Posted Wednesday, September 07, 2016 - 12:40 pm
The home of the Salem witch trials has birthed another effort to hang the imagined heretics, and the State of Alaska is seeking to supply the judges with the rope.
Massachusetts Attorney General Maura Healey, along with 19 other attorneys general from 17 states, the District of Columbia and the U.S. Virgin Islands, have mounted an inquest against ExxonMobil seeking as much as four decades worth of internal documents and communications with independent groups in an effort to prove the company “knew” its fossil-fuel based products were going to destroy the planet and hid the evidence.
Under the guise of consumer protection backed by the threat of law enforcement, the thin veil on this masquerade was pierced almost immediately in April through uncovered emails obtained in a Freedom of Information Act request that showed climate change activists not only colluding with the AG offices from New York and Vermont about their strategy to bury ExxonMobil under a flurry of subpoenas but to also conceal their participation in the effort.
Unbelievably, Alaska’s brand new Attorney General Jahna Lindemuth is siding with those undertaking this blatant abuse of government power.
Lindemuth joined 16 other attorneys general — nearly all from the so-called “Green 20” group who launched this effort March 29 alongside carbon footprint hypocrite and former Vice President and Al Gore — in an amicus brief filed Aug. 17 in opposition to ExxonMobil’s complaint against Healey filed in federal court that seeks to quash her crusade against the company.
ExxonMobil took its case to federal court in North Texas, where it is headquartered, alleging that the Massachusetts AG is leading an interstate effort against it rooted in no law but rather in a purely political shakedown aimed at putting the company out of business and silencing those who diverge from the Green 20’s dogmas.
Because make no mistake about it. These AGs and their supporters who sought to conceal their involvement in this case want to put ExxonMobil into the same place it drills for oil and gas: the ground.
Also make no mistake about this: The same people who Lindemuth lined up with also want to put Alaska out of business.
Oh, Lindemuth has tried to defend her action as a “states’ rights” issue in a pathetic attempt to separate the amicus brief from the underlying action against ExxonMobil, but there is no differentiating the two.
While there is certainly a sound argument to be made that an entity subject to a state inquiry shouldn’t be able to go to federal court to halt the action, that is far from the case here.
The brief cites the undisputed authority of state attorneys general to investigate “fraudulent, misleading, or deceptive practices” within their jurisdictions, but there is no squaring that circle against the bogus charges being leveled against ExxonMobil.
Attorneys general do not have the authority to use the power of their offices to pursue political advocacy or to target people and organizations with differing perspectives.
Yet that is the practice that Lindemuth is attempting to secure through her joining this case as a friend of the Massachusetts AG’s defense.
The examples cited in the brief include 46 attorneys general who successfully litigated against the tobacco industry and the 50 who joined the investigation into fraudulent mortgage practices.
Were this such an obvious states’ rights issue, it is more than a little telling that the amicus brief was joined by so few attorneys general. The refusal of more to sign on is a glaring indication that the vast majority of states’ chief law enforcement officers see this effort for the transparent sham that it is.
Other cases cited included a Toyota recall, “four nationwide sham cancer charities,” and a telecommunications company based in New Jersey that was successfully sued by the State of Texas for fraudulent promises of service.
“These joint efforts have greatly enhanced the ability of state Attorneys General to uncover and halt widespread practices that harm individuals and businesses across the nation,” according to the amicus brief.
That’s all well and good, and rooted firmly in legal precedent.
It also has absolutely nothing to do with what the Green 20 are doing to ExxonMobil.
Considering that ExxonMobil is being targeted across multiple states with AGs and judges sympathetic to the Green 20 effort, it is laughable that Lindemuth would accuse the company of “forum shopping” in her letter to House Speaker Mike Chenault and House Judiciary Chair Gabrielle LeDoux.
If ExxonMobil is to be forced to defend itself in as many as 20 courthouses around the country it is only fair play for the company to seek any advantage it can, including taking these rogue attorneys into federal court.
Lindemuth told Chenault and LeDoux that “bad facts make bad law.”
Bad lawyers make bad law, too, and allowing these AGs to debase the law for their political aims will do far more damage than stopping this injustice in its tracks.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, August 17, 2016 - 11:55 am
Much like Usain Bolt in the 100-meter dash, contests for the state Legislature in November figure to be races in name only.
