Posted Friday, October 20, 2017 - 1:53 pm
We’re optimistic that our Alaska Legislature will be able to not only strengthen the course of criminal justice reform by passing SB 54, but also address our state’s fiscal crisis in the upcoming special session in Juneau. Here’s why:
Legislators and all Alaskans should be careful not to get so wrapped up in the ongoing debates over taxes, state spending and crime sprees, that we all miss the very real connection between our economy and the overall health of our state.
It’s really that simple. And it’s really that serious. Which is why we have hope and confidence that the Legislature and governor will work together toward fiscal compromise when they convene in special session Oct. 23.
Think about it. You would not buy a house until you know the interest rate on the loan, until you know the property tax bill. You would not invest in a business until you knew what the balance sheet looked like, both profit and loss. You would not construct a new building or expand your business until you knew the economic health of the community.
That’s the problem in Alaska today: Investors, whether oil and gas companies or real estate or mining or tourism or retail, are not confident that the state has a fiscal plan. They worry that they will start writing checks, only to see the state change the economics underlying their business plan.
Fiscal uncertainty can kill private investment, or at least wound it. We need stability. We need to show investors we are willing to help pay our own way.
We’re not losing jobs in Alaska because of one line or another in the state budget. We’re not losing private investment dollars because we talk about using Permanent Fund earnings to help provide public services. And we’re not ruining our future by considering broad-based revenues, as some irresponsibly claim.
The truth is, all those bad things — job losses, investor reluctance and a shaky economic future — are because we’re not doing enough.
The governor’s proposal for a flat wage tax is not perfect. No legislation ever is, and certainly no tax is ever popular. But it is an opportunity for debate, amendment, compromise and ultimately passage of a fiscal plan that doesn’t rely solely on one commodity.
The Alaska Legislature has recently shown it can work together on tough issues; they hammered out a budget comprise earlier this year which avoided a government shutdown; they came together in the spirit of compromise to eliminate unaffordable cash payments to oil companies and passed HB 111; and, they approved a capital budget in one day without taking per diem to get the job done.
Like many Alaskans across the political spectrum, we were supportive of the 2016 criminal justice reform bill. But we knew it would not solve all our problems and we support constructive changes in current legislation on the table this month. We know the opioid epidemic has contributed to the public safety crisis that has hurt so many families and communities.
We also know that we need sustainable funding for law enforcement, prosecutors and mental health services. And we absolutely must address the chronic shortage of rehabilitation beds. Finally, we acknowledge that addressing these public health and safety crises will require an investment of financial resources.
Now more than ever we need our lawmakers to come together and focus on our state’s economy and a safer Alaska. If we do nothing, if we fail to put the state on a path toward sustainable finances, if we miss another opportunity to build a stronger Alaska… we just give businesses, investors and the public another reason, another year, to put their money, and their future, elsewhere.
Our focus should be on a stronger, economically healthy state for decades into the future.
It’s not a matter of who wins or loses or who pledges to defend a political line in the sand or who stands strongest against any given issue. It’s a matter of compromise, working together and finding an acceptable solution that can give certainty to 735,000 Alaskans.
Mike Navarre is the outgoing mayor of the Kenai Peninsula Borough and Jim Matherly is the mayor of Fairbanks.
Posted Wednesday, October 18, 2017 - 12:38 pm
After President Barack Obama used Congressional intransigence as an excuse to upend the separation of powers spelled out in the Constitution, President Donald Trump is using the same reason to restore it.
Not once, not twice, but more than two dozen times, Obama told audiences and interviewers that the Constitution did not allow him to use an executive order to change the immigration status of millions of people brought to the country illegally as children.
Congress refused to pass the DREAM Act, and Obama proceeded to violate his previous claims by issuing an executive order to create the Deferred Action for Childhood Arrivals, or DACA, program, which granted legal status to those who claimed their parents brought them to the United States illegally as children.
A group of state attorneys general promptly sued and a federal district court judge issued an injunction against continued implementation of DACA.
In another case, once the Republican Party took full control of Congress following the 2014 midterm elections it refused to appropriate funds for the Cost Sharing Reduction payments under the Affordable Care Act also known as Obamacare.
Obama’s administration ignored the lack of authorization and continued sending the payments to insurance companies, which led to an unprecedented lawsuit in which the House of Representatives was granted standing to sue the president.
Again, a federal district court judge decided that Obama’s actions were outside the bounds of the Constitution and ruled the payments illegal without an appropriation from Congress. The judge stayed her own ruling as the appeal was processed, and Trump continued to make the payments on a month-to-month basis after inheriting the lawsuit from Obama’s Justice Department as he waited on the GOP to deliver on seven years of promises to repeal and replace Obamacare.
Now, by giving the DACA program an expiration date less than six months away and turning off the illegal CSR payments as of Oct. 13, Trump is forcing Congress to work rather than continue to rely on unconstitutional actions by the executive branch.
Few sights are more amusing lately than watching the unhinged left that has spent every day since Jan. 20 declaring Trump either a tyrant or one in the making now demand that he continue Obama’s acts that have been declared unconstitutional by federal courts.
Just days after Trump announced an end to the CSR payments, Senate Health, Education, Labor and Pensions Committee Chair Lamar Alexander, R-Tenn., and ranking Democrat Sen. Patty Murray announced the outline of a deal that would restore the payments with an actual appropriation from Congress and create more flexibility for states through block granting the funds and expediting the Section 1332 waiver process.
The 1332 “innovation waivers” under the Affordable Care Act allow states to create programs suited to their needs and allow federal funding for them so long as they are deficit neutral.
Alaska received one of the first such waivers earlier this year after creating a reinsurance program in 2016 as Premera Blue Cross Blue Shield, its lone remaining insurer serving the individual market, was considering rate hikes of as much as 42 percent for 2017 after increases of nearly 40 percent in the previous two years that shot the state’s premiums to the highest in the country at nearly $1,000 per month for a silver plan.
Using an existing fee structure on every insurance policy sold in the state, the state directed $55 million to offset the costs of the few dozen high-cost customers in the small individual pool, which led to a much smaller rate increase of 7 percent this year.
The cost of premium support tax credits that go to about 90 percent of the individual pool dropped dramatically. The 1332 waiver will now allow money that would have gone to premium support to flow to the reinsurance program — with savings for both the state and federal government — and the end result being Alaska is likely the only state in the country to not see a rate hike in 2018. In fact, Premera’s rates will drop by more than 21 percent.
Alaska’s premiums will still rank highest in the nation, but at least there was some progress and it is a good thing that the HELP Committee, of which Sen. Lisa Murkowski is a member, heard from Alaska Division of Insurance Director Lori Wing-Heier about how the state’s return to isolating its high-risk pool from generally healthier customers helped lower costs.
The fate of the Alexander-Murray proposal is far from certain, but having a Democrat of Murray’s stature on board is precisely the outcome that Murkowski has been clamoring for and one that wouldn’t have happened had Trump not returned to constitutional order and forced Congress to do its job by ending the illegal CSR payments.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, October 18, 2017 - 12:38 pm
In a recent class action lawsuit against Ticketmaster, the court ordered the company to pay out $42 million over four years, and no less than $10.5 million per year to consumers.
However, the reality of what consumers actually received is detailed in a New York Times article entitled, “Why You Probably Won’t Get to Use Your Ticketmaster Vouchers.”
Outlined in the article is the fine print of the settlement including the difficulty consumers have in actually receiving any remuneration.
The author of the article notes, “How and when those vouchers can be used has befuddled people, and confusion has only grown since Ticketmaster released $5 million worth of free tickets this week. Those tickets were quickly claimed, leaving most people unable to redeem their vouchers and feeling pretty irritated.” Such a measly payout to those who actually deserve to be made whole is not an uncommon result for class action litigation.
For credit union members, the results of class-action litigation are even worse because it essentially means that the resources of all of that credit union’s members are moved to a small pool of members (or even non-members), with plaintiffs’ attorneys taking their cut in-between.
At a credit union, each member with an account is also an owner: an owner that has pooled his or her resources with fellow owners. This means all the financial resources of the credit union is money that belongs to all its members. Therefore, members are directly affected by any negative monetary impact, especially regarding any costly legal matters.
