage Alaskans on a path toward independence.
It is rare in politics to find a win-win policy. So often it seems new proposals just take from one hand to give to the other. By contrast, a Medicaid work requirement benefits everyone. It increases the pool of volunteers Alaska non-profits need to serve our most vulnerable and it encourages able Alaskans to move towards education and job experience — the surest way off a treadmill of dependency and onto the road towards independence.
Pete Kelly, R-Fairbanks, is the President of the Alaska Senate.
Posted Wednesday, February 28, 2018 - 10:35 am
Earlier this month in testimony before the U.S. Senate Intelligence Committee outlining the major national security threats facing the country, former Sen. Dan Coats, currently President Trump’s Director of National Intelligence, said:
The failure to address our long-term fiscal situation has increased the national debt to over $20 trillion and growing. This situation is unsustainable … and represents a dire threat to our economic and national security.
Last fall in an op-ed piece current U.S. Senator David Perdue, R-Ga., a member of the Armed Services Committee, wrote “The single greatest threat to our national security is our national debt.”
Despite these and similar warnings from other current and former government officials, over the last two months Congress has passed, and the President has signed, two bills that substantially increase the national debt even further.
Indeed, the federal Office of Management and Budget recently admitted that even with the spending cuts reflected in the President’s most recent budget proposal, national debt is projected to rise from the current year an additional $8.7 Trillion over the next decade and the annual budget will not be back balance even by the end of that period.
The nonpartisan Congressional Budget Office is expected to provide an even more dire assessment in the next few weeks.
Our national debt as a share of the economy is already almost twice the historic average over the past 50 years, higher than any time in history except World War II. If not brought under control it will stunt investment, slow wage growth, increase interest rates, and pass a massive financial burden onto future generations.
To be sure, tackling the national debt requires tough decisions, but it only gets more difficult the longer we wait. As the debt becomes more uncontrollable, it will eventually require both higher tax increases and more severe cuts to spending — both non-military and military — than would have been needed if lawmakers had acted in a timely manner.
Letting the current situation fester also reduces the federal government’s capacity to respond to unexpected crises.
Before the last recession, debt was only half of what it is today as a share of the economy. The United States was able to endure and ultimately, climb out of that recession by strategically using our debt capacity. But unless we replenish that capacity now, by reducing debt back to prudent levels in the midst of a strong economy, we will not have sufficient capacity remaining to respond to the next, inevitable difficulty without significant adverse consequences.
Our aging population, rising health care costs, growing interest costs, and lack of revenue are considerable challenges, but as the nonpartisan and highly regarded Committee for a Responsible Federal Budget has outlined, they are surmountable.
The first step involves responsibly addressing our spending levels, at a minimum making sure that we offset any needed increases in some defense and nondefense spending areas with real cuts and reforms elsewhere, necessarily including our current, so-called mandatory spending programs. The second step, efforts to slow the growth of healthcare spending, should follow, making sure that Medicare and Medicaid focus more on value rather than quantity of care.
The third step should aim to keep Social Security solvent for future generations through a mix of benefit formula adjustments, new revenues, and other changes such as increasing the retirement age. Any changes made today can be gradual and targeted, giving workers time to plan and adjust while protecting lower-earning seniors.
And finally, but inevitably given the size of the task, in the not too distant future we need to revisit the tax code.
We must do far more to cut the $1.5 trillion of annual tax breaks in the code — almost none were eliminated in the legislation that just passed. And, to be blunt, fixing the debt will require some new revenues.
This country needs a more stable fiscal foundation, not more debt. To address both the nation’s long-term security and our children’s long-term financial well being, lawmakers need to start filling the hole, not digging it deeper.
Brad Keithley is Managing Director for Alaskans for Sustainable Budgets.
Posted Wednesday, February 07, 2018 - 8:08 am
This week, the Walker Administration introduced a bill to pay off up to $1 billion of outstanding oil and gas tax credits by issuing bonds to pay for them at a fair discount. By purchasing these tax credits held by small oil and gas exploration companies, the bill will free up frozen credit markets to allow new exploration and development to continue.
This bill is part of Gov. Bill Walker’s economic stimulus plan calculated to put Alaskans back to work, and will ultimately result in increased production, leading to increased revenue for the benefit of all Alaskans.
Some Alaskans are asking hard but good questions about why we are doing this.
First some background. Last year, we worked with the Legislature to end the cashable oil and gas tax credits program. In many cases the program had worked — it brought small oil and gas exploration companies to Alaska to look for new fields.
In Cook Inlet, the tax credit program largely solved the serious problem of disappearing gas supplies — gas that Alaskans need for electricity to light and heat their homes. And there have been new large oil discoveries on the North Slope, like the Pikka field, that have promise to put substantial volumes into the pipeline and bring new revenues to the State.
With the passage of House Bill 111 last year, we have ended the program of cashable oil and gas tax credits. The tax credits had quickly added up to a huge sum, and given the collapse in oil prices, the state was simply unable to continue paying them immediately.
The point of this bill is to be able to “clear the decks” and put the saga of cashable oil and gas tax credits behind us.
Alaskans are asking, why provide a bail-out to large oil and gas companies? We aren’t. The point of the tax credits was to encourage small oil and gas companies to explore for new oil and gas reserves. We promised cash and they came. Not only that, they employed Alaskans.
They borrowed hundreds of millions from banks and attracted capital from investors. They spent this money and hired Alaskans. In many cases they found new oil and gas. The production from these new finds will create new revenues for all Alaskans. We need to fulfill our side of the bargain.
Alaskans should know that the bill is cost neutral to the state. We are asking for a fair discount from face value when we buy the tax credits under this bill. The small oil and gas companies get paid immediately, but they will take a discount that will cover our cost of paying the bonds.
The companies have the option to take a smaller discount, but in that case, they have to commit to further in-state capital expenditures or give the state an additional royalty. This is a win-win for Alaskans.
We are proposing this program to achieve a fair resolution and conclusion to the cashable oil and gas tax credit system. Fair to the State, fair to Alaskans, and fair to the small oil and gas exploration companies that came and did what we asked them to do: look for new oil and gas resources.
We look forward to successful outcomes: fully and quickly extinguishing these tax credits, completion of the exploration and development of prospects funded by the tax credits, new production, and new oil and gas revenues for the state.
More investment means more jobs for Alaskans. More production equals more revenue to benefit all Alaskans.
Sheldon Fisher is the commissioner of the Department of Revenue.
Posted Wednesday, January 31, 2018 - 11:09 am
Nobody could blame Rep. Justin Parish for loving the sound of his own voice.
The problem is that everything that comes out of the Juneau Democrat’s mouth regarding oil taxes following his baritone “Madam Chair” reveals a depth of knowledge that is shallower than a contact lens case.
Parish was on full, cringe-worthy display at a couple recent hearings of the House Resources Committee, where co-chair Rep. Geran Tarr, D-Anchorage, is forcing oil industry representatives to hump to Juneau yet again for more hearings on another oil tax bill that’s going nowhere.
If these hearings are good for anything — other than serving as a constant reminder that the state is on track to see its third straight year of production increases on the North Slope — it is to witness the Democrat-led Majority’s utter cluelessness on policy from definitional basics to more complex financial reporting.
First up was Parish questioning Tax Division Director Ken Alper, whom Democrats have relied upon since taking the House majority in 2016 to help craft their seemingly endless series of oil tax increases.
At the Jan. 26 hearing, Alper had an innocuous PowerPoint slide that noted Tarr’s proposal to raise the gross minimum tax from 4 percent to 7 percent is a 75 percent increase.
Parish, who once wrote that “French is the international language of freedom,” decided to wade into the universal language of math.
“We are contemplating increasing the effective rate by 3 percent,” Parish said. “It’s such a curious quirk of language. Because if we were increasing it from 1 percent to 2 percent, you could say we’re increasing the effective tax rate by 100 percent.”
Alper agreed, “Yes, doubling it.”
“Which just, on the face sounds like we’re going up to an effective tax rate of 101 percent,” Parish said. “Which is positively bizarre. I would ask you in the future not to muddle things by saying we’re increasing the effective tax rate by 75 percent when on the face of it you’d think we’re going from a 4 percent gross tax to a 79 percent tax rate, which is also a plain language reading of what you have here.”
The only thing muddled is Parish’s thinking but the problem is his muddled thinking came along with an instruction to Alper to refrain from using math because it accurately portrays the size of the tax increase Tarr is proposing.
Parish wasn’t done yet, and saved some of his best column material for BP Vice President Lewis Westwick a few days later on Jan. 29.
Just five minutes earlier, Westwick had responded to Rep. George Rauscher, R-Wasilla, who gave him an opportunity to address Parish’s statement at the Jan. 26 hearing that BP earned 74 percent of its global profits in Alaska in 2016.
The original source of that claim is from the Journal itself, when BP reported results for its upstream business of $85 million. The company only made $115 million worldwide that year, leading us to draw the same erroneous conclusion that Parish is still quoting two years later.