What drama could be found took place on primary night and ended up decided by a tiny fraction of Alaskans even in the contested elections.
Democrats succeeded in toppling one of their top targets within their party — Rep. Bob Herron of Bethel — and Republicans did the same by taking out one of their own as George Rauscher defeated Rep. Jim Colver in the Mat-Su Valley.
The Democrats may go two-for-two in their efforts to knock off members of their party from Bush Alaska who caucus with the Republican-led Majority of the state House. Rep. Ben Nageak was leading by just nine votes against Dean Westlake with 87 percent of the vote counted as of this writing.
GOP interests failed to take out Rep. Paul Seaton of Homer, another prime target from their ranks, and saw influential members of their House delegation fail in their bids to elevate to the Senate with the losses of Reps. Lynn Gattis of Wasilla and Craig Johnson of Anchorage.
Seaton and Colver are members of the self-titled “Musk Ox” caucus that coalesced late in 2015 when the Republican leadership, frustrated with Democrats holding out votes to reach the magic 30 of 40 to draw from state savings in the Constitutional Budget Reserve, introduced a measure that would have emptied the Permanent Fund Earnings Reserve into the CBR in order to remove the requirement for a three-fourths vote to fund the budget.
The Musk Ox caucus continued to draw party ire in 2016 as they joined with Democrats on bills sharply curtailing the state’s oil and gas tax credit program, creating an embarrassing situation for House Speaker Mike Chenault, R-Nikiski, who couldn’t wrangle his majority and had to pull bills from the floor once it became apparent he didn’t have the votes.
Chenault, who served a record four terms as Speaker, is stepping down from that role although he is headed back to Juneau with no opposition either in the primary or general elections.
With only half of the body up for reelection, the Republican-dominated Senate shouldn’t look much different in 2017. That can’t be said for the House after the primary shakeups and the entry of a yet undetermined Speaker.
No matter what happens in Nageak’s race, there is a strong possibility for a bipartisan coalition of some kind that could end up controlled by Democrats, who already succeeded this year in determining votes by linking with the Musk Ox Republicans and a couple other stray members of the Majority.
The Democrat minority had 13 members last year including independent-in-name-only Dan Ortiz of Ketchikan, who will face a Republican challenger in the general election.
If Ortiz returns, Nageak loses, and other districts maintain the status quo, the Democrat caucus would number 15. The five remaining members of the Musk Ox group could create a caucus of 20, which still isn’t enough to control the House.
That would leave the Musk Ox Republicans with a choice of being a minority within their own party, or a minority among their supposed opposition party.
Seaton, who’s opposed the oil and gas tax credit program and proposed a state income tax, aligns well with the Democrats on their favorite means of closing the budget gap.
Attacking the state’s No. 1 industry and going after the state’s federal taxpayers are bad policies but make for good politics, and they also happen to jive with Gov. Bill Walker’s revenue strategies even though they’ll diverge sharply on reducing the PFD to completely close the deficit.
This is probably a good time to recall that when 10 Democrats and six Republicans formed the Bipartisan Senate Majority they passed the most bloated budgets in Alaska history from 2006-2012.
In the end, it’s difficult to tell if Alaskans even care who goes to Juneau.
The highest turnout in any district on primary night was 21 percent in Herron’s race vs. Zach Fansler, followed by 18 percent in Seaton’s race.
While it’s understandable that uncontested primaries had pathetic turnout with no statewide ballot initiatives to draw attention, seeing turnout of 15 percent to 17 percent in supposedly competitive elections in the Valley, Eagle River and South Anchorage sends a pretty clear message to legislators: We don’t give a flying you-know-what.
It’s bad enough that districts have been so gerrymandered as to render nearly every race uncompetitive. It’s worse when even in races that matter more than 8 in 10 Alaskans didn’t bother to register an opinion.
An old axiom is that we get the government we deserve, and Alaskans’ nonchalance in the face of serious times means we’re going to get it good and hard.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, July 27, 2016 - 1:14 pm
Gov. Bill Walker likes to talk about his background in construction and how much he loves building things, but so far after a little more than 18 months in office his most successful project has been demolition.
The effort to undermine and eventually dismantle the Alaska LNG Project that began within days of Walker taking office in December 2014 culminated July 22 with the official announcement that his former law partner and Attorney General Craig Richards had been signed to a $275-an-hour contract barely a month after he resigned citing personal reasons.