Yet, the Consumer Financial Protection Bureau, or CFPB, is taking away the ability to limit class action litigation. In what’s known widely in Washington as the arbitration rule, the claim from supporters is that arbitration harms consumers and that class-action litigation is the consumer-friendly ideal. Unfortunately, even the agency’s own research does not support this rhetoric championed by the trial bar.
Instead, it shows that 87 percent of putative class actions resulted in zero class-wide recovery and that of the 13 percent of class actions that did settle on a class-wide settlement, a weighted average of only 4 percent of consumers in those cases received any monetary recovery at all.
According to the CFPB’s own study, the average payout for the few consumers who actually recover something is about $32 while the average plaintiffs’ lawyer pockets $1 million. In arbitration, however, consumers recover $5,389 on average. The CFPB’s study also shows that the average time frame for arbitration is two to seven months while the average class action suit takes one to two years to complete. It is quite unclear how padding the pockets of trial lawyers improves the financial situation of most Alaskans.
Credit unions are the go-to financial institution for a majority of Alaskans. There are several reasons for this, including the fact that credit unions are known for excellent customer service and their personal relationships with their members, which means disputes between credit unions and their member-owners are rare.
However, should a dispute between a credit union and a member arise, the credit union’s structure as a not-for-profit, member-owned financial cooperative provides numerous ways to quickly and amicably resolve the dispute. While credit unions are less likely to enforce an arbitration clause, it can be an important resource to protect the equity built by and owned by the credit union’s members.
A rule banning the ability to use arbitration doesn’t make sense for any credit union member across this state. Thankfully, there’s a chance we can avoid any negative impact.
The House of Representatives disapproved of this anti-arbitration rule and the Senate has the chance to do the same. Unfortunately, more Washington-based groups, many representing the interest of trial lawyers, are putting pressure on our senators to back the anti-arbitration rule, and we couldn’t disagree with them more on this matter.
As the original protectors of consumer’s finances, credit unions believe this rule has the potential to hurt more Alaskans than it protects.
Dan McCue is the senior vice president, corporate administration, for Alaska USA Federal Credit Union.
Posted Thursday, October 05, 2017 - 3:28 pm
Creating wealth unfortunately doesn't just happen; rather, it’s a function of having a "can do" spirit, working hard, being smart and sometimes even a little luck comes into play.
We don't have to look very far, only to Seattle, to see the negative consequences of what happens when government places a local income tax on individuals. The reaction was swift and severe. Amazon’s founder and chairman, Jeff Bezos, announced that his company — which from 2010 through 2016 provided $38 billion to Seattle’s economy — plans to open Amazon HQ2, a second company headquarters in North America. Amazon is now asking other cities and states across the nation to submit their proposals to home HQ2.
One city’s mistake could be Alaska’s gain.
Amazon’s proposal for the initial investment for their new headquarters is $5 billion. This would create more than 50,000 jobs averaging wages of more than $100,000 a year in the first five to 10 years.
Amazon has stated that the criteria for selecting a location would be a metropolitan area with more than one million people, a stable and business-friendly environment (we need to work on this), urban or suburban locations with the potential to attract and retain strong technical talent.
Why Alaska? While no one city or metropolitan area has all the attributes that Amazon is seeking, Alaska offers a diverse workforce, a geographically strategic position in the world, quality schools, an international airport that is a cargo crossroad of the world and best of all, a place of majestic beauty, quality lifestyles and an abundance of outdoor activities that their "millennial workforce" demographic appreciates and values.
Landing Amazon HQ2 would be a prize for anyone. But for Alaska, it would be a home run that would play a huge role in diversifying our economy. The economic activity would shore up home prices, spur construction, generate new businesses to service Amazon and their employees, and substantially grow the property tax base of local governments.
Unfortunately, while many other states and municipalities across the country are scrambling to get in front of Amazon, Alaska's political hierarchy seems content to let this opportunity pass them by.
I'm sure the left will criticize my advocacy for wealth creation, screaming the need for more taxes. To them I say, "we can't tax ourselves into prosperity." Yes, taxes are a necessity to fund government; however, energizing the private sector and insuring its well-being, especially during a time of economic decline and uncertainty, is prudent. I realize that the politics of such are tricky. But that’s not a reason to not try. Just like there’s no reason not to try to lure Amazon to Alaska.
I think its time that we change the narrative from more taxes to focusing more on economic opportunities, resource development, growing our tourism market and the many other opportunities that are out there. This requires vision and hard work. Its time our elected officials start working with the private sector to grow the economy and create wealth. This will ensure that future generations have even better opportunities and benefits from this great state that we have experienced.
Can we get Amazon's HQ2 to Alaska? We'll never know if we don't try. If nothing else, it would be a good exercise in taking inventory and evaluating Alaska’s business climate. It could also serve to pull us together as a state, to remind us of what we have and what we are capable of. Alaskans deserve vision from our elected officials. We need leaders who look to other areas to see what’s worked and what hasn’t worked. Amazon’s announcement is proof that businesses want tax stability. We should heed that lesson for current and future businesses in Alaska, and we should strive for more.
Curtis W. Thayer is lifelong Alaskan and serves as president and CEO of the Alaska Chamber.
Posted Wednesday, October 04, 2017 - 12:15 pm
The Arctic National Wildlife Refuge is the largest wildlife refuge in America.
Spanning more than 19 million acres, it’s an area larger than 10 U.S. states. This vast expanse is home to caribou, fox, bears, and dozens of other species.
Much of that land is also home to the Native Iñupiat, and our people have utilized the resources it has blessed us with for more than 10,000 years. One type of those natural resources lies beneath this great land — oil and gas — and lots of it.
The debate over opening ANWR to drilling gained headway nationally in 1980, when President Jimmy Carter set aside less than 8 percent of the refuge for potential oil and gas development. This section of ANWR became known as the 1002 area, after a section of the Alaska National Interest Lands Conservation Act.
Since then, Alaskans and the oil and gas industry have fought unsuccessfully to open the 1002 area to drilling, which literally requires an act of Congress. At the same time, Lower 48 lawmakers, special interest groups across the country, folks and organizations around the world have waged war on the idea citing the disruption of wildlife and the pristine Arctic environment.
As ANWR debates occur, the views of the Iñupiat who call the area home are often times left out. The wishes of the people who live in and around the refuge’s coastal plain are frequently drowned out by people who live hundreds and even thousands of miles away. Many of whom have never bothered to set foot anywhere near the Arctic. Well, today is a new day.
Voice of the Arctic Iñupiat, an organization with 21 members from across the Arctic Slope region — including members from Kaktovik located inside ANWR — have voted unanimously to pass a resolution supporting oil and gas development in the 1002 area.
This is an unprecedented show of unity from the community leaders of the North Slope, those who live in and around the coastal plain of the Refuge, and should send a very clear message to America: we support the development of a portion of the coastal plain of ANWR.
My fellow Iñupiat and I firmly believe in a social license to operate, and perhaps no other potential project in the history of America has called for such a blessing from local indigenous peoples more than this one.
When oil was first discovered on our land in 1969, the Iñupiat were worried of industry activities and fought hard for self-determination in order to protect our subsistence resources. So, we fully understand the trepidation from outsiders; the fear that the presence of industry on the coastal plains of ANWR could disrupt wildlife and affect America’s manufactured perspective of our land and culture.
However, we also have the benefit of decades of experience working with the oil and gas industry to implement stringent regulations to protect our lands, and the industry has consistently lived up to our standards. Prudhoe Bay, the largest oil field on the continent located 60 miles to the west of the coastal plain of ANWR, has demonstrated for four decades that resource development and ecological preservation can and do coexist in the Arctic.
The 1002 area of ANWR resides in our backyard and is entirely within our homeland, which gives the Iñupiat a unique perspective in the debate to allow drilling there.
The oil and gas industry supports our communities by providing jobs, business opportunities and infrastructure investments; and has built our schools, hospitals and provided other basic services most Americans may take for granted.
Our region recognizes its importance to our local and state economy, and we believe that development can be done responsibly in a portion of the 1002 area. We are not alone.