In fact, our subsequent reporting based on an email we obtained written by BP Alaska President Janet Weiss corrected the record to reflect BP’s annual report did not break out the results from its midstream business, namely TAPS and its marine tanker business.
“We made a loss of almost $200 million,” Westwick said, which jives with Weiss’ statement of a $184 million loss in her email. “Despite seeing a positive $85 million in the annual report, that’s just a slice of our Alaska business.”
Turns out Parish’s listening skills are about as good as his math skills.
“I wonder, if about 74 percent of BP’s global profits as your documents to your shareholders I presume assert, how can it be said we’re not competitive when we account for, again, about 74 percent of global profits according to your documents and yet only 1 percent of global production,” Parish said. “I really would be interested in knowing.”
Westwick was as pleasant as could be and even graciously took the blame for Parish’s ignorant question.
“As I tried to explain, perhaps not very well,” Westwick said, “the $85 million is just a slice of the Alaska business. It would be akin to taking your best well and saying, ‘this is how I’m going to report my financials.’ The actual entirety of the Alaska business lost money in 2016, which for legal reasons around disclosure, we don’t disclose in the annual report. In 2016, the way we look at the Alaska business, we made a loss of almost $200 million. It would not represent, as you describe, 75 percent of the total group profit.”
Parish does represent, unfortunately, the people of Juneau. Surely they can do better.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, January 10, 2018 - 10:10 am
The only thing surprising about U.S. Attorney General Jeff Sessions rescinding the Obama administration’s policy of nonenforcement in states that have legalized recreational use of marijuana is how many people acted surprised by it.
A law-and-order Attorney General who stands in stark contrast to his lawless predecessors Loretta Lynch and Eric Holder and who has made it one of his missions to go after sanctuary cities for ignoring federal immigration laws was never going to maintain an official policy of doing the same for marijuana.
To his credit, Sessions did not make enforcement of federal marijuana laws one of his national priorities and simply tasked the U.S. attorneys in each state to follow existing principles for prosecutions. The Alaska U.S. attorney announced nothing would change, as did his counterpart in Colorado where recreational marijuana for adults is also legal under state law.
The pro-cannabis crowd was quick to jump on Sessions for withdrawing the Cole memo issued in 2013, but they should be thanking him instead.
What Sessions did was to send the issue where it rightly belongs and shined a bright light on Congress to finally do something about reconciling the conflict between states that have legalized medicinal and/or recreational use and the laws on the books classifying the drug alongside heroin and cocaine.
Truly, it is an amazing thing to hear those with the power to change the law demanding the Attorney General not do his job because they have failed to do theirs.
Overall, 29 states have legalized medicinal marijuana; eight states plus the District of Columbia have legalized recreational use; and 18 states allow for the use of cannabinoid oil, also known as CBD, which is non-psychoactive.
Together that is more than 40 states with some kind of law conflicting with federal law, which should in theory create a super majority of elected officials that could change the law in bipartisan fashion.
Instead, Congress has been content to sit on the sidelines relying on federal nonenforcement, which is neither proper nor sustainable.
When pressed in the past, Congress has acted to protect state laws on marijuana.
As the Obama Justice Department and affiliated agencies were conducting hundreds of raids on marijuana dispenseries around the nation that were otherwise in compliance with state laws, Congress began passing amendments to annual spending bills that prohibited any money from being spent on such prosecutions.
The Rohrabacher-Farr amendment has been included in every spending bill since 2014. Another amendment to Veterans’ Affairs spending bills has also prohibited the VA from sanctioning doctors who talk to patients about potential benefits of marijuana in treating Post-Traumatic Stress Disorder.
In short, Congress has found the will to allow certain uses of marijuana already and now will be forced to go further because of Sessions’ action.
Rep. Don Young has been at the forefront of this issue and is a co-founder of the Congressional Cannabis Caucus that is seeking to recognize states’ rights to regulate marijuana as they see fit and to open the banking system to legally operating businesses.
Sens. Lisa Murkowski and Dan Sullivan have suggested it may be a bridge too far to take marijuana off the Schedule I list under the Controlled Substances Act, but that should be the easiest call. Keeping it listed alongside the highly-addictive and far more dangerous heroin and cocaine makes no sense given what’s been seen in Alaska and elsewhere it has been legalized.
After a voter initiative to legalize recreational use for adults in Alaska somewhat narrowly in 2014, there have been four efforts at the local level to turn back the clock. In the conservative Matanuska-Susitna Valley, in Fairbanks and on the Kenai Peninsula voters have overwhelmingly voted to keep the cannabis business legal.
Not everything has gone perfectly in Alaska, with the recent issue of testing inconsistencies rising before the Marijuana Control Board to address, but there have hardly been any of the deleterious effects opponents warned of before the 2014 vote.
Sessions is no fan of marijuana, and Alaska’s congressional delegation are always quick to point out they don’t advocate for its use either, but that is irrelevant. The people have spoken loud and clear across the nation and it’s time for Congress to start listening, and respond with action.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, January 10, 2018 - 10:10 am
We owe a huge debt of gratitude to our congressional delegation of Sen. Lisa Murkowski, Sen. Dan Sullivan, and Congressman Don Young. They delivered the ultimate Christmas gift to Alaska: the ability to open the 1002 area of the Arctic National Wildlife Refuge for safe and environmentally responsible oil exploration.
ANWR has been a 37-year, uphill battle, once passed by Congress only to be vetoed by President Bill Clinton in 1995. Now that Congress and President Donald Trump have finally approved ANWR, Alaska must not squander the opportunity.
Considering how we have stymied progress on new oil discoveries by independents during the past three years, we are now our own worst enemy to developing ANWR.
I recently had the opportunity to talk with several independent oil companies’ executives, some doing business in Alaska and others not. And while their interests and objectives vary, there are common conversational threads throughout, some heartening and all worth noting.
Most independents believe that Alaska has the potential to be one of the hottest oil basins in the world. In fact, it’s a point that has been reiterated time and again. I find that very encouraging, but it begs the question, “Why aren’t we seeing a boom on the North Slope?”
The independents’ answers were swift and critical. They said we need to listen as a state and be proactive to take advantage of the huge opportunity to compete with other states and attract the billions of dollars available for investment after the passage to the recent federal tax legislation.
They weren’t critical of our geological formations or their potential; rather, as one seasoned North Slope independent put it, “Alaska’s problems aren’t in the rocks, the state’s problems are all above the rocks.”
This is one of the universal themes shared by the industry executives I’ve spoken with. They believe the state’s problems are of our own making, and what I find encouraging is that these problems are preventable.
All the independents agree that we need to approve permits in a reasonable amount of time. California, for instance, is revered as an environmentally sensitive state. It’s embarrassing that its permitting time is a fraction of what companies must endure here in Alaska.
The independents also complained about the state’s confusing and ever-changing tax code. They wondered why they couldn’t create a simple, reasonable and fair tax code and stick with it like all the other oil basin states do.
Some executives suggest that Alaska might partner with industry by helping with much-needed infrastructure. Similar to what we did to stimulate the development of Red Dog Mine, we can build roads, airstrips and shared facilities that become revenue generators through industry user fees.
Others were critical; suggesting that the state could work with Native village corporations to improve relationships and help mitigate land use plans and permits.
All the independents agree that if the state would meaningfully address these concerns, Alaska’s oil fields would boom with success. Success seldom just happens. It’s not a game… it is a plan and a strategy. And if we want success, we need to address these concerns with practical resolve.
Independents like Hilcorp, Armstrong Oil &Gas, Caelus Energy Alaska LLC, and Oil Search — coupled with companies like BP, ConocoPhillips, and ExxonMobil — are all striving to ignite a renaissance on the North Slope.
They are proving that our geological formations are oil rich with much more still to be discovered. These companies are finding success despite the unfriendly environment that has soiled Alaska’s reputation with investors and explorers.
It’s time that we quit fighting industry over nickels and dimes when billions are at stake. It’s time to remove the barriers that hinder our state’s financial success.
With the New Year fresh, let’s seize this opportunity and work to realize our potential. Let’s put our minds and efforts towards creating new wealth for Alaska instead of fighting over a series of nuisance and regressive taxes that will harm the economic well-being of our communities.
The opportunities exist for success. All we need now is the political will and leadership to realize that success.
It’s time to roll up our sleeves, formulate a plan, implement that plan, and enjoy a tremendous 2018 for Alaska.
Curtis W. Thayer is lifelong Alaskan and serves as president and CEO of the Alaska Chamber.
Posted Wednesday, December 27, 2017 - 9:39 am
How many special sessions in one year does it take for the Legislature come up with a plan to stem Alaska’s economic decline? Obviously not four, the new record set this year.
After nearly three consecutive years of recession, legislators remain divided over whether it’s better to raise taxes or cut government spending. While they argue, jobs, revenue and families continue to depart in a southerly direction at a worrying pace.
All of that makes the quickness at which some dismiss obvious answers to the deficit problem worrying. We aren’t the only state facing a budget deficit, but we are the only state sitting on a $62 billion rainy-day account that could provide some of the money we need to see us through the hard times.