With his man Keith Meyer heading up the Alaska Gasline Development Corp., a compliant board of directors and a contracted legal hit team in place, Walker is ready to go it alone on the project and to war with the producers.
It is important to recall what Walker said while campaigning for the office about the Alaska LNG Project that was orchestrated under former Gov. Sean Parnell.
“I’ll follow the process in place now, you bet I will,” Walker said on Oct. 28, 2014, at an Anchorage Dowtown Rotary Club debate. “But at the first sign of delay, or someone says ‘we’re going to slow this down,’ that’s when the state needs to have a governor who understands what to do and has the guts to say, ‘we’re going to finish this project as Alaskans.’”
Having created the circumstances himself that threaten to delay the project, Walker now has what he planned for all along: a state takeover of AK LNG and a break with Alaska’s North Slope partners.
The shadowy effort to execute this plan began with Walker’s hiring of Jim Whitaker, the former executive director of the Alaska Gasline Port Authority, as chief of staff and Richards as his AG.
The AGPA was Walker’s effort to build a pipeline from the Slope to Valdez to export LNG, but it failed because the group never had access to any gas, which, ironically, is where the state finds itself once again.
In early January 2015, Walker unceremoniously sacked two members of the Alaska Gasline Development Corp. board of directors on the eve of a regular meeting. One of the members didn’t find out he’d been dismissed from the board until he got off the airplane in Anchorage.
Walker then instructed his new commissioners and new board appointments at AGDC to not sign confidentiality agreements, setting up his first of many unnecessary fights with the producer partners.
A month later, Walker wrote an op-ed in which he put forth a plan to create a parallel pipeline effort to AK LNG as a backup in case one or more of the producers pulled out of the project despite no evidence such a decision was even under consideration.
In June 2015, Walker sent a letter to the producers asking them to study a 48-inch pipeline rather than the standard 42-inch pipeline, which added additional time to the preliminary engineering process and cost $20 million. The study and expense ended up a total waste of time and money as the project team maintained the design at 42 inches.
Around that same time, Richards hired Mark Cotham, a Houston-based attorney who’d done contract work for the Port Authority and penned an op-ed in the Juneau Empire in 2005 that advocated threatening producers’ leases as a means to spur development of the Slope gas resource.
Also that month, Richards issued a legal opinion concluding that a constitutional amendment was needed to set fiscal terms for the state’s share of the gas over long-term contracts.
As it turns out, this legal opinion requiring a general election vote in 2016 on a constitutional amendment to keep the project on schedule was the most clever of all Walker’s strategies to drive a wedge between the state and the Slope producers. But we’ll come back around to that.
That September, Walker called a special session of the Legislature to buy out TransCanada’s share in the project and make the state responsible for 25 percent of the costs. Not only did Walker put the buyout on the call, but he also resurrected the gas reserves tax that his chief of staff Whitaker authored in 2005 that was voted down in 2006 by a 2-1 margin.
Much like his idea for a parallel pipeline effort, the idea was panned roundly by legislators and the producers as counterproductive and Walker — after his usual, doe-eyed, “What’s the big deal?” routine — ended up not even introducing a bill.
He did, however, later extort written statements from BP and ConocoPhillips that they would sell gas to the state if they chose to exit the project.
The Legislature then, rather gullibly, voted to give Walker the keys to the state portion of the project.
With the state’s 25 percent share acquired, Walker kept moving with his plan, declared that “We’re TransCanada now” and fired another two AGDC board members including chair John Burns and the CEO Dan Fauske.
Of course he wasn’t even close to done.
Two events then took place in January. Richards had Department of Natural Resources Commissioner Mark Myers send out a letter to all the unit operators in the state demanding detailed gas marketing information. Disguised by the apparent equal treatment of all operators was the true target: the Prudhoe Bay Unit operated by BP and the source for three-quarters of the gas for the AK LNG Project.
Walker then sent a detailed demand letter to the producer partners laying out a heavy schedule of commercial and gas balancing agreements he said were necessary to be completed by April in order to meet a June deadline to place a constitutional amendment on the November general election ballot.
Here is where the decision to require a constitutional amendment was the master stroke of the plan.