Over the past 35 years, the Alaska State Legislature has consistently passed resolution after resolution supporting the opening of ANWR to drilling. During that same time period, each Alaska congressional delegate and every single Alaska governor has supported responsible development of the 1002 area.
More recently, in January, Senator Lisa Murkowski introduced Senate Bill 49 — the Alaska Oil and Gas Production Act — which would allow development of 2,000 surface acres in the refuge’s coastal plain. This proposed legislation served as the catalyst for the Iñupiat people coming together to make an informed, united decision on whether or not to support drilling in ANWR.
As Iñupiat, we stand to be unarguably the most affected by oil and gas activity in the Arctic. Therefore, we have the greatest stake in seeing that any and all development is done in a manner that keeps our land and subsistence resources safe. We know it can be done, because it’s already being done.
Now is the time to open ANWR to drilling.
Matthew Rexford is the president of Kaktovik Iñupiat Corp.
Posted Tuesday, October 03, 2017 - 3:51 pm
Crime is on the rise. We’ve been hearing a lot from Alaskans about their cabins, cars, shops, and homes being broken into. People feel scared and that fear is warranted. The crime statistics confirm what we have been hearing in all of our Alaska communities.
As Alaska’s Attorney General and commissioner of Public Safety, public safety is our highest concern. We agree action is needed to protect Alaskans. Passing Senate Bill 54 during the special session is an important first step in this direction.
A number of factors contribute to our public safety problem. The foremost issues are the opioid epidemic and the fiscal crisis. Demands on our public safety resources have gone up while budgets to fight these problems have gone down.
We need to solve our fiscal crisis to ensure that the state has the resources available to address public safety. Ignoring our fiscal crisis will leave us with an inability to keep Alaskans safe.
We also need to ensure that our criminal laws establish appropriate sanctions to prevent and punish criminal acts. Enacted just over a year ago, Senate Bill 91 comprehensively reformed our criminal justice system by changing the classification and sentences for a number of crimes, adding pretrial and probation services, and focusing on rehabilitation of criminals and treatment for those with substance abuse problems.
SB 91 also increased the mandatory minimum sentences for murder in the first degree from 20 years to 30 years and murder in the second degree from 10 years to 15 years.
Based on evidence and positive experience of other states, SB 91 brought proven solutions to bear on the upward trend of crime and recidivism in Alaska. To be clear, the majority of changes brought by SB 91 are reforms that we support.
Prior to it, we saw the number of inmates growing faster than the facilities we had to house them, and two out of three inmates returned to jail within three years of release.
Our justice system clearly was in need of an overhaul. But criminal justice reform will need time – and resources – to bear fruit. For example, starting in January, the state will begin using a new risk assessment tool to assess individuals before they are released on bail.
The Department of Corrections will deploy 60 new officers to monitor defendants on bail. Additional substance abuse and mental health resources will soon come on line.
SB 91 is good policy. Yet, while SB 91 holds promise, as with any comprehensive overhaul, we knew adjustments would be needed. While the rise in violent crime preceded SB 91, the recent increase in larceny and vehicle thefts appears to correspond to certain changes made by the bill.
Feedback from courts, law enforcement, and prosecutors confirms that we need to adjust the tools available to judges to deter those crimes. Last session, SB 54 was introduced to correct some of these outstanding issues with SB 91, and these changes are intended to support the overall effectiveness of this criminal justice reform effort.
The governor added SB 54 to the special session this fall. We believe passing SB 54 is an essential step in addressing public safety. It gives courts more discretion to tailor appropriate sentences for repeat theft offenders and for first time Class C felonies. Under Alaska law, Class C felonies encompass a wide array of criminal conduct, including pointing a gun at someone, vehicle theft, causing a riot, and low level drug trafficking, to name a few.
It also returns violating a condition of release to a crime punishable by jail time. These are three issues that we’ve heard a lot about. We believe that these changes will help to deter offenders and provide tools to encourage offenders addicted to opioids and other illegal drugs to seek treatment.
This bill responds to the very concerns voiced by Alaskans, and representatives from both law enforcement and prosecutors testified in support of the bill before it passed the Senate. It now needs to pass the House, and be signed into law.
Passing SB 54 is one step, but it’s not the only step. Governor Walker also tasked us with putting together a comprehensive public safety action plan with steps the state can take to improve public safety around the state. This plan will soon be unveiled. We will continue to communicate and engage across state, federal, municipal, and tribal lines to make sure that we’re actively working to improve public safety at all levels.
Everyone deserves the right to feel safe in their neighborhoods and communities. To all Alaskans: please know that we are listening to your concerns. Public safety is our number one priority.
Jahna Lindemuth is the Attorney General of the State of Alaska. Walt Monegan is the Commissioner of the Alaska Department of Public Safety.
Posted Wednesday, September 27, 2017 - 12:11 pm
This summer, observers across the nation watched as lawmakers in the state of Alaska pulled together a buzzer-beating compromise that prevented a potentially catastrophic budget shutdown and kept the government funded through the coming fiscal year.
For countless Alaskans who simply wanted their government to continue to operate, the compromise is a win. The alternative — an unprecedented shutdown — would have been untenable, resulting in significant upheaval for Alaskans seeking to utilize programs ranging from fishery permitting to cruise ship oversight to early education and Head Start services.
For political and policy junkies, it was a budget showdown that checked nearly every box, complete with flaring tempers, bruised egos, high stakes, and the discussion of policy shifts that could send ripples through the economic landscape for years to come.
This is particularly true in the case of the oil and gas industry, a sector that is looking at increased taxes in the eye in Alaska while simultaneously facing extremely challenging market conditions across the nation and around the world.
On the heels of a massive surge in domestic production driven by advances in extraction technology and finds from the Bakken to the Marcellus, fortunes have changed somewhat for the American oil and gas sector.
Prices have fallen steadily in recent years, hovering around $47 per barrel, and analysts expect the price to remain in the $40 to $60 range for the next five years. The cost of producing a barrel of oil is also increasing alongside advances in extraction technology, with companies pursuing projects that are riskier, more difficult to access, and ultimately more expensive.
The oil and gas industry is strong, and no one will mistake it for a struggling mom-and-pop operation. But these are no longer the boom times of the early 2010s – margins are thinner, profits are lower, and the challenges on the horizon are greater than they have been in some time.
As the fight continues in Alaska, it’s essential that lawmakers keep these facts about the energy market landscape in mind as they debate their course of action, and that they focus squarely on reducing government spending in ways that won’t cut the legs out from under the state’s economy over the long term.
The compromise measure includes language convening a special task force of legislators and advisors charged with consideration of additional changes to the overall tax system. The panel, once appointed, will make recommendations for additional tax changes in the coming legislative session. For oil and gas companies still struggling to adjust to a tax structure that has shifted significantly on a nearly annual basis in recent years, the prospect of even more change — and more uncertainty — is troubling and would represent an added hurdle for companies seeking to limit the risk inherent to the capital-intensive business of oil and gas development.
This should be a source of serious concern for Alaskans, because the oil and gas industry’s outlook is extremely important to the state. No other industry is more heavily integrated into the state’s economy, with 35 percent of all wages and well over 100,000 jobs tied up in the oil business in 2016, according to a McDowell Group report. The sector also poured $2.1 billion into the state government via taxes and royalties in 2016.
Higher taxes, like those under debate in Alaska, would only add to the challenges the industry faces.
Such changes may sound insignificant, but the fact of the matter is that tax policy — and policy uncertainty in general — matters a great deal to companies choosing where to explore or where to invest their billions. Caelus delayed a major Alaska project this summer, for instance, citing tax uncertainty among the motivating pressures that led them away from their development schedule.
In a state where the latest jobs report showed 7,500 lost jobs in the last year, with the deepest losses concentrated in the oil business, this should raise red flags.
If Alaska continues to focus its policy efforts not on spending cuts and instead on harmful oil tax hikes, more companies like Caelus will rethink their investments. And if other states or jurisdictions consider similarly harmful policy in this market environment, the industry will likely be forced to contract there, too.
Even amid low crude oil prices and a difficult market, the oil industry employs 10 million Americans and serves as a pivotal engine for economic growth. We simply can’t afford to let bad policy — in Alaska or anywhere else — add to the challenges faced by one of our nation’s most important job creators.