It is a step forward that more lawmakers acknowledge the potential of using a portion of the Alaska Permanent Fund’s earnings reserve to help pay for government. But rather than placing an outright cap on dividends, Juneau should be looking at the percent of market value, or POMV, proposal to preserve both the potential for increasing dividend checks as well as providing for public safety and other essential state services.
POMV was formerly hailed as an assault on the dividend, but today we have an arbitrary and artificial cap — one that impacts the most-needy residents and, frequently, rural Alaskans the most.
How much more can we inequitably squeeze our villages before there is no more rural Alaska? POMV was a good idea when Gov. Frank Murkowski proposed it in 2004, and it’s still a good idea today. But that recognition has yet to result in the kind of bipartisan bargain that’s needed to move the needle in Juneau.
Touching the Permanent Fund remains a third-rail issue for many. No one wants to kill the golden goose that’s paid out more than $21 billion in dividends since 1982. But while it will take time to convince voters of the benefits of such a plan, there are clearly options for resolving our current revenue crisis by encouraging diversified private-sector investment.
And let’s be clear, what we face is a short-term revenue crisis brought about by low oil prices and overspending. As oil prices rose after 2006, we collectively forgot about the economic challenges we faced just a few short years earlier. In the interim, government became bloated, including handing out an “energy rebate” rather than saving for today, and making short-sighted gasline commitments that cost us $65 million.
As bad as our current situation is, it is not permanent or fatal. New investment from the private sector and greater diversity in the types of industries that invest here can provide long-term economic stability.
Alaska ranks 49th on Forbes’ list of best states to do business, based on costs, availability of qualified labor, regulatory and economic risks, and quality of life. Only West Virginia ranks lower. According to Forbes, Alaska’s economy shrunk faster than any other state over the past five years, net migration out of the state ranks second worst ahead of only Illinois, and the employment outlook is the worst in the country.
Businesses aren’t investing because they aren’t sure what the Legislature is going to do next. If we want to avoid another series of special sessions in 2018, we need to adopt policies this winter that encourage private-sector investment.
In the meantime, we need a bridge.
Rep. Don Young, Sen. Lisa Murkowski and Sen. Dan Sullivan deserve huge accolades for opening the 1002 area to exploration, but it will still be years before we receive royalty revenue.
It took almost nine years from the discovery of Prudhoe Bay to the first oil in the Trans-Alaska Pipeline System in 1977, and that was during a time of national emergency due to the oil crises.
We don’t have to construct TAPS this time around, but we are more focused on the potential environmental impacts, climate change, and the ensuing environmental regulatory hurdles to ensure that the 1002 area is developed with the utmost sensitivity and respect.
Determining what a “fair” rate of return is for our natural resources is also a difficult question — and probably the wrong one. Instead, we should be asking ourselves how we can encourage more companies to come to Alaska to create jobs exploring for new sources of oil and gas, gold, zinc and rare earth minerals. Stable job creation counts as much or more for our economic future than royalty income.
Tourism is great, but it is a short summer season when Alaska is an eco-Disneyland, and then those tourism dollars — and many seasonal tour business owners themselves — head south with the snowbirds. Similarly, how much of our fishing fleet and fishing dollars end up in the Lower 48? We need economic value that applies year-round.
Instead of focusing on the future, we may be focusing too much on filing today’s fiscal gap. That has led to multiple proposals to impose new taxes on working families, themselves struggling in this anemic economy. While the tax issue was mostly ignored in the last special session, it is now resurrected.
The question of how to fill the gap is a difficult one. Spending should be cut, but the formulas federal agencies follow to determine how many dollars Alaska gets can penalize the state if it doesn’t provide a match for certain programs. Leaving federal dollars behind is just as short-sighted for our economic growth as is permanently locking up resource development opportunities.
An income tax puts more money in the government’s pockets, not the pockets of Alaskans.
Artificially capping the PFD carries its own set of risks: it hits lower-income households, including many families in rural villages, the hardest. Instead, we need to be taking a hard look at POMV, and do everything in our power to encourage private sector investment, even if that means more Alaska reality television shows.
Rob Corbisier is an environmental and natural resources attorney at Reeves Amodio in Anchorage. He was an assistant district attorney from 2007-2012, and a special assistant to Gov. Frank Murkowski.
Posted Wednesday, December 20, 2017 - 1:19 pm
This holiday season, Alaskans can have a renewed sense of hope for good jobs, larger paychecks, stronger growth, and enduring prosperity. The reason why is today’s passage of the Tax Cuts and Jobs Act, which includes two historic opportunities for our state.
The first — and perhaps most unexpected, at the start of this year — is the opening of the 1002 Area within the non-wilderness portion of the Arctic National Wildlife Refuge. Set aside by Congress in 1980, Alaskans never gave up on its incredible potential for energy development, and our longstanding efforts finally succeeded this week.
Opening the 1002 Area is the single-most important step we can take to strengthen our long-term security and create new wealth. Given Alaska’s economic struggles, with the highest unemployment of any state and massive budget deficits projected well into the future, the substantial benefits that responsible development will bring cannot arrive soon enough.
New production from the 1002 Area will help restore throughput to the Trans-Alaska Pipeline System, our state’s economic backbone. It will help lower tariffs for the pipeline, increasing the viability of all North Slope oil development. Over time, it will create thousands of good jobs. And it will generate what we project to be over $60 billion in royalties for our state alone.
Thanks to new technologies, we can also be confident that development will not come at the expense of our environment or wildlife. We need less land to produce more energy than ever before, which is why we have limited the footprint of development to no more than 2,000 federal acres — just one ten-thousandth of all of ANWR.
In developing our legislative text, we took great care to listen to those who will have the most at stake as development begins. After visiting Kaktovik earlier this year, I took the concerns of local residents to heart, and made sure that neither the environmental review process nor consultation requirements would be waived in any way.
While opening the 1002 Area is a significant milestone for Alaska, so, too, is tax reform. It will provide the kind of relief for working families that we have not seen since the days of President Reagan, some 31 years ago, while also taking long overdue steps to make our businesses competitive on a global scale.
We cut tax rates for individuals in every income bracket.
We doubled the standard deduction, to allow you to keep even more of your own money.
We doubled the child tax credit, while making more of it refundable.
We took significant steps to advantage small businesses — which make up 99 percent of the companies in our state.
We significantly lowered taxes on pass-throughs, to create a ripple effect that will allow them to keep growing and hiring.
We even cut the excise tax on small brewers, which should make everyone hoppy as good beer becomes more affordable.
On the education side, our bill maintains all of the tax incentives to pursue postsecondary education that exist in current law. Students and parents will continue to benefit from tax deductions for tuition and student loan interest, exemptions for student tuition waivers, and employer-provided assistance.
Finally, we restore Alaskans’ freedom to make their own decisions on health insurance by eliminating the individual mandate, a tax penalty that has harmed many in recent years. By repealing the mandate – all that is impacted is the tax that was imposed on those who chose not to buy insurance they cannot afford or simply don’t want to. Nothing else under the ACA is impacted.
The Tax Cuts and Jobs Act was a team effort — the culmination of decades of work from countless Alaskans who never gave up. And while gratitude is deserved in many quarters, we would not have succeeded this year were it not for two particularly effective advocates for our state: Congressman Don Young and Senator Dan Sullivan, my friends and colleagues.
This holiday season, we have plenty of reason for cheer, a lot to be thankful for, and even more to look forward to in the years ahead.
Posted Wednesday, December 20, 2017 - 10:43 am
Just a few days remain in 2017, and what a year it has been since the inauguration of President Donald Trump.
While the Alaska Legislature still can’t agree on a solution to the state’s budget woes and has nearly run out of the politically-accessible savings accounts, in a welcome change it has had no bigger friend than the leader of the executive branch in Washington, D.C.
As this column was being written the news came that a bill is on its way to Trump’s desk to massively overhaul the tax system and hand Alaska its longtime, No. 1 goal of opening the coastal plain of …
ANWR: The Democrats in the Senate couldn’t stop it this time, nor could their allies in the environmental extremist movement. We are a long way from first oil, and the lawsuit machine is no doubt cranking up, but there can be no doubt that the prospect of opening up another Prudhoe Bay bodes well for Alaska’s future.
Budget battle: The Legislature spent a record 211 days in session this year, partly thanks to its divided houses’ inability to compromise and partly because of Gov. Bill Walker’s October special session that transformed from a supposed “revenue” session to a referendum on the criminal justice reform bill passed barely a year earlier.
Cannabis: The sky hasn’t fallen in Alaska after the legalization of cannabis in 2014, with the first legal sale in October 2016. Prohibitionists have attempted to overturn the state vote in the Mat-Su, on the Kenai Peninsula and in Fairbanks, but voters have resoundingly rejected every effort to turn back the clock.