In February, Myers resigned as commissioner at DNR about a week after his Deputy Commissioner Marty Rutherford told Journal reporter Elwood Brehmer that agreements would not be complete in time for a November vote.
Securing fiscal terms is a critical component to moving to final engineering and design, and not getting it on the ballot — again, a situation created by Walker and Richards — achieved its purpose by throwing up a roadblock to the producers moving forward and gave Walker the opening to portray the companies as not committed to the project.
On the same day Myers’ resignation was announced and a week after the Journal story was published, Walker called what can only be described as a hostage video of a press conference on Feb. 17 dragging up BP Alaska President Janet Weiss and ConocoPhillips Alaska President Joe Maruschak to announce that progress had stalled on AK LNG.
By now, oil prices had dropped to less than $30 per barrel compared to the $80 range when Walker took office and started tearing down the project he inherited.
With the bonus of collapsing prices along with the artificial timeline of a constitutional amendment working as intended to derail negotiations — there was no reason talks couldn’t have continued absent a need to seal all the deals in time for a November vote — Walker instructed his team to break off discussions with the producers.
At this moment, Walker was pursuing Keith Meyer to take over AGDC, and he made his splash immediately after taking the job in mid-June by asserting the state could lead the project with or without producer participation, draw investors from around the world by selling off pieces of the project and do all of this with almost no risk to the state treasury.
Part of selling this idea to legislators required creating the perception that the producer partners were “shelving” the project and had no desire to go forward.
It didn’t take long for Meyer to keep putting words in their mouths before ExxonMobil fired back with a strongly worded response that Meyer was issuing “inaccuracies” and mischaracterizations about the company’s belief in AK LNG.
So here we find ourselves with the state’s best hope for future petroleum revenue drenched in uncertainty and Walker’s legal team preparing to litigate with the producers over unreasonable demands for confidential information tied to a unit that supplies half of Alaska’s unrestricted general funds and is still the largest field in North America.
Walker’s lack of transparency and honesty over his true intentions for the AK LNG Project have been borne out by his actions. He’s paid lip service to the project and our partners all the while taking every step possible to crater the effort.
What Walker wants is clear. What makes him think he’ll be successful other than a circle of like-minded people rooting him on is impossible to decipher.
This kind of litigation will take years upon years. Years the state doesn’t have to waste. Years that will extend well beyond one or two four-year terms for Walker.
Walker’s attempt to divorce the state from its partners and lead the way on a project that will cost $45 billion or more is doomed to fail, and will cost Alaska dearly.
The governor likes to say he ran to do the job, not to keep the job, but it’s questionable how many voters would give him the job again if they knew his ulterior motive was to blow up AK LNG and start a legal war with the Slope producers.
Alaska has a few brick-and-mortar testaments around the state to the government’s inability to execute mega projects, or even simple ones.
Walker’s Quixotic quest to build the gasline himself gives him a chance to be the state’s first living boondoggle.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, June 29, 2016 - 8:17 pm
The 29th session of the Alaska Legislature is starting to resemble the final scene of Reservoir Dogs when everyone ends up dead.
Gov. Bill Walker dropped the veto hammer on $1.3 billion worth of state spending on June 29 after the House Finance Committee refused to even allow a floor vote on using part of the Permanent Fund earnings to bridge a budget deficit of almost $4 billion.
Democrats and Republicans alike howled at the $666 million cut to the Permanent Fund Dividend appropriation — setting it at $1,000 this year versus a projected $2,000 — and the House Finance co-chairs Mark Neuman and Steve Thompson issued a whiny press release about Walker vetoing $430 million in oil tax credit payments that no one disputes are fully owed to companies who’ve already spent that money in the state.
What, exactly, did these people think was going to happen?
It is rich that Rep. Chris Tuck, leader of the House Democrats, would put out a statement that Walker is “playing politics” with the budget after his caucus has done nothing but play politics over oil tax credits this entire session.
To read their press release that contains Tuck’s statement, you’d think the oil tax credits are a discretionary expense. They aren’t, and the Democrats know it.
To celebrate the state sticking it to companies that invested in the state in good faith tells you all you need to know about how seriously they take their responsibility to create a stable financial climate for the companies they expect to pay for everything.
The state cannot get out of paying this money. Period. Full stop. We can pay it now or we can pay it later, but the amount isn’t going to change.