Dr. Margo Thorning is the senior economic policy advisor with the American Council for Capital Formation in Washington, D.C.
Posted Wednesday, September 27, 2017 - 10:58 am
Gov. Bill Walker appears to have not learned his lesson when calling a special session.
After the Legislature went all 121 days it was allowed this year without producing a budget or a way to pay for it, Walker called a special session with a loaded agenda that proved a recipe for disaster as the divided House and Senate exerted their respective leverage over the various pieces and it ended after 30 days at the same stalemate.
Now with a government shutdown looming, Walker called another special session with one agenda item: the operating budget. With no leverage over each other and an understanding of the consequences of not passing a budget by June 30, the House and Senate were finally able to agree on something and accomplished their one constitutionally-mandated task.
After the operating budget was agreed upon June 22, Walker added a second item to the session: ending the cashable credit program for North Slope explorers and small producers.
Again, with one item to consider and with both sides understanding the need to end a program with a $1 billion liability to the state budget, the House and Senate eventually agreed to kill the program retroactively to the start of the current fiscal year on July 1.
By this point the per diem counters were running and the public anger was growing over legislators collecting thousands of dollars per day while only a handful were actually involved in the heavy lifting of negotiation.
Acknowledging that anger, Walker declared he would not call a third special session until a capital budget bill was ready to pass. Like the limited call of the second session, with one thing to work on the House and Senate leaders finalized a deal and were able to come to order for a single day and pass it.
With the fourth special session of the year now set to begin Oct. 23, Walker has set himself up for another failure.
The agenda is limited to just two items, neither of which is the use of Permanent Fund earnings to cover the budget deficit that have passed in some form by both the House and Senate in the last two years.
Instead of putting a version of one of those bills on the call, Walker chose instead to introduce an income tax that will effectively end the Permanent Fund Dividend and create two classes of Alaskans: those who get one and those who don’t.
This proposal — unlike his veto to set the PFD at $1,000 in 2016 or the Legislature’s decision to set it at $1,100 this year — is the real fundamental change because Alaskans are no longer treated equally as the program intended.
What Walker is pitching is that the PFD be reduced by half from what it would be under the current statutory formula and the remaining half would be taxed away from those making more than $75,000 per year.
Quite simply, some Alaskan income earners would get a PFD and some would not, which transforms it from an equal distribution into a welfare program.
The governor can cite spending cuts until he turns blue in defense of his tax plan, yet he cannot point to any structural changes in how state government works to make his pitch because none have happened.
When the state’s largest public employee union contract was negotiated over the past year, Walker’s administration didn’t even achieve bare minimums of a wage freeze or a health plan contribution that resembles the private sector.
The Senate Majority, which has stood fast against any income tax, did not outright reject Walker’s proposal but President Pete Kelly did make a reasonable request for a realistic oil production and revenue forecast.
Currently, the production forecast for this fiscal year is just 459,000 barrels per day that no one believes yet hasn’t been officially revised and isn’t required to be until December.
North Slope production is now tracking even with last year when 529,000 barrels per day flowed through the pipeline in the second straight year of growth after annual declines in every year but 2002 since the peak of 1988.
Through the first 25 days of September, production for the month is averaging 508,000 barrels per day compared to 474,000 barrels per day in the same month a year ago. Prices are also rebounding, which combined with production and the success of the financial managers at the Permanent Fund changes the state fiscal picture greatly.
If the goal is to get something done, Walker’s special session call makes no sense. If the goal is to set up an election that will feature class warfare between those who want an income tax and those who don’t it will be a smashing success.
Andrew Jensen can be reached at [email protected]
Posted Monday, September 18, 2017 - 10:37 am
The rumors swirling around about yet another special legislative session devoted to a broad-based tax are both troubling and wrong. This whole narrative, concept and belief coming out of Juneau that “we can tax ourselves into prosperity” is a shortsighted plan that in the long term is simply not sustainable.
Alaska is a wonderful state with abundant resources, vast amounts of wide-open spaces, pristine water and a global position of strategic and geographic importance. Instead of talking about taxes, new taxes and more taxes that will likely cause our economy to further constrict, we should be talking about plans, opportunities and incentives to create new wealth. New wealth, not more taxes, is the only real answer to our state’s fiscal woes.
We’ve just experienced back-to-back special sessions that mark 2017 as the year with the most legislative days since statehood and not one of them was spent discussing a vision of hope and prosperity.
The concept of wealth creation was never even discussed let alone put on the table. Government seems to suck the creativity and entrepreneurial spirit out of the best of our elected officials. That’s too bad. Because, now more than ever, we need big thinkers with the courage and vision to cut a sustainable path for our state’s economy and treasury by creating new wealth.
New wealth can come in a variety of ways and from different sectors. Let’s talk about how to expedite getting the newfound North Slope oil into the pipeline and to market. Let’s talk about what will it take to increase the activity in our oil fields — such as honoring our commitments on tax credits, create some tax stability, and truly being a committed and reliable partner.
Let’s talk about new and creative ways to expand and make more of our tourism — we have so much more to offer than being just a “bucket list” destination. We also need to talk about our other natural resources — mining, fishing, and forestry and growing these sectors for the benefit of all Alaskans.
It’s time to wake up, roll up our sleeves and help develop the many opportunities right under our noses.
To continue the narrative about taxes, new taxes and more taxes without talking about capitalizing on new economic opportunities is a disservice to the working men and women of Alaska and to our future generations.
Some say we have a fiscal crisis, I say we have a fiscal challenge. I believe that the challenge is manageable and presents opportunity. With the right vision and desire, Alaska’s best days are still ahead of us. Our government needs to start thinking more like the private sector. It needs to learn how to live within its means and how to create new opportunity and wealth. It also means that sensible planning is a necessary element of success.
Senseless, conflicting goals need to better be vetted and thought through.
Our elected officials are good men and women. They just need to realize that we are facing a new dawn, with new challenges that require new, maybe outside the box thinking and innovative solutions.
They need to realize that we can’t tax ourselves into prosperity and instead we need to focus on creating a better, more prosperous Alaska by finding the means to creating new wealth.
Alaskans are a resilient people and are willing to meet challenges head on, overcome them and build a better economy for tomorrow and future generations. Together, we can create new wealth that will fill our state treasury, provide profits for our businesses while providing good meaningful jobs for our working men and women.
It’s time to change the narrative from one focused on taxes to one that is sustainable and create new wealth for Alaska.
Curtis Thayer is the president and CEO of the Alaska Chamber.
Posted Wednesday, September 06, 2017 - 12:19 pm
The first step to solving a problem is admitting one exists.
Alaska education officials have finally crossed that threshold after releasing the results from math, science and English tests administered this past spring to more than 70,000 students across the state in grades 3 through 10.
The outcomes were shockingly poor.
Fewer than 15 percent of 10th graders statewide scored proficient in math; for English only 38.4 percent scored proficient or better. More disturbing still is looking at the bar charts that show a steady decline in proficiency from grade 3 to grade 10.
In math, 44.5 percent of third graders scored proficient or better. That’s not great, but it is a starting point for improvement. Instead there is a steady path downward at every grade level before bottoming out at 14.7 percent in grade 10.
“We have to be dissatisfied with the current results,” said Alaska Education Commissioner Michael Johnson.
Anchorage School District Superintendent Deena Bishop was even more blunt.
“Our scores stink,” she told KTUU.
If anything, she understated the situation for the state’s largest local school system.
In the ASD, just 12.2 percent of 10th graders scored proficient in math and a miniscule 2.2 percent as advanced. One in four 10th graders were far below proficient and another 60 percent were below proficient.
In English, a whopping 38.3 percent of ASD 10th graders scored far below proficient while just less than one in three scored as proficient or advanced.
There can be no pointing to an urban-rural divide in outcomes for the state education system when the district with every advantage possible is failing in such epic fashion.
Back in February, Herb Schroeder, the founder of the wildly successful Alaska Native Science and Engineering Program, released a study that tracks with the poor results of the state testing by showing that more than half of incoming freshmen from state high schools require at least one remedial course in math or English.