Dean Don: Rep. Don Young assumed the title of “Dean of the House” after Michigan Rep. John Conyers was forced to resign amid multiple sexual harassment allegations and settlements of those allegations. There’s no shortage of legendary stories about Young over his four decades in Congress — including one that surfaced this year about brandishing a knife at former Speaker John Boehner — but thankfully none that resemble the daily revelations coming out of DC, Hollywood and New York.
EIS: Probably more Alaskans know what EIS stands for than any other state population, and environmental impact statements are now underway for the Liberty offshore Arctic project, the Nanushuk onshore discovery by Armstrong and the 211-mile road to the Ambler mining district.
Fake news: The media created this term in order to discredit Trump’s win, and the president has turned it into a club to bash the ever-shrinking credibility of an industry once regarded as a check on power that is not even bothering to hide its progressive agenda anymore.
GDP: After never crossing the 3 percent growth mark in eight years under President Barack Obama, GDP has steadily averaged 3 percent under Trump as the stock market soars. Even before tax reform passed the Federal Reserve now estimates fourth quarter GDP will be 4 percent.
Harassment: The story of the year, as the mountain of allegations against Hollywood mogul and Democrat heavyweight Harvey Weinstein has unleashed a tsunami of pent-up accusations that shows no signs yet of ebbing that have brought down some of the biggest names in media, politics and entertainment who have largely spent years portraying themselves as champions of women’s rights.
ISIS: After Obama downplayed the rise of ISIS and sat by as it ran roughshod over Iraq and Syria committing atrocity after atrocity, less than a year after Trump became Commander-in-Chief the “caliphate” has been routed from its capitals of Mosul in Iraq and Raqqa in Syria. Although much like the GDP numbers, the media isn’t much interested in reporting on this tremendous military success.
Jerusalem: Yes, it is the capital of Israel and yet another example of Trump keeping a promise where his predecessors going back to Bill Clinton have not. If you haven’t watched UN Ambassador Nikki Haley give it to the Security Council, it is worth a view for the refreshing sound of a nation that is unashamed of exercising its sovereignty rather than be cowed by the constraints of “international opinion.”
King Cove: The road is on its way to being built, again to the consternation of environmental groups who care not a whit for the people of the region and would not live for a minute under the conditions they want to impose on others.
LNG: Gov. Bill Walker got some serious face time in China with its president and Trump. Whether the joint development agreement with the Chinese corporations is simply a memorandum of understanding by another name will become more clear in the coming year.
Media meltdown: A continuation on the fake news, the more the media protests like Fredo Corleone that it is smart and wants respect, the more they trample on their own feet trying to unearth the smoking gun on Russian collusion by Trump. There have been nearly as many corrections, retractions and resignations surrounding the Trump-Russia story as there have been sexual harassment allegations.
Nanushuk: The discovery by Armstrong Energy keeps getting bigger. Now estimated at more than 2 billion barrels while still barely delineated, the record amounts bid per acre in the formation at the state lease sale bodes well for future production regardless of how long it takes to develop ANWR.
Obamacare: The biggest GOP debacle of the year, Obamacare still exists as the law of the land after Congress failed to repeal and replace it this past summer despite seven years of promises of what Republicans would do if they had the House, Senate and White House. The individual mandate repeal is a start but fixing the broken system is a huge item still on the to-do list.
PFD: For the second year in a row it was set below the statutory formula, this time by the Legislature after Walker vetoed half of it in 2016 and had his action upheld by the Supreme Court. The fight to enshrine it in the Constitution is now on, and is likely to be led by the unlikely duo of arch-conservative Sen. Mike Dunleavy and staunch liberal Sen. Bill Wielechowski in the coming year.
Quintillion: The Anchorage telecom has completed its Arctic fiber network around the coast of Alaska and turned on its high-speed service Dec. 1. By any measure an impressive infrastructure accomplishment, rural Alaska has another entry to the information superhighway.
Rocket Man: Trump being Trump, he called the North Korean dictator Kim Jong-un “Rocket Man” in a speech to the UN after several missile tests and a nuclear test over the past year. The missiles are showing increasing ability to reach the US mainland and that means a huge amount of federal dollars are going to be flowing to Alaska as the first line of defense at Fort Greely.
Salmon: A bountiful harvest of salmon in virtually every area of the state was a highlight of 2017, with record harvest of chum in the Northwest in a boon to that area’s limited economy. The downsides were Cook Inlet reds and Southeast kings, neither of which look better in 2018.
Tax cuts: The media has trashed the tax overhaul constantly, and is pointing to their polls of the public who has heard nothing good from them about the bill. We’ll see how the polling looks as soon as February when nearly every paycheck gets bigger thanks to less withholding.
Uber: Alaska became the last state in the nation to allow ridesharing companies like Uber and Lyft to operating here. In a rare wise move, the Legislature prohibited local jurisdictions from piling regulations on top of the companies.
Virgin: Alaska Airlines closed on its deal to acquire Virgin America and is still experiencing some growing pains, but the company has the cash, the assets and the management to iron them out.
Waiver: One of the few worthwhile aspects of the Affordable Care Act ended up benefitting Alaska when Health and Human Services approved an innovation waiver to help cover the costs of the state reinsurance program. It’s a simple redirection of federal subsidies from premium support to paying high-cost claims, but it is a model that can work elsewhere by giving states more control.
Xtra revenue: Better prices and higher production have the state projected to take in $250 million more than previously expected after the Revenue Department released its latest forecast on Dec. 12.
Yakutat: An interesting exploration project is going on at Icy Cape near Yakutat with potentially huge deposit of heavy minerals such as garnet. The big positive is that no major processing or leeching is needed to extract what could produce millions per year in revenue for the Mental Health Trust that owns the land.
Zinke: Nearly an honorary Alaskan at this point, Interior Secretary Ryan Zinke has ordered the resource review of NPR-A and ANWR, elevated the King Cove road to a high priority and tapped Alaskans Joe Balash, Tara Sweeney and Steve Wackowski to join his staff.
Posted Wednesday, December 20, 2017 - 10:43 am
Have you ever wondered why every year since Gov. Bill Walker took office the state’s estimated budget deficit has been reported as $2.5 billion? Have you asked yourself why the Walker administration estimated oil production would fall by 12 percent this year when it actually increased by 2.5 percent?
Why does he have such a pessimistic view of Alaska’s future? The answer to these questions is simple. Gov. Walker pushes a narrative of “crisis” because it justifies the economically destructive actions that he has taken during his tenure.
I am optimistic about the future of Alaska and the economic potential of our great state. Rather than the negative picture that Gov. Walker paints of oil revenues, the reality is a very different story. Oil producers have done a great job of finding new oil and gas. This year, 533,400 barrels a day will flow through the pipeline, and increased production is projected for the future.
Contrary to the state’s forecast of $56 per barrel for the rest of the fiscal year, the price was recently close to $64 per barrel. Clearly, and perhaps intentionally, Gov. Walker and his administration wildly underestimated the revenue that oil would generate by hundreds of millions of dollars.
But what if the price of oil falls? How do we pay our bills? These are questions that Gov. Jay Hammond and the people of Alaska had the foresight to consider and answer years ago. Alaska has a permanent stream of future revenue to help fund government — the Alaska Permanent Fund.
When increased oil revenues and this year’s earnings of the Permanent Fund are added to the $6.8 billion of income generated from the Fund last year (half of which can be used for state spending), along with a portion of funding from the Constitutional budget reserve, we are able to cover the cost of government and still distribute a full dividend to every qualified Alaskan.
Hammond and the founders of the PFD also knew that future governors and legislatures would be constantly tempted to spend the earnings of the fund. To protect the earnings from the insatiable appetite of politicians, they established the permanent fund dividend program or PFD. Since its inception, and until recently, permanent fund earnings have been paid according to statue, with half available for use by government spending and half paid to qualified Alaskans.
Gov. Walker radically broke this long-standing tradition in 2016 when he vetoed half of the dividend appropriation. Then, in 2017, the legislature only partially funded the dividend. The Governor justified his decision to not fully fund the PFD because of “our fiscal crisis.”
Alaskans were led to believe that part of their PFD had to be cut to pay for the deficit. But what many Alaskans do not realize is that the thousands of dollars taken from Alaskan families did NOT pay for government. That’s right. Not one penny of the PFD cut went to help pay for government. It sits in the Earnings Reserve of the Permanent Fund and is NOT being used to help fund the budget, and it is NOT being used by you.
As a result of the governor’s actions, a larger concern has emerged: How do we protect the Permanent Fund, its revenue stream, and the PFD from politicians only interested in growing government?
In addition to electing leaders who understand fiscal restraint, we must provide constitutional protection for the fund. We must use the traditional 50-50 plan that was established years ago to protect the earnings and dividends, and properly inflation-proof the fund.
Gov. Hammond and Gov. Hickel recognized that the dividend was not and is not a government handout. They felt strongly about protecting the PFD because they knew that its earnings were for each Alaskan as a member of our owner-state. In 2018, we should restore Gov. Walker’s raid of half the 2016 dividend, restore the Legislature’s raid of half of the 2017 dividend, and pay full dividends going forward.