It’s a rash and destructive action by Walker as well, who is trotting out his new CEO of the Alaska Gasline Development Corp. to attempt to convince legislators the state can go into the private markets and finance a $45 billion LNG export project.
Really? How does the state convince investors that Alaska is a good place to put their money when for two years running the state has failed to make good on what it owes?
Some of that money is no doubt owed to Furie and to BlueCrest, who began producing gas and oil, respectively, within the last year. Surely the state isn’t collecting its royalty share of that production while it is reneging on paying tax credits. That would only be fair.
The guess here is that Furie and BlueCrest wouldn’t be operating for very long if they refused to make their royalty payments to the state, but it’s becoming crystal clear that Walker and his fellow Democrats think this is a one-way street.
Absent from Walker’s vetoes were the automatic “merit” pay raises for state employees. The absence becomes conspicuous when considering that the amount due for raises next fiscal year is larger than what Walker vetoed from K-12 funding and the University of Alaska System.
Neither the governor or the Legislature comes off well here, and like the end of Reservoir Dogs, it doesn’t matter who shot first or who killed Nice Guy Eddie.
Nobody walks out alive.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, June 22, 2016 - 4:31 pm
Gov. Bill Walker has said repeatedly he’s willing to take the hit for reducing the Permanent Fund Dividend as a partial solution to the state’s budget deficit, and it looks like he’s going to get that chance.
The Alaska House of Representatives adjourned the latest special session on June 18 one day after the Finance Committee failed to advance Senate Bill 128 for a floor vote.
SB 128, which passed the Senate 14-5, would have ensured a $1,000 dividend for the next three years and contributed about $1.8 billion toward reducing the fiscal year 2017 deficit.
The version that failed in House Finance would have guaranteed a $1,500 dividend the next two years and $1,000 in the third, but even that sweetener wasn’t enough to get six votes.
So Walker has called the Legislature back once again for a fifth special session to begin July 11, but it is hard to see anything that will change attitudes toward a reduced PFD in the House between now and then.
Walker doesn’t have a lot of good options, but he’s not up for reelection until 2018. That gives him a chance to put his veto pen where his mouth is.
If the governor wished to leverage funding that is important to the House minority Democrats, he could begin by line-item vetoing budget items dear to their hearts such as increases in the Base Student Allocation, pay raises for state employees, the University of Alaska System and the like.
“We can’t afford x, y and z if we’re going to spend $1.4 billion on dividends every year,” Walker could say, and put it on them to explain why they would rather keep the PFD at an unsustainable level than support education or health care or their union constituency.
Walker has said, though, that he’s not interested in those kind of games and his lack of acuity for deal-making has already become self-evident during his first two years as governor.
A simpler fix, one that would allow the House to become the heroes of the dividend and allow Walker to make the fiscally responsible call, would be for the governor to veto the PFD appropriation down to a level that would pay his preferred amount of $1,000.
With the Senate on his side, the House could not override the veto on its own even if the members could muster 30 votes. Walker wouldn’t get his plan, but at least he’d be saving about $750 million the state is going to need sooner or later.
That would leave the House with a choice.
Pass the House Finance version with the $1,500 PFD for two years while incorporating the annual draw from the Earnings Reserve, or go home and campaign against a governor who isn’t up for election for cutting the PFD.
The problem with the latter choice is House members would have to explain why they didn’t vote to increase the PFD when they had a chance and let the mean ol’ governor take their hard-earned money instead.
If the House finally passes the modified SB 128, they would be able to at least campaign on standing up for the PFD, and achieving a smaller cut than the governor and the Senate proposed.
They’d still be free to rail against oil tax credits and megaprojects and all the other Democrat bogeymen lurking under your bed, which is all they really care about, but at least the state would have done something to get its fiscal house in order.
And in the end, cutting the PFD to $1,000 or $1,500 isn’t going to hurt the state economy very much, if at all. Consider that in 2015 the PFD appropriation of $1.2 billion represented 2.2 percent of the Gross State Product of $52.8 billion.
If the GSP is relatively similar this year, cutting the PFD by either $375 million or $750 million would represent 0.7 percent to 1.4 percent of the total state economy.