In one particularly ugly data set, Schroeder found that 74 percent of students from five high schools ranging in size and location required remediation despite graduating with an average GPA of 3.16.
What that means is students who qualified for state performance scholarships were unprepared for basic college work.
At the time, many superintendents faulted his study. None should dare question his conclusions now.
Schroeder has since estimated that the cost of remediation between students and the state pushes $42 million per year. Considering the state spends more than $1.3 billion per year on education, it is often paying twice to educate students.
A state with budget deficits topping $2 billion per year cannot afford to spend this much money on a failing system; what it can afford even less is to continue churning out unprepared students.
The state doesn’t need another task force or committee to find solutions. It needs a single mission: To teach English, math and science first, second and last.
Fluffy social science, arts and expensive extracurricular activities must take a backseat to the old fashioned basics. There is no alternative.
The solution is surely not what is found on the ASD website under guidance for parents about state exams that advises: “Encourage your child. Praise him/her for the things they do well. If your child feels confident, he/she will likely do their best on a test.”
This kind of touchy-feely nonsense that has plagued our education system for decades has got to stop. “Feeling confident” is not how to pass a test. Confidence flows from preparation, not from empty praise.
Another thing that has to stop is the misguided focus on graduation rates.
Graduating is obviously important, but it is the academic equivalent of the participation trophy if the end result is merely passing students through the system without educating them.
Schroeder has built the ANSEP success from the middle school level up by ensuring students are not only prepared to enter college, but prepared to excel. That hasn’t happened by lowering standards and social promotion.
A total overhaul must start now for an education system that is crippling our next generation.
Andrew Jensen can be reached at [email protected]
Posted Tuesday, August 22, 2017 - 8:34 pm
From being Hitler to being a Russian tool and now back to being a Nazi, President Donald Trump has come full circle.
For the left and the media, although that is redundant, nothing feels so comfortable as returning to their safe space governed by Godwin’s Law.
“Why do Nazis like you?” one bylined operative yelled at the president on Aug. 15.
“Do you support the Confederacy?” asked another, who presumably had a credential that wasn’t signed in crayon.
The media works itself into a frothy rage daily over Trump, but its members were in a particular frenzy this day over his latest high crime and misdemeanor of blaming both sides for engaging in violence in Charlottesville.
For eight years the press was sent swooning over President Barack Obama and his love of nuance such as citing the Crusades a thousand years ago as a reason to not “get on our high horse” about the unending radical Islamic terrorism of today.
The left adores this kinds of nuance. Just get into a conversation with one of its members about the implications of widespread radical Islamic terrorism and be assured of a counter in the next breath with something about abortion clinic bombings that have a cumulative death toll of less than the Barcelona attack just last week.
Trump’s sin wasn’t failing to condemn white supremacists harshly enough. His sin was noting the political violence that is practiced, perfected and preferred by the left.
Let’s just be real. Nothing Trump said that Saturday after Charlottesville would be acceptable to the media and the left, and anything he said would be used against him.
In other words, the narrative has been set. The media just fills in the stories like Mad Libs.
Sens. Dan Sullivan and Lisa Murkowski, along with pretty much every other Republican, then jumped at the chance for their cameos in a storyline that’s been running longer than The Simpsons entitled “Republicans are Nazis.”
Both their statements accused the president of not going far enough in denouncing the white supremacists, with Murkowski bizarrely equating the group that took to the streets armed with makeshift tear gas, clubs and bags of urine as standing up to hate.
Just how far do you have to go to denounce white supremacists and Nazis? The entire premise of the question is insulting and Republicans should treat it with the disdain it deserves instead of issuing plaintive statements about “I hate Nazis times infinity!”
Where have Sullivan and Murkowski been for the last year? Surely they have at least heard of a movement oxy-moronically known as “antifa” (anti-fascist) that has been wreaking havoc from city to city with near-impunity attacking anyone and everyone its members find guilty of “hate speech.”
This didn’t start in Charlottesville, and it isn’t going to end there either. The entire political establishment and the left declaring antifa the good guys just standing up to Nazis lessens the chances of it ending anytime soon.
Taking sides with antifa against the Nazis is like taking sides in the Bloods versus the Crips or the Hatfields versus the McCoys.
Antifa has already been emboldened by its success shutting down conservative speakers, destroying property and assaulting anyone in a Make America Great Again hat all the while flouting laws prohibiting the wearing of masks in public that were originally passed to confront the Ku Klux Klan.
Just two months ago, a radicalized Bernie Sanders supporter shot up a baseball field full of Murkowski’s and Sullivan’s fellow Republicans and somehow it is still a problem for Trump to condemn violence on the left as well as the right.
Instead of competing over who can say they hate Nazis the most, it would be nice of senators from a freedom-loving state to stand up for the First Amendment.
Larry Flynt, 2 Live Crew and the KKK are not the people you would invite to dinner, but those are the ones who have had to go to court defended by the likes of the American Civil Liberties Union to protect their First Amendment rights.
The First Amendment doesn’t exist to protect Big Bird and the Smothers Brothers.
With narrow exceptions, the First Amendment has been construed absolutely. One person’s standard of offense cannot be used to prohibit speech by another, and though politicians of both parties have often sought to limit various speech based on their own standards they have not prevailed over the Constitution.
We are a nation of rights and of laws, or we are nothing at all.
Descending into a nation of mob rule against political opposition is where antifa wants to take us. Anyone who has been watching knows they have a pretty wide definition of who is a Nazi, and Murkowski and Sullivan are probably already on the list.
After all, they’re Republicans.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, August 09, 2017 - 12:05 pm
North Korea recently launched a missile that appears to be capable of hitting targets in the U.S. mainland, including Chicago. Pyongyang says that Washington should regard the launch as a “grave warning.”
No argument there.
This sobering development comes years earlier than many experts had predicted. The upshot: The U.S. policy of “strategic patience” — waiting for North Korean dictator Kim Jong Un to come to his senses and the bargaining table — is officially over.
President Donald Trump needs a far more muscular policy than his predecessor’s, pronto. What will that be?
So far, there’s been talk of shooting down North Korean test missiles as a warning. But that could provoke Pyongyang to rain massive conventional retaliation on Seoul. Bad sequence.
There’s been smarter talk of amping up the U.S. cyber campaign to send the North Korean missile program into a tailspin, much as the U.S. did against Iran’s nascent nuclear program. But we hope that effort is already happening.
And the U.S. also is moving to impose economic sanctions against Chinese banks and businesses for trading with North Korea. Let’s hope there is much more of that to come.
What hasn’t worked yet: haranguing China, Pyongyang’s major trading partner and ally, to do more to rein in the outlaw Kim regime. As President Trump rightly tweeted about China, “they do NOTHING for us with North Korea, just talk.”
Cut to America’s recent display of military prowess: Two supersonic B-1 bombers streaked over the Korean peninsula as part of a joint exercise with Japan and South Korea. U.S. forces also demonstrated the effectiveness of the Terminal High Altitude Area Defense system (THAAD), which detected, tracked and intercepted a medium-range ballistic missile launched from Alaska.
All this posturing is directed not only at Kim Jong Un, but also the leaders of China and their “What, us worry?” attitude.
The last thing China wants is U.S. supersonic bombers roaring close to its borders.
The last thing China wants is a potent demonstration of how the U.S. can knock down missiles before they reach the American mainland.
The last thing China wants is Japan and South Korea seriously mulling whether they should go nuclear to defend themselves. Both countries are believed to be capable of jump-starting a nuclear program on short notice. At the moment, however, both countries rely on U.S. nuclear deterrence for their security.
The big question: Can North Korea be deterred, just as the Soviet Union and China were?
In other words, do the North Koreans believe that the U.S. will retaliate, possibly with nukes, if North Korea attacks Japan or Seoul? The greater the doubt, the greater the risk that North Korea will make a first strike.
All of this is unsettling and happening in China’s neighborhood. And as any businessman will tell you, rising tensions and threats of war aren’t good for business.
China has a choice. It can help defuse the situation by choking off its energy trade with North Korea. It can make Kim Jong Un and his elites go without their favorite cognac and fancy cars. China can yank hard on the North’s economic lifeline and help inform average North Korean citizens that they could live far better lives without the Kim regime and its brand of leader-take-all communism. Just look south.