The people of Alaska should be part of the process to protect the fund by insisting the legislature pass a constitutional amendment referendum that goes to the people for a vote to protect the PFD as securely as the corpus of the fund itself. If legislators and the governor defy the will of Alaskans, then they will risk being voted out of office by the very people they purport to represent.
The Permanent Fund has worked well for 35 years, and it will continue to do so if the people of Alaska demand it.
Sen. Mike Dunleavy represents Wasilla, Palmer, Talkeetna, Delta Junction, Glennallen, Valdez and Whittier in Senate District E.
Posted Wednesday, December 06, 2017 - 10:23 am
Opening the Arctic National Wildlife Refuge coastal plain to development wouldn’t be necessary if only we could power our economy with Democratic hysteria.
The biggest outrage since the last outrage, of course, is the impending passage of a tax reform bill that should reach President Donald Trump’s desk for his signature before the end of the year.
In the days since the Dec. 2 Senate vote that cleared the way for a conference committee with the House, Democrats and their media sympathizers have been gnashing teeth and rending garments over a bill that ranks as only the eighth-largest tax cut as a percentage of Gross Domestic Product since 1918.
That’s the conclusion of the Washington Post fact checkers, who unintentionally confirmed the derangement of their partisan friends in an attempt to undercut Trump’s boasts about the bill.
Accepting the Congressional Budget Office estimate that the bill reduces revenue to the federal government by $1 trillion over a decade, the average of $100 billion per year amounts to 2.7 percent of estimated fiscal year 2018 tax receipts and 2.3 percent of the budget.
That’s right. The Democrat-media Apocalyptic freakout is based on Uncle Sam collecting a whopping two or three pennies on the dollar less than it does now.
Although it is more heart-warming than watching a litter of puppies chase butterflies to see the Democrat-media industrial complex suddenly care about budget deficits after the national debt increased by $10 trillion in eight years of President Barack Obama, the position is as disingenuous as it is overwrought.
Throughout the national media and to the editorial page in our capital city here in Alaska, the foregone revenue to the federal government is being described repeatedly as a “cost” to the taxpayers.
Only in the through-the-looking-glass world we live in now could taxpayers and businesses keeping more of what they earn be described as a “cost.”
Jumping off from an analogy that regular American “sparrows” are left to pick the oats from the feces of corporate “horses,” the editorial from Juneau is filled with so much magical thinking it could be a Harry Potter novel and reading the piece from the seat of our state government makes one wonder if Sen. Bernie Sanders has joined the editorial board.
Juneau is coincidentally home to more millionaires per capita than any city of its size in the country, and just as coincidentally the four richest counties in the United States are home to the suburbs of Washington, D.C., where a record $3.6 trillion in tax dollars will flow this fiscal year. Funny that, how the richest parts of our state and nation are concentrated where the tax dollars are collected and distributed.
The editorial claims that for the “cost” of the tax bill we could give every American household $1,000 per year for 10 years, plus pay for free college tuition for every student at the same time, or pay for national health care system, or “maybe” fund one year of the War on Terror.
All that was missing was a free unicorn for everyone and brown cows that give chocolate milk.
The $1,000 for every household for 10 years adds up to $1.2 trillion, which leaves nothing for the free tuition plan.
National health care expenses between private and government sources totaled $3.2 trillion in 2015, so that math is a little short, too.
As for “maybe” paying for a year of the War on Terror, the fiscal year 2018 budget for overseas combat operations is about $71 billion.
Much of the ire over the tax bill flows from the reduction of the corporate tax rate from 35 percent, currently the highest in the world, to 20 percent.
Lost in the furor is the fact that despite having the highest corporate rate in the world, the revenue from that source accounts for only about 11 percent of total tax receipts. In fact, collections from the corporate tax through the first 10 months of the 2017 fiscal year were just $232 billion compared to $273 billion in the same period of 2015.
Looking back at the history of the corporate tax rate, every time it has been reduced there has been an increase in GDP in the following years.
Under tax reductions championed by President John F. Kennedy, the corporate rate was cut from 52 percent to 50 percent in 1963. GDP growth went from 4.3 percent in 1963 to 5.6 percent in 1964.
It was reduced again from 50 percent to 48 percent in 1965, and growth increased to 6.2 percent.
From 1963-66, despite the cut in rate, the percent of revenue from corporate taxes increased from 20.3 percent to 23 percent.
A year later, the rate went up from 48 percent to 52.8 percent in 1967, and growth slowed from 6.3 percent in 1966 to 2.5 percent.
After GDP growth slowed to 0.2 percent by 1969, the corporate rate was returned to 48 percent in 1971 and growth increased to 5.2 percent and 5.6 percent, respectively, in 1972 and 1973.
When the corporate rate was cut from 40 percent to 34 percent in 1987, GDP growth increased from 3.1 percent that year to 4 percent in 1988.
Add all that up with the bonus of opening ANWR to development and a chaotic year in Congress can end with at least one promise kept to the people who handed Republicans the power to deliver on the ones they’ve been making for seven years.
Andrew Jensen can be reached at [email protected]
Posted Tuesday, December 05, 2017 - 9:41 am
Mid-June 1970: one of the most important days in my life. It rained, as I waited in-line outside a trailer in Johnson’s Trailer Court in Valdez to receive my first dispatch. That day, I received my first dispatch ticket from Laborer’s 341 business agent Jim Robinson to begin work on the Trans-Alaska Pipeline System.
At 19, I knew that beginning that day my life would never be the same. That dispatch, and others as a Teamster and a Journeyman Carpenter in Local 1281, to work on the oil pipeline opened educational opportunities I never would have dreamed of, and later brought into my world, the woman of my dreams.
At that time, I had just finished my first year at community college in Oregon, made possible by a $400 basketball scholarship and housing with the family of a former elementary school teacher.
However, after that first summer working on TAPS, with my oil pipeline paychecks in hand, I transferred to a full four-year college. That pipeline construction also drew a young woman named Donna Pyle to Alaska, who is now Alaska’s First Lady.
I now have another important date to remember: November 9, 2017. The day that all the entities needed to build the Alaska LNG Project signed the Joint Development Agreement, or JDA.
The U.S. and Chinese governments, at the highest level, vetted and deemed qualified the JDA. All five signers of the JDA have formally committed to work to monetize Alaska’s stranded natural gas.
This unique agreement differs from the past attempts to monetize Alaska’s vast resources of stranded North Slope gas.
Let me be clear, this is a non-binding agreement, as are all such agreements for projects of this size at this stage of its development and there is more work to be done to get to binding agreements by the end of 2018.
However, for the first time we have the state (as owner and builder), as well as the buyer, the investor and lender signing the agreement. President Donald Trump and President Xi Jinping —heads of the world’s two most powerful economies — witnessed and approved the signing of the JDA.
Never in the prior efforts to build an Alaska gasline have the interests been aligned like this:
• We have a federal administration focused on infrastructure and resource development; an administration that views Alaska as playing a crucial role in securing the nation’s energy dominance and in offsetting the trade deficit.
• For the first time, Alaska has a customer: China — which will be the largest consumer of liquefied natural gas LNG in the world. Cleaner air is a top priority for the Chinese government, as for Alaskans, and Alaska’s natural gas will play an important role in that effort by reducing the emissions by 80 million tons per year.
The buyer, the investor and the lender who have signed on to the Joint Development Agreement are big players.
• Sinopec, the buyer, world’s largest integrated oil and gas company and ranked the third-highest revenue-generating company by Fortune Global, which ranked Apple ninth and ExxonMobil 10th.
• China Investment Corp., the investor, ranks as the largest sovereign wealth fund at $813 billion behind Norway and Abu Dhabi respectively.
• Bank of China, the lender, as the fourth-largest bank in the world it has financed many LNG projects worldwide.
Once construction begins, the Alaska gasline will be one of the largest infrastructure projects on the continent, and it will be the biggest economic boost to the state since construction of TAPS.
It will generate between 10,000 to 12,000 construction jobs for Alaskans and up to 70,000 total jobs. It will bring $2 billion into the state economy each year over the life of the project (40-plus years). Payment for the project will come from the long-term sales of the gas.
But, more than just another boom in Alaska’s economy, it will open the door to Alaska for many underdeveloped opportunities between Alaska and Asia: direct flights to bring thousands of tourists from Asia; increased agriculture, mineral, and timber export markets as well as continued growth in seafood exports to Asia.
Finally, Alaska can go from having the highest cost of energy in the nation to the lowest. It will help other industries become economical, like mining, because it will help to lower the cost to do business.
The gasline will bring clean burning affordable energy to Alaskan homes and businesses. This gasline will mean cleaner air in the Interior. It will mean families will not have to choose between heating their homes or paying for groceries.
The gasline means thousands of jobs within 10 years; jobs that bring purpose, change lives, provide for a healthy future and fuel generations. Under the state law, 20 percent of the revenue to the state will be directed to alternative, affordable energy projects for rural Alaska.
While this is Alaska’s gasline, it has become a project of national and international significance. A big project with big players and big benefits to Alaskans. The time is now.