The only peaceful solution to this standoff is one that lets everyone save a little face. Allowing the House to vote to increase the PFD after a veto may give both sides what they want.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, June 15, 2016 - 4:20 pm
President Barack Obama was unsure of the motivations of a man who yelled “Allahu akbar” as he opened fire on hundreds of defenseless people at an Orlando nightclub, but he was certain what the real problem is.
“This massacre is therefore a further reminder of how easy it is for someone to get their hands on a weapon that lets them shoot people in a school, or in a house of worship, or a movie theater, or in a nightclub,” he said. “And we have to decide if that’s the kind of country we want to be. And to actively do nothing is a decision as well.”
After presiding over, in succession, the worst terrorist attacks on U.S. soil since 9/11 from Fort Hood to the Boston Marathon to San Bernadino and now Orlando, Obama still believes the problem is guns and not the ideology of the people who pull the triggers.
Rather than blaming the radical Islamic terrorists who are wantonly slaughtering civilians on a daily basis around the globe, Obama’s statement effectively blames Americans — “if that’s the kind of country we want to be” — for allowing the sale of semi-automatic rifles.
Democrats were following Obama’s lead as bodies were still being identified at Pulse, pointing the finger at Republicans in Congress, Christian bakers, Donald Trump, the National Rifle Association, and just about anyone else other than the killer and the Islamic State that has flourished under Obama’s watch for the last four years.
Obama and Democrat nominee Hillary Clinton are happily pushing the idea that Trump is “doing the work” for the Islamic State with his inflammatory rhetoric about Muslim immigration.
It should take a new definition of chutzpah to blame Trump for the Islamic State when he was nowhere near the national stage in 2014 when Obama scoffed at the group as “the JV team” as it steamrolled across Iraq and Syria accumulating hundreds of millions of dollars in cash and American military equipment along the way.
At that time, Obama made the decision to “actively do nothing” until the horrific images of American citizens being beheaded by the Islamic State that August forced him to interrupt his golf game momentarily and at least appear to be doing something.
Three days after Orlando, the reliably left-wing New York Times came straight out and blamed “Republican politicians” for bigotry against minorities while claiming that the terrorist’s motivation “remains unclear.”
For Obama, his fellow Democrats and his praetorian guards in the media, it’s all too simple. Their enemies aren’t the enemies of America who have demonstrated they will kill citizens of the West of all political persuasions and colors.
Their enemies are their fellow Americans.
Whether it’s Sarah Palin, Trump or the Dukes of Hazzard, Democrats are quite willing to assign the fault for every gun crime or terrorist attack to someone other than the perpetrator, unless that fault can be traced to radical Islam.
It takes sick kind of mental gymnastics to witness a clear cut case of Islamic terrorism committed by a registered Democrat and turn around and blame Republicans.
As this column is being written a Connecticut senator is filibustering a budget bill demanding some kind of action on gun control.
Never mind that the FBI had every red flag it needed to deny a weapon to the Orlando terrorist, or that it was a clerical screwup that allowed the Charleston church killer to buy a .45 caliber handgun that isn’t even covered by the Democrats’ renewed calls for a ban on “assault weapons.”
The FBI had warnings from the Russian government about the Boston Marathon bombers. Immigration officials had warnings about the female half of the San Bernadino terrorists. The Fort Hood terrorist had the acronym for “Soldier of Allah” on his business card for goodness’ sake.
Yet for Democrats the Golden Calf of government is always the answer despite its repeated cases of butterfingers when it comes to carrying the ball in the fight against radical Islamic terrorism.
Looking inward at whether their strategy — to the extent one exists at all — to combat the Islamic State is working, or what federal law enforcement could do better to prevent terrorists from acquiring weapons in the first place would be too hard.
Blaming Republicans, on the other hand, takes no work at all no matter how high the body counts grow.
As we’ve seen after Orlando, it gets easier every time.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, June 08, 2016 - 3:24 pm
Only in Alaska could a guaranteed $1,000 to every man, woman and child be considered a rip-off.
Only in Alaska could such an unrealistic attitude take hold fueled by widespread expectations that everything should be paid for by the federal government funded by U.S. taxpayers and the state government funded almost entirely by a single industry.
Those who have opined that the Permanent Fund Dividend has created an unhealthy sense of entitlement among Alaskans have been proven more right than wrong over the past couple days as the howls of “raids” on the Fund and claims of outright stealing