Beijing, the choice is yours. Every North Korean missile launch brings confrontation closer.
Posted Wednesday, August 02, 2017 - 12:13 pm
Senate Republicans have set the bar pretty high for achievements in failure.
By bungling their attempt to repeal or replace Obamacare, they accomplished the impossible: they now own a law that none of them voted for in the first place and in fact campaigned for seven years to scrap.
Of course there is a sound argument to be made that Sens. Lisa Murkowski, Susan Collins and John McCain have indeed voted for Obamacare by casting the decisive votes to kill the “skinny repeal” bill and derailing a conference committee process to reconcile with the bill passed earlier this year by the House of Representatives.
Bizarrely, some Republican members of the Senate are now asking President Donald Trump to continue bailing out the disastrous legislation by maintaining the payments to insurance companies that were ruled unconstitutional by a federal judge in May 2016.
In an unprecedented case, the U.S. House successfully sued the Obama administration for making the billions worth of payments annually despite the fact there was no congressional appropriation to do so.
Expecting an appeal, the judge who found in favor of the House argument stayed her order pending resolution of the case, which allowed President Barack Obama to continue sending the unauthorized cash to insurance companies in cost-sharing reimbursements, or CSRs.
Trump has held off on the appeal and kept up the CSRs despite their dubious legal status since he took office while giving Congress a chance to deliver on the promises made since voters handed them the majority in the House in 2010, the Senate in 2014 and the White House in 2016.
But now he is threatening to stop the payments and let one of the greatest flaws in the law take effect instead of papering over the problem by shoveling billions more in taxpayer and borrowed dollars out the door.
Ever since Obamacare passed in March 2010 there have been multiple waivers and delays of its worst features to cover up just how bad it is. The GOP was even complicit in this in 2015 when the party voted to delay implementation of the so-called “Cadillac tax” on expensive health insurance policies that would sweep up virtually every union plan in the country and is vehemently opposed by labor groups.
All of the “popular” parts of Obamacare — Medicaid expansion, coverage of preexisting conditions, staying on a parent’s policy until age 26 — were allowed to take effect immediately while the worst parts were put off as states got hooked on the federal sugar.
Having fallen on their faces trying to repeal or replace Obamacare and lacking the political will to actually appropriate funds for the CSRs, Trump is being set up as the fall guy by his party if he doesn’t keep up the payments that very same party successfully sued to stop.
The other threat Trump has made is to reverse Obama’s decision through the Office of Personnel Management to classify Congress as a “small business” despite its 20,000 employees. That OPM action allowed the federal government to keep contributing 72 percent of congressional employee premiums despite the fact individuals on the exchanges are otherwise not allowed to receive such benefits.
Obamacare has been held together through a patchwork of carveouts, bailouts and handouts, executive orders and illegal payments all designed to mislead the public about its costs and negative impacts.
If the only way to spur Congress to act is to allow those negative impacts to take place then so be it, and sooner rather than later.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, July 26, 2017 - 12:17 pm
Alaska has less oil production than California and a credit rating just better than Illinois and New Jersey, yet 51 incumbents will run for reelection next year with at least one of them seeking a promotion.
A day after this column goes to press, the Legislature will meet for a day in Juneau to pass the capital budget that — like everything else its members did or didn’t do this session — should have been finished three months ago.
The self-congratulatory back-patting is nauseating.
Instead of passing a bill both sides agreed upon to use Permanent Fund earnings in a sustainable fashion to cover part of the budget, the Legislature burned through another $2.5 billion from the Constitutional Budget Reserve.
Instead of passing an increase in the motor fuels tax to fund transportation projects and address a growing backlog of deferred maintenance — again, that both sides agreed to — they did nothing and pulled the money from the general fund.
Instead of beginning to settle the hundreds of millions in unpaid liabilities owed to small oil companies that already spent the money in good faith, the Legislature ended the program and will stiff those companies for a third straight year after Gov. Bill Walker vetoed $630 million in payments in 2015 and 2016.
Deadbeat and do-nothing barely begins to cover it.
While much of the blame lies with the Democrat-led House Majority for dragging out the process for months in their insistence to institute a $700 million income tax on an economy in recession and double or triple oil production taxes as the industry sheds thousands of jobs, the Senate Majority and Walker can shoulder some responsibility for hanging the state’s breadwinning business out to dry.
Sure, the Senate tried to pay off about half the outstanding credit bills in its version of the capital budget but its negotiators folded like linen and are taking less than a tenth of what they proposed in the “compromise” budget set to pass July 27.
The biggest crock coming from everyone in Juneau is that the state can’t afford to pay off the tax credits. Between the Permanent Fund Earnings Reserve and what’s left in the Constitutional and Statutory budget reserves, the state has about $15 billion.
For less than 5 percent of that balance the state could pay what it owes, put this debacle behind us and restore some semblance of credibility to its self-proclaimed “partner” status with the oil business.
If the state and the oil business were partners, there would be one who does all the work and generates the company revenue while the other lazes around the office spending the money, giving itself annual raises, letting invoices pile up and demanding an ever-increasing share of the profits.
The Senate Majority can talk a good game about wanting to pay the bills, but every one of its members were fine with skipping out on the Downtown Anchorage office building they commissioned and leaving its owners on the hook for a $28 million loan and losing their $9 million cash position.
There is no squaring the circle of arguing the damage caused to small companies by holding out on tax credits owed while ignoring the financial ruin put on a pair of Anchorage real estate developers who made the mistake of relying on the signed commitments of the Legislature.
Some have and will counter that both the oil companies and the developers knew what they were getting into and should have no recourse, which is akin to the parable of the woman and the snake.
After nursing the injured snake back to health, the snake eventually bites the woman and as she’s dying of the poison she asks, “Why? I was your friend.”
“Lady, you knew I was a snake when you picked me up.”
That won’t be anyone’s campaign slogan next year, but at least it would be an honest one.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, July 19, 2017 - 1:23 pm
The only conclusion that can be drawn from watching D.C. Republicans vomit all over themselves in their pathetic efforts to repeal and replace Obamacare is that they were just as surprised as Democrats when Donald Trump defeated Hillary Clinton.
After spending the past seven years campaigning and fundraising on promises to scrap the widely unpopular law — and being rewarded with total control of all three branches of government — the GOP has found out what it’s like to be the dog that catches the car.
The destructive fallout from Obamacare isn’t the only thing that can be traced back to 2010. Just as the law laid the foundation for the Democrats’ decimation from the local to the national level over the next two midterm cycles, another event that year set the stage for the Republicans’ embarrassing self-inflicted defeat this past week in Congress.
After Joe Miller’s stunning upset of Sen. Lisa Murkowski in the Alaska Republican primary, she decided to run as a write-in candidate and eventually triumphed to seal her status in the state’s political history alongside Rep. Don Young and the late Sen. Ted Stevens as virtually untouchable.
Before refusing to support the Republican nominee, Murkowski was one of Senate Majority Leader Mitch McConnell’s favored lieutenants in his so-called “kitchen cabinet.”
Once she decided to go it alone without the party’s support, McConnell was forced to remove her from that inner circle status, although he allowed her to keep her committee seniority in a move that has paid dividends since the GOP took over the Senate in 2014 and landed her the chairmanship of Energy and Natural Resources.
Now it is clear that McConnell would have benefitted from having Murkowski’s advice, not just on the flawed process on repealing and replacing Obamacare, but general best political practices.
When the GOP took over the Senate in 2014, helped by Sen. Dan Sullivan’s defeat of Mark Begich in Alaska, Murkowski tempered her literal chair-wielding enthusiasm with the best way forward.
“If Republicans fail to govern, if we say our responsibility is just to win the next cycle, we won’t win,” she said at Sullivan’s victory party. “We will not be in charge. We will not be setting the agenda. We will not be legislating.
“We have our chance now. This is our time and if the American public doesn’t see us doing the hard work, then we’re going to be shown the exit just as the Democrats have been this cycle.”
As the unbelievable news was sinking in this past November with Trump winning and the GOP holding the Senate, barely, Murkowski echoed her 2014 comments.
“This isn’t Christmas,” she said. “We still have to govern.”