Bill Walker is the 10th governor of Alaska. He is running for reelection in 2018 as an independent.
Posted Wednesday, November 29, 2017 - 10:15 am
One by one, the items on Alaska’s wish list are being checked off as the first Christmas of the Trump administration nears.
With Republicans appearing to gather enough votes in the Senate to secure passage of their tax overhaul bill, we could see President Trump signing legislation that will finally open the coastal plain of the Arctic National Wildlife Refuge.
Also in December we’ll see Italian oil major Eni begin drilling exploratory wells into the federal Arctic Outer Continental Shelf from its Spy Island in state waters following the Nov. 28 approval of the plan by the Bureau of Safety and Environmental Enforcement.
On Dec. 6 in Anchorage, the National Petroleum Reserve-Alaska bids will be opened after the Interior Department made all 10.3 million acres currently available part of the annual lease sale. That will follow the third-largest amount of bids ever received in the 2016 sale and reflects the commitment of the administration to unlock Alaska’s energy potential.
A less certain but potentially major development could also be forthcoming in Southeast as Sen. Lisa Murkowski — who has shepherded the ANWR legislation through the Energy and Natural Resources Committee she chairs — used her position as chair of the Appropriations Subcommittee for the Interior to revisit the 2016 Tongass Management Plan and to repeal the confounding Roadless Rule the state has been battling in court since 2003.
That would be part of the fiscal year 2018 budget, but the uncertainty stems from the current continuing resolution funding the government expiring on Dec. 8 and the prospect of Democrats trying to leverage immigration reform for the so-called “Dreamers” into the negotiations.
No state has benefited more than Alaska under the Trump administration, but that isn’t terribly surprising considering the federal government controls two-thirds of the land and nearly all the waters off our shores.
What has been surprising is how willing leaders at the state and local level have been to squander the opportunities presented by the most friendly federal government toward Alaska seen in generations.
Gov. Bill Walker and Democrat legislators have proposed multiple increases in oil taxes and supported the stop payment on tax credits earned and owed, which has directly led to lost jobs and production.
Rep. Louise Stutes, the Fisheries Committee chair in the House and a member of the Democrat-led majority, is supporting both legislation and a ballot initiative that threatens development throughout the state of projects big and small.
Permitting the Donlin gold mine or Walker’s gas pipeline could be impossible if Stutes’ bill or the initiative passes.
While the state economy labors through a recession and has lost 3,600 high-paying jobs in the oil and gas and construction sectors — and the Republicans in Congress are attempting to lower tax burdens — the obsession with income taxes continues from Walker and the Democrats, whose best argument for one boils down to “we have to have one.”
Meanwhile in Anchorage back in August, Mayor Ethan Berkowitz held a fundraiser for Sen. Maria Cantwell, who is leading the fight against opening ANWR now after helping block it back in 2005. There were plenty of reasons for Alaska Support Industry Alliance CEO Rebecca Logan to run against Berkowitz in the April election, but raising money for an enemy of Alaska is good enough on its own.
Former Sen. Mark Begich, fortunately replaced by Dan Sullivan in 2014 as part of the GOP takeover of the Senate, also hosted the Cantwell fundraiser and donated to his former Democrat colleague.
While far friendlier to resource development than most Democrats (Begich was the lone voice in his party supporting Shell in Arctic exploration), if he decides to throw his hat into the race for governor his support of Cantwell will have to be an issue.
At least Santa won’t have any trouble figuring out whose stockings deserve a lump of coal this year.
Andrew Jensen can be reached at [email protected]
Posted Tuesday, November 21, 2017 - 9:53 am
As tax reform becomes a major focus in Washington, Congress faces a unique opportunity to fix a situation that has long favored multinational corporations at the expense of U.S. companies.
Doing so could level the playing field for American companies while also delivering an extra $1 trillion in tax revenue over the next decade.
Currently, domestic American corporations are required to pay U.S. taxes on all of their worldwide income. In a rather unfair contrast, however, multinational firms are only required to pay taxes on foreign income after their profits are brought into the United States. Unfortunately, taxation on “foreign” profits can be avoided for decades because large companies can still use the money without appearing to return it to the U.S.
It works like this: A factory in Germany makes shoes. En route to the United States, the shoes pass through a financing subsidiary in the Cayman Islands. And then the shoes are insured via another branch of the company in the Isle of Man.
Then another subsidiary in Bermuda arranges for shipment with a transportation company. And finally, the shoes are shipped for sale in the U.S. Each of these steps allows the parent company to strip away the appearance of profit in the U.S. by allocating earnings to subsidiaries in low-tax countries.
As Washington ponders tax reform, it’s time to focus on taxing the profits that corporations earn from the actual sale of their product inside America’s borders. This is the way that most U.S. states now assess taxes on corporate profits. And it’s a sensible system, because it would eliminate the ability of companies to hide taxable income via intermediaries in low-tax countries.
The idea of taxing U.S.-based sales, an approach often referred to as “Sales Factor Apportionment”, or SFA, has been gaining traction of late. It calculates a tax obligation based on the percent of a company’s sales destined for customers in the United States.
For example, a corporation sells 60 percent of its product to U.S. customers. If the company’s worldwide profit at year’s end comes to $1 billion, then $600 million (60 percent) would be taxed as U.S. income.
This “sales destination” approach would allow for a vast simplification of America’s corporate tax system, because taxable income would be determined solely by final sale in the U.S. None of the intermediate steps would be allowed to complicate or detract from the tax owed.
Multinational firms would be taxed the same as domestic U.S. companies because they could no longer hide their profits in tax haven countries. The various subsidiaries, branches, and partners used to obscure tax liability would all be considered part of the same overarching entity.
SFA could also improve America’s trade competitiveness, because domestic producers would only pay taxes on domestic sales, not exports. Conversely, foreign producers who sell goods and services in the U.S. would be required to pay taxes on their U.S. sales as the price of accessing America’s lucrative consumer market.
It’s estimated that in 2016 alone, profit-shifting through tax havens reduced U.S. corporate tax revenues by 34 percent. A destination-based tax would halt this hemorrhaging of much-needed revenues while allowing a reduction of the overall corporate tax rate
It’s time to end discrimination against domestic U.S. companies that play by the rules and don’t hide profits in tax havens. Taxing all companies based upon the profits from sales to U.S. consumers levels the playing field. Small and large corporations would all pay equally for the privilege of profiting from access to the U.S. market.
Michael Stumo is CEO of the Coalition for a Prosperous America, a bipartisan, non-profit organization representing the interests of 4.1 million households through its agricultural, manufacturing and labor members.
Posted Wednesday, November 15, 2017 - 10:06 am
There’s new math, old math and just plain crazy math, which best describes the latest formula from Sens. Berta Gardner and Tom Begich to close our fiscal gap in part by raising taxes on oil and gas a seventh time in 12 years.
While most governments around the world have offered incentives to help energy companies weather low oil prices, Alaska raised its oil taxes in 2006, 2007, 2014, 2016 and 2017 – and now talks about upping them again. To be fair, the Legislature did pass a tax credit incentive package in 2010, which turned a gas shortage in Cook Inlet into a surplus and doubled the area’s oil production while also attracting new independents to the North Slope.
Changing tax policy every year or two just doesn’t add up because it’s a destabilizing factor that makes it harder for Alaska to compete for the capital we need to fully develop our assets.
Sens. Gardner and Begich base their argument on their claim that Alaska is not receiving its “fair share” of the value of our oil and gas. The fact is Alaska has some of the highest oil taxes in the world. The fact is Alaska’s share is higher than the producers at every price point. The fact is the state gets paid even when producers are operating at a loss because it still collects royalty, property tax and income tax.
Based on the facts, one could argue that’s more than fair.
Our current oil tax policies are working, balancing Alaska’s “fair share” with the needs of the industry to create a viable operating environment for the companies to do business.
Oil production has risen the past two years for the first time in a decade, even though 2016 was a rough year to be in the oil business. The industry cut its spending by 44 percent, laying off 3,600 workers and letting drilling rigs sit idle. The state expects another increase in production this fiscal year, even if oil prices don’t rise significantly.
In a Preliminary 2017 Fall Production Forecast report recently presented to the House Finance Committee, Paul Decker and Ed King from the Department of Natural Resources point to the efforts of Alaska’s producers for the increased output, saying they “outperformed expectations, doing more with less.”
That’s a lesson the state should learn.
And in its Fall 2017 Preliminary Revenue Forecast Presentation, the state Department of Revenue reported that petroleum revenue is projected to represent 70 percent to 72 percent of the state’s unrestricted revenue in fiscal years 2018 and 2019, up from 65 percent in fiscal year 2017, an increase tied to projected increases in production and oil prices.
It should be noted that these production increases come not from the giant new oil finds on the North Slope but mainly from existing fields, primarily Prudhoe Bay and Alpine. The billions of barrels of oil still in the ground need billions more in new capital before they can leave the ground.
The solution to increasing Alaska’s revenues is not tipping the scales by piling more taxes on an already lean and still struggling industry. As we’ve seen under past oil tax regimes, increased taxes on the industry does not equal increased production. Instead, we saw years of decreased production when oil prices were sky high. In fact, Alaska was the only state to lose production when oil topped $100 per barrel.
We must maintain stable policies, encourage investment and put more oil into our pipeline. That’s how we increase much-needed revenues for Alaska.
We hope our elected officials will recognize the long-term effects of their actions, take steps to ensure a healthy and stable operating environment and recognize that the best way to increase revenues for Alaska is to get more oil in the pipeline. Threatening our resource industry with increasing taxes is not productive.
More oil is the answer — but to get more oil, we need more investment.
Gail Phillips is a former Speaker of the Alaska House of Representatives and current board member of KEEP Alaska Competitive, a group that aims to encourage oil industry investment and discourage higher oil taxes.
Posted Wednesday, November 08, 2017 - 10:23 am
A year ago to the day from this writing, Donald Trump defeated Hillary Clinton in a political upset for the ages that both Democrats and Republicans are still trying to come to grips with.
The infighting between Republican ranks of the establishment put off by Trump’s brash nature versus the voters who put them all in power is rivaled only by the Democrats’ self-immolation over the still ongoing Wednesday-morning quarterbacking about how Clinton blew what was supposed to be an easy win and recent revelations about primary-rigging and the Russian “collusion” that are leading not to the White House but to the Democratic campaign apparatus instead.
While there was immediate hope within Alaska at the realization that the federal government would get its boot off the state’s neck after eight years of strangulation by the Obama administration, nobody could have predicted just how greatly Trump would focus on unlocking the state’s resources.
This December, the entire available area of the National Petroleum Reserve-Alaska of nearly 12 million acres will be up for bid in a lease sale.
Around that same time, Congress should be passing a tax reform bill through budget reconciliation that will finally open the coastal plain of the Arctic National Wildlife Refuge to development as was intended nearly 40 years ago when that area was set aside for its vast potential.
After the much-publicized $7 billion failure of Shell to explore its Arctic offshore leases, Eni and Hilcorp are quietly advancing plans to produce oil from federal waters of the Outer Continental Shelf from manmade islands.
Regular order has been restored to the permitting process for the Pebble mine, whose owners have finally released a plan for a scaled-down version of the project with an assurance it will finally get a fair hearing.
Right now, Gov. Bill Walker is the only state executive traveling with Trump on his trip to Asia, and the president has dotted his administration with Alaskans in some of the most important positions.
Trump has recognized Alaska’s strategic national security importance, and just sought another $4 billion for a new missile defense site at Fort Greely.
He put Alaskans in charge of the nation’s fisheries, its on and offshore minerals, the Environmental Protection Agency Region 10 covering the state and made Tara Sweeney the first Alaska Native woman appointed to a confirmation-level post as the Assistant Secretary of the Interior for Indian Affairs.
The road from King Cove to Cold Bay looks surer to become a reality than it ever has, and while the environmental non-government organizations have howled at its recent progress, the fact an issue as relatively small as this one has caught the attention of Interior Secretary Ryan Zinke as a priority speaks volumes about Alaska’s status in the current administration.
Oh, there have been troubles along the way, as Trump has aimed his Twitter ire at our senior Sen. Lisa Murkowski over her reticence to go along with a rushed process on repealing Obamacare that even included an alleged threat from Zinke in a beef that was quickly squashed.
Even on that front, earlier this year the state received an “innovation waiver” under Obamacare that allowed the federal government to fund the state’s reinsurance program in lieu of larger premium support payments. The move makes Alaska likely the only state in the nation in line to see insurance premiums fall next year.
Thanksgiving is still a couple weeks away, but it’s never too early to be glad for where the state stands now compared the wasteland it would have been under a President Hillary Clinton.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, November 08, 2017 - 10:23 am
Alaskans could be forgiven for feeling like Phil Connors, the TV weatherman played by Bill Murray in the movie Groundhog Day, when it comes to the state’s response to the ongoing budget crisis.
The Legislature is once again back in session to consider Gov. Bill Walker’s proposal to impose a 1.5 percent tax on the wages of Alaskans earning $75,000 or more a year.
This is the second year in a row that Walker, an independent, has proposed the adoption of an income tax to cover at least part of the annual budget shortfall. Despite his protests that the proposal is really a “head tax,” a tax on income is an income tax, plain and simple.
Legislators by now must be feeling like weatherman Connors themselves — doomed to wake in a city that is not their home and repeat the same debate about how to cover the cost of state services, and run headlong into the same deadlock with their colleagues over which Alaskans should pay more for those services — over and over again.
Two years of constant in-fighting, failure to reach compromise and the inability to pass meaningful legislation. What is the answer?
The only way to escape this time warp is for our state’s leaders to learn from past mistakes and change the behavior patterns that burdened Alaska with a $2.5 billion deficit in the first place. That means addressing the policies that result in Alaska consistently being ranked among the least attractive places in the nation to do business.
Alaska is already one of the nation’s most expensive places to live, so legislators should think twice before adding to the burden of working families. With the state limping through another year of recession with the nation’s highest jobless rate, taking a bite out of Alaskans’ take-home pay is the wrong way to revitalize the economy.
Almost two years ago, my family and I chose to leave our Alaska home to seek a more prosperous path. Burdened by the high cost of living and a recent job loss, we moved south but our hearts stayed in Alaska. It is frustrating to see the place I called home for so long, head down a path of self-destruction.
New taxes are not the answer. Taxes don’t create wealth — they simply redistribute money that someone else has earned by employing labor, creativity, and enterprise to generate value from the kinds of resources we have in abundance. As long as the size of Alaska’s economic pie continues to shrink, there will be less and less to go around, no matter how you slice it.
Instead of new taxes, what Alaska needs is a fiscal plan that restores sanity to the budget process by reducing spending and encourages investment in the state’s sizable resources.
The state’s current budget crisis is the result of low oil prices and declining North Slope production, but the fiscal situation has been made worse by years of Legislatures that failed to live within their means.
Legislators can’t set the price of oil, but they can make Alaska more competitive by enacting stable regulatory and fiscal policies designed to attract the private-sector investment necessary to harvest the billions of barrels of new oil reserves whose discovery the state has worked so hard to make possible.
The first step toward achieving this goal is to put the state’s fiscal house in order with a series of targeted cuts that bring spending down to a sustainable level. When you’re in a hole, stop digging.
Second, legislators should cap unrestricted general fund spending to ensure future legislatures don’t revert to bad habits once the price of oil rebounds.
Finally, structural changes to the $61 billion Permanent Fund would allow lawmakers to use a small portion of the investment earnings to pay for essential services. No one is suggesting we give them the keys to the piggy bank, but providing the Legislature with a reliable source of revenue to pay for truly essential state services would remove the need to tax working Alaskans while ensuring that a reasonable dividend program survives for future generations.
New revenue alone won’t close the budget gap as long as spending remains unchecked and oil production continues to decline. The Percentage of Market Value plan put forth by the Senate, though, would provide the revenue to see the state through potential shortfalls while giving new oil discoveries time to come online.
We cannot tax our way to prosperity. We can, however, make Alaska a more attractive place to invest and stay. If we continue to repeat the mistakes of the past, though, more young families will leave in droves as legislators once again engage in the same political battles about who should pay for state services.
Anne Seneca is a 25-year resident of Alaska who is currently pursuing economic opportunities in Texas. She hopes to return to Alaska with her family soon.
Posted Monday, November 06, 2017 - 2:01 pm
I read with some satisfaction — and disappointment — Senate President Pete Kelly’s recent opinion piece “The sky is not falling.” While I share his optimism regarding North Slope oil production, I am sorely disappointed that he continues to issue statements that rationalize ignoring our fiscal crisis.
I also object to President Kelly’s false claim that my administration manipulated oil revenue forecasts to justify new revenues. Nothing could be further from the truth, and I will not allow his fabrications to go unchallenged. The hard-working members of the Department of Revenue serve with integrity as they strive in good faith to solve Alaska’s fiscal crisis.
Yes, recent technological advances by North Slope producers have slowed the decline in our older fields. Exciting new developments that have been talked about for years are now close enough to reality that a modest increase in throughput in the Trans-Alaska Pipeline System is possible. I applaud the splendid work of the producers on these fronts.
The additional revenue from this production, compared to previous forecasts, could reach $500 million per year by 2026. As encouraging as this sounds, that additional revenue would only help our income keep pace with inflation. If the state continues to provide the same services it does now, when adjusted for modest inflation, we’ll continue to see annual budget deficits similar to what we have today.
Sen. Kelly noted, “The Senate will support new revenues only when it is proven to be in the best interest of Alaskans as a whole, not just their government.”
Here’s where President Kelly and I agree: We have now reached that point where it is in Alaska’s interest to diversify our revenue stream. The benefits Alaskans would gain from stable and sustainable state services outweigh the cost of a small additional tax.