She warned early on in the repeal-and-replace process that closed-door meetings would not produce a victory, and she was proven right yet again.
Murkowski’s bipartisanship and care to craft sound policy are so rare in D.C. that she probably qualifies for an Endangered Species Act listing.
The GOP could start listening to her for a change, or the entire party is going to be on a milk carton come 2018.
Andrew Jensen can be reached at [email protected]
Posted Thursday, July 13, 2017 - 12:16 pm
If the House Democrats keep up these futile political gestures, someday they may grow up to be Congressional Republicans.
The latest last-second nonsense from the Democrats managed to top their ridiculous vote in June when they introduced — and approved with the help of half the Republican caucus — a $2,200 PFD as they stuffed the operating budget into the capital budget bill before adjourning the first special session called by Gov. Bill Walker.
Now with three days to go in the current second special session, House Democrats introduced another non-starter July 12 with their proposal to simply end net operating loss deductions for oil companies in a hopeless gambit to force the Senate to the table to rewrite the entire oil tax structure.
Once again the House Democrats look clueless about the amount of leverage they hold and reveal their claimed concern for stability in the oil industry means jack and squat.
Walker, rather than hold another press conference that says and does nothing, could put a quick end to the Democrats’ games by declaring what kind of bill he will sign.
He could simply say, “I will not sign a bill that raises taxes or cuts deductions, so don’t bother sending me one.”
There’s no chance the Senate would ever approve such a bill, but such a statement from Walker would send a strong message to the House to stop jerking around.
A couple statements at the Wednesday hearing from the House Resources co-chairs Andy Josephson and Geran Tarr were laughable.
Tarr repeatedly said that the Constitutional Budget Reserve is empty because it will be drawn down to about $2 billion after covering the deficit for the 2018 fiscal year.
Setting aside her definition of “empty” regarding the state’s cash flow, what she never mentioned is that the $2.5 billion CBR draw wouldn’t have happened if the House had agreed to pass a bill to use the Permanent Fund earnings to help fund the budget.
Instead, just like ending the cashable oil credits, the House demanded a $700 million income tax and killed a necessary fiscal reform on which both sides agree in their quixotic quest for new and higher taxes.
As an argument for ending the net operating loss deductions with a deadline to compel action for a replacement system, Josephson said the Legislature does its Christmas shopping on Christmas Eve.
In case he hasn’t noticed, the Legislature is currently doing its Christmas shopping in March because the House has sabotaged the areas where there is agreement by making demands where there is none.
If House Democrats truly believe the public is on their side when it comes to instituting an income tax and raising taxes on oil, by all means run 51 state races next year on that platform and see how that goes.
The Democrats have a twisted idea of what compromise means. To them it means “give us everything we want or we’ll kill the deal.” An actual compromise would be both sides setting aside what they can’t get and taking what they both want.
For the state budget situation, a sustainable draw on the Permanent Fund earnings and an end to cashable credits are both huge accomplishments for which both sides could take credit.
But the Democrats would apparently rather keep accruing cash liabilities of $1 million per day in their attempt to squeeze $50 million out of the oil industry, and use the CBR instead of the Fund earnings because they can’t have an income tax.
The Democrats’ tax proposals would make the current recession worse, and their refusal to act on the areas of agreement are doing the same to the state budget.
Senate Republicans can run circles around the House Majority all day. It’s time for Walker to step up and tell the Democrats to stop wasting everyone’s time and money.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, July 12, 2017 - 1:25 pm
We have to end unaffordable oil company cash subsidies that are estimated to cost the state $1.5 billion over the next ten years. Some legislative leaders say they will only end those unaffordable subsidies during this Special Session if we “replace” them with new subsidies that cost Alaskans almost as much.
Through press statements, they’ve offered to replace $1.5 billion in cash payments by the state with a $1.45 billion reduction the state receives in oil company tax payments. They also want a separate $10 million per year reduction in already meager oil company production tax payments to Alaskans.
There’s a path to meaningful compromise and closing our deficit. This isn’t it.
Progress in politics requires legislators to put down their ideological swords. And it means special interests, including our partners in the oil industry, need to truly chip in so a deficit solution is fair to all, and not just the loudest, wealthiest interests.
Politics, when it works, requires ideological purists to put on their adult clothes. Most, but often not all, legislators recognize that.
Last week our Republican-led Senate told the press they will only end unaffordable oil company subsidies if we adopt almost equally unaffordable new oil company subsidies in their place.
That might be great for our oil industry partners, but it’s not great for you. It doesn’t materially reduce a crippling deficit that’s harming our economy, nearly drained our savings, and that’s making Alaskans feel insecure in their jobs.
Our House Majority Coalition of Independents, Democrats and Republicans came together this year out of a deep concern that prior legislatures have let annual $2.5 billion to $3 billion deficits fester, while draining our once healthy savings.
The reality our House Coalition recognizes, and has to keep recognizing, is that the public also elected a Republican-led Senate.
Our House Coalition passed a modest 25% tax on oil company profits, so we can receive fair revenue. We ended unaffordable subsidies. The House bill would reduce Alaska’s deficit by roughly $1.5 billion to $2 billion over the next ten years. It intentionally recognizes that a fair deficit fix can’t just rest on the backs of those with little privilege, little wealth, and no lobbyists.
This House Coalition plan didn’t meet with Senate approval, and we all have to keep working to find common ground. But common ground isn’t leaving the deficit unsolved, and our economy in peril.
Solving our budget deficit is now a math problem. A solution doesn’t leave lots of room for people to stand on ideological purity. Fair oil reform has to be part of a needed deficit reduction plan, in part because there is no source of revenue, on its own, that can solve a $2.5 billion to $3 billion deficit in a state that has largely run out of savings. We cannot afford a current oil tax system that taxes most oil fields in Alaska at either a 0% or meager 4% oil production tax.
Currently the oil tax rate in North Dakota is 250% higher than Alaska’s, and Conoco calls North Dakota a good place to do business. Additionally, North Dakota oil royalty payments are about double Alaska’s oil royalties. So let’s drop the soundbite that Alaska, with its vast oil resources, is somehow a bad place to do business.
Statesmen and stateswomen can bridge differences.
Both sides agree $1.5 billion in oil company cash subsidies over the next ten years are unaffordable. Let’s focus on that area of agreement. The House has offered a compromise to eliminate the $1.5 billion in poorly crafted, unaffordable oil company cash subsidies. Legislators can join and do what we can agree upon now.
Let’s agree to work this summer and fall, with oil consultants we’ve recently hired, to fix the rest of our oil tax system so that a full solution can be passed when session starts in January. And let’s fully fix our deficit.
I want an Alaska people believe in, where people want to raise their families. Haggling over ways to NOT solve our deficit is going to drive away the Alaskans we need to teach our children, care for our seniors and build a better state.
Rep. Les Gara is an Anchorage Democrat and Vice Chair of the House Finance Committee
Posted Wednesday, July 12, 2017 - 1:22 pm
A compromise to end cash payments to oil companies is on thin ice because of the propaganda perpetuated by Anchorage Representative Les Gara and the politics of the House Democrats. The oil and gas industry has always been Gara’s favorite target, and he’s launched a fresh campaign to hold hostage a compromise on cashable credits that will save Alaska a million dollars per day.
For the past decade, the state has offered tax credit incentives to new explorers on the North Slope for developing new fields and to small companies. The state offers to buy back these tax credits in cash, if these companies do not produce oil in Alaska.
The program worked, breathing new life into Cook Inlet and the North Slope. These incentives and a fair, competitive tax have drawn new companies to explore, develop and produce more oil. The larger, established companies like BP, Conoco, Hilcorp and Exxon are not eligible for cash credits.
Legislators and the Governor acknowledge the state can no longer afford cash payments for tax credits. They’ve been volleying versions of bills to end these payments for months.
Rep. Gara and his cohorts are telling Alaskans that the Senate proposal, backed by Gov. Walker, is a sham that simply replaces a credit today with deductions tomorrow, costing the state the same in the long run.
This is where Gara’s fish tale becomes dangerous misinformation. Cash credits and tax deductions are not the same. Oil companies can only use the tax deductions if they produce oil. We all know that many exploration projects never produce a drop of oil so deductions from those projects will never be applied to an oil company’s state tax bill. In exchange for eliminating these cash credits, the Senate Majority suggests that these explorers be able to deduct their exploration expenses against future profits. Gara calls this a sham.
Tax structures all over the world allow business to deduct their legitimate operating expenses and they allow companies to apply losses from their bad years against earnings from their profitable years. Gara again calls this a subsidy to the oil companies.
So why would Rep. Gara push his cohorts in the Democratic House Majority to refuse a compromise that will end these credits? Could it be that he smells the opportunity to slip a significant tax increase into the same bill and skin some more hide off the industry?
What Rep. Gara does not say is that there is little, if any, company profit left to tax. With oil around $45 per barrel, the state takes 77 percent of the sale value of a barrel of oil; the federal government takes 12 percent, leaving the taxpayer, the oil companies, with 11 percent. In fact, at all oil prices from very low to very high, Alaska takes more from a barrel of oil, than the companies who invest the capital and take the risk. Now Gara wants to raise these taxes again so Alaska gets its “fair share.” That’s ridiculous.
More oil in the pipeline is critical for Alaska, and we must fix our sights securely on that prize. With higher production come jobs for Alaskans, new money circulating through the economy and tax revenue to the state. New revenues from higher oil production go into the Alaska Permanent Fund, including the annual PFD.
The current oil tax system works. Alaska is collecting more tax revenue at today’s low prices than we would have under the previous system. Companies are now investing in the North Slope fields, resulting in increased production of three percent in fiscal years 2016 and 2017.
Gara’s House majority held Alaska hostage all session, demanding an income tax and excessive new taxes on the oil industry in return for passing things they actually agree on, namely: reducing cash credits, passing an operating budget, passing a capital budget and developing a long term fiscal plan.
Rep. Gara’s rhetoric isn’t new. He’s been at this for years now; he mangles the facts and conjures up sound bites that prey on people’s genuine concerns for children, schools, families and our seniors.
It’s time to do what’s right for Alaska, to quit playing games with the facts, fix the cash credits problem and pass a capital budget.
Hal Ingalls is the president of Denali Drilling.
Posted Monday, July 03, 2017 - 1:55 pm
What’s been obvious for several months became official on June 30.
The 2017 fiscal year ended with a final average of 528,484 barrels per day of production on the North Slope.
That is a 2.6 percent increase versus the 514,900 barrels per day last fiscal year, or virtually identical to the 2016 increase in production from 501,500 barrels per day in 2015.
To put this in perspective, the last time the state saw consecutive years of production increases was in 1987-88 when North Slope production peaked at more than 2.1 million barrels per day.
This would be a remarkable story in any circumstance given the number of early obituaries that have been written for North Slope production and the Trans-Alaska Pipeline System, but it is even more so considering the price environment and the ongoing attacks on the industry from Democrats in Juneau.
North Slope crude averaged barely more than the breakeven point at less than $50 per barrel for the fiscal year and the House Majority continues to demand tax increases on production despite the proof of the current policy’s success staring them in the face from the Department of Revenue’s daily reports.
The House Democrats want to double the effective tax rate at the current price, triple it should prices reach $70 per barrel, reduce deductions and eliminate the proven per-barrel incentive.
The per-barrel production incentive is the only explanation why companies have continued to invest billions on the North Slope even after prices started to free fall not long after Senate Bill 21 took effect.
They have certainly not seen the upside from the reduction in progressivity at high prices under SB 21; to the contrary they have paid far more in taxes than they would have had ACES remained in place.
Under ACES they wouldn’t be paying any production taxes at the current price. In fact, they wouldn’t be paying production taxes until prices went past $63 per barrel.
Because SB 21 taxes oil at a higher rate than ACES at low prices, the companies have taken the only tool at their disposal to reduce the effective tax rate: more production.
Every additional barrel brings down the effective tax rate. It’s that simple, and it is a win-win for the producers and the state, which collects both the tax revenue and the additional royalty share.
But never let a good fact get in the way of a Democrat argument.
SB 21, which took effect Jan. 1, 2014, has now been in place for three full fiscal years.
Since fiscal year 2013, the last full year of ACES, production has declined by a barely-measurable 0.6 percent overall (531,600 barrels per day to 528,400).
That is an average annual decline rate of just 0.2 percent.
The average annual decline rate during six years of ACES was 5 percent, or 2,500 percent greater than under SB 21.
Math — the Democrats’ kryptonite — tells a staggering story when comparing where we’d be under the ACES decline rate versus SB 21.
Had the 5 percent annual decline rate continued, fiscal year 2017 production would be 433,000 barrels per day, or about 95,500 fewer barrels per day than what we saw under SB 21.
Adding up the actual production compared to the ACES decline rate over the past four years, the state has collected tax and royalty income from an additional 75.3 million barrels; the 2017 production versus ACES decline alone is an extra 34.8 million barrels.
Democrats’ oil tax policies aren’t just bad. They are proven failures.
Andrew Jensen can be reached at [email protected]
Posted Friday, June 30, 2017 - 1:34 pm
For six months, politicians of all parties in Juneau have sung a similar song: the state can no longer afford to offer cash payments to oil and gas companies for work we’ve incentivized these companies to undertake.
These cash payments are costing the state an estimated $1 million per day through the end of 2017. That’s a lot of money — $1 million could fund seven state troopers for a year. The $200 million we’ll owe in cash payments by the end of the year could fund the entire Department of Law and Department of Public Safety — for a whole year.
Make no mistake: the incentives of cash payments and credits have worked. They spurred a renaissance in Cook Inlet oil and gas work, ending the rolling brownouts of six years ago. They’ve brought a new slate of fresh companies to the North Slope, who are exploring for the oil we’ll need to keep TAPS flowing strong.
Yet, the state can no longer afford these incentives.
Despite this year’s budget reductions, Alaska remains in a deficit. Oil prices are $6 to $10 lower going into the fiscal year starting July 1 than the state is forecasting.
We all know that when you’re in a hole, the first thing you have to do is stop digging.
And we can. There’s a simple way to end these cash payments. Let’s return to Juneau and finish the work before us. Let’s end cash payments for oil and gas companies.
The Republican-led Senate Majority extended a new offer to the Democrat-led House Majority to resolve this issue — to stop the cash bleed. We’re willing to take up a compromise bill that addresses these cash payments and tax credits.
Our offer was met with an immediate, outright rejection by the two House members negotiating this issue. The House likewise issued a flat refusal to a different proposal by Gov. Walker weeks ago.
Ending cash payments isn’t enough for them — they’re willing to walk away unless they can force a significant tax increase on oil production. But the clock is ticking, and costs are accumulating. We remain optimistic that after their full caucus thinks over the $1 million per day implications of inaction, they will reconsider our offer to act on what we agree is in the best interests of Alaska. The Senate is standing by.
Both the House and the Senate this session passed versions of a bill that would end cash payments to oil and gas companies. But, we’ve been unable to reach a final compromise.
The House Majority is holding out, refusing to end cash payments unless we in the Senate agree to increase taxes on oil production, taking even more than the 77 percent of the profit we get now. That’s right, for every barrel of oil coming out of the ground, the State of Alaska reaps 77 percent of the profit at today’s prices.
With the energy sector already losing jobs and struggling to weather global price pressures, now is precisely the wrong time to squeeze the industry that has funded our roads, schools and prisons for decades.
The Senate believes, as many Alaskans do, that the current oil tax system is working for the state’s advantage. We’re taking in more revenue under our current tax system than we would have under ACES. More small, agile companies are working in our oil patch, which means more opportunities than ever for Alaska workers, support companies, and service sectors.
While we disagree on broader changes to our oil tax regime, the House, Senate and governor do agree that we must end cash payments to oil companies. We can, and should, end this program without delay. The House Majority says they want to end these payments — we ask them to act with us to accomplish this work for the good of Alaska.
We ask the House Majority to reconsider. Politics remains the art of the possible, which requires compromise. We can only advance those issues on which we all agree — and we’ve all agreed the cash payments must end.
Sen. Pete Kelly, R-Fairbanks, is the president of the Alaska Senate.