As President Kelly knows, nearly 50 percent of the state operating budget goes directly to local communities. In his community’s case, this includes a portion of education funding in the Fairbanks-North Star Borough, law enforcement and school debt reimbursement for the Fairbanks area, University of Alaska Fairbanks funding, health care for those in the Interior, safe roads in the area, and more. These are all critical services that support Alaskans, not their government. But they cannot be maintained with our current revenue.
The legislature has already made significant reductions to state spending. These budget cuts — from $7.8 billion in 2013 to $4.3 billion this year — impact every department and every Alaskan. Smart cuts will continue and efficiencies will be found, but the truth is that the fat my administration inherited is largely gone: muscle and bone are now at risk.
While denying our fiscal reality, those in the Legislature who oppose any new revenue have spent down $14 billion in savings, with nothing to show for it. We could have funded the state’s deferred maintenance many times over with that money, yet some still refuse to act.
Nearly all legislators agree that a Permanent Fund restructuring that protects the fund and preserves a dividend is an essential part of the fiscal solution. But that alone won’t get us to a balanced budget.
President Kelly acknowledges this deficit, yet feels additional revenues are unnecessary. His claims are based on overly optimistic assumptions of revenue growth and unrealistically static expenditures for years to come.
Our savings are all but gone. Credit rating agencies continue to downgrade our borrowing ability. Billions of dollars in deferred maintenance are going unfunded. We simply can’t count on improbable outcomes; there’s too much at stake.
My administration’s small revenue proposal is reasonable fiscal policy, and will still leave Alaskans as the lowest-taxed Americans. It also ties Alaska’s budget to the state’s economy, so that when growth occurs, we can collect the additional revenue needed to provide the roads, schools, troopers, and other services new jobs and people require.
Moreover, for the first time, nonresidents — who make up about 20 percent of our workforce — will finally start contributing to the cost of essential services they use.
No, the sky isn’t falling, not even close. Alaska is strong, and we have world-class resources and enviable assets set aside for just this moment. The combination of wise use of our Permanent Fund with a small and limited new revenue source can put us back on the path to prosperity. To those who propose to do nothing, I say that Alaskans deserve results, not rhetoric; solutions, not slogans. The time to act is now.
Gov. Bill Walker, an independent, is the 11th governor of Alaska.
Posted Friday, November 03, 2017 - 9:33 am
About a week ago, Alaskans received some outstanding news. North Slope oil production is forecast to rise for a third consecutive year. Since 1988 was the last time this happened, it’s worth stepping back to take in the larger picture.
Because Alaska gets the bulk of its revenue from oil, increased production means the state has a lot more money in its future than the Gov. Bill Walker has been telling us. It also means Alaskans chose wisely when they voted to keep in place the oil tax reform known as SB 21 — but that’s a topic for another day.
Remember, it was just last March when Gov. Walker and the House Democrat Majority were desperate to justify an income tax. The Walker administration told us to expect a 12 percent decline in oil production this year that would result in a catastrophic loss of revenue.
As it turns out, we have a two percent increase. So, what unforeseen economic event accounts for this 14 percent turnaround? The answer is, nothing. It appears the sky-is-falling projection was never justified. Doomsday scenarios were useful, however, to the Walker administration as they worked to rationalize a tax and spend agenda.
Last year, when we in the Republican-led Senate Majority were confronted with Walker’s projections, they just didn’t make sense and our Finance Committee pushed back. After all, we had just experienced two years of increases after decades of declines.
In addition, there was a barrage of good news about huge discoveries on the North Slope. Even though we didn’t have exact numbers, the anecdotal evidence was mounting, and it suggested the administration’s production estimates were nonsense.
Ultimately, Walker’s officials admitted their numbers were “stale,” and the Senate told them to sharpen their pencils and provide us with more realistic information. About a week later, they came back and their new projections showed only a four percent decline. It was still off by about $600 million gross, but at least in the realm of reality.
This all happened in an environment where Gov. Walker and the House Democrat Majority envisioned an Alaska IRS system under which working Alaskans would write a second check on April 15. The Senate said, “No.” As a result, we were dragged into multiple special sessions as the governor and political left sought to wear down the Senate’s resistance.
During this time, we were told repeatedly to “do our job”, but apparently what that really meant was “capitulate!” And do it quickly before anyone calculates the math.
When the governor began talking about another special session on taxes in October, the Senate told him he needed to provide accurate oil production numbers before we would engage in any discussions about revenue.
To the governor’s credit, the new numbers didn’t help his position, but he delivered them anyway. It is these new oil production estimates that show a two percent increase instead of a 12 percent decline. That 14 percent change represents nearly an additional $1.5 billion circulating in our economy.
The Senate does not believe our fiscal problems are over. However, these new oil production estimates suggest we may be dealing with a difficult but manageable problem, not a dire crisis.
The Senate has repeatedly found that our reserves, if prudently managed, will earn enough investment income to fund government and ultimately close the fiscal gap without taxing Alaska’s wage earners. Our plan does not rely on draconian cuts, nor does it wipe out our budget reserves. It does, however, envision a state spending limit and continued downward budget pressure to reduce the size, scope and intrusiveness of government.
Gov. Walker and the House Democrat Majority labor under the false impression that the Senate will act counter to the best interests of Alaskans after we have been sufficiently leveraged, worn down or cajoled. The governor can drag us back to Juneau, ad nauseam, and the leftists can pin every government ill on us, but it simply won’t work.
Here’s the deal: in the last two years, senators have spent more than a year living in Juneau hotels and sleeping in rented beds, but we will not be more easily leveraged just because we are tired. We won’t be leveraged because we’re unpopular with the bureaucracy, either.
The Senate will support new revenues only when it is proven to be in the best interest of Alaskans as whole, not just their government.
Sen. Pete Kelly, a Republican from Fairbanks, is President of the Alaska State Senate.
Posted Wednesday, November 01, 2017 - 12:06 pm
Alaska needs to repeal Senate Bill 91. I say this as a former supporter of the bill. I even co-sponsored it. I fully believed in the bill. I don’t believe in it anymore.
Senate Bill 91 has failed — and ever since its passage I have watched my neighbors and fellow Alaskans suffer as crime has increased, seemingly without end. We need to start over.
We got it wrong and we need to say so. If we don’t acknowledge it’s broken, we won’t be able to fix it. The good intentions of Senate Bill 91, and the results seen in other states, are meaningless if Alaskans are not safe. We need to recognize the law failed us and has hurt Alaskans, families, and businesses. The public has lost its trust in our criminal justice system, and repealing this law is the first step to gain it back.
When I was growing up in Turnagain, my parents left the front door unlocked for friends and neighbors. Today those same friends and neighbors tell me they no longer feel safe in their homes. With unprecedented levels of car theft and other crimes, we’ve lost the sense that our community is a safe place to live.
The first step toward feeling safe in our communities is a full repeal of Senate Bill 91. Here’s why.
Those on the front lines of public safety — our police — tell us they no longer have the tools in law to keep us safe. Decreasing sentences under Senate Bill 91 was supposed to provide for rehabilitation and other alternatives for offenders that would prevent crime. That isn’t happening. Alaskans are frustrated and angry to see thieves walk away from crime scenes with merely a citation.
The wholesale rewrite of our criminal statutes happened during an economic recession and drug epidemic in Alaska. Our criminal justice system is overwhelmed and not able to keep up with rapid changes required by Senate Bill 91. Lowering sentences, a new bail schedule, and changes to probation and parole have created confusion around our efforts to improve public safety.
Since the passage of Senate Bill 91, Alaska’s crime rates have spiked. According to crime data collected by the FBI, Alaska jumped from being 25th in the country in burglary to 14th. For larceny, we went from 13th to second. In property crime, we’ve gone from 17th in the nation to third. Alaska is in the top 15 in every category of crime for the first time in our history — just since Senate Bill 91 passed.
Some fervent supporters of Senate Bill 91 say that crime has been increasing for years and that Senate Bill 91 isn’t to blame. But this isn’t quite true. According to the Department of Public Safety’s Crime in Alaska 2016 report, over the last 15 years, the trends for larceny, burglary, and vehicle thefts were down — until last year, when Senate Bill 91 was signed into law.
All categories showed sharp spikes upward in 2016. In fact, except for murder, crime rates in all offenses increased in 2016.
Naturally, Alaskans don’t want a knee-jerk reaction to public policy, and neither do I. Repealing the law, and reviewing the provisions that we agree can work one by one, is the best way to restart this process. We need continue thoughtful, focused dialogue with the Legislature and the public. However, that conversation needs to begin by listening to those of you who have been affected by Senate Bill 91.
Right now, criminals are emboldened, and law-abiding Alaskans have lost our sense of safety. We need to send a clear message. We owe it to our communities to repeal Senate Bill 91 and start over.
Senator Costello serves as the Chair of the Senate Labor and Commerce Committee and a member of the Senate Judiciary Committee. She is a graduate of West High, Harvard University and has a Master of Art in Teaching from the University of Alaska Southeast. She has served West Anchorage in the Legislature since 2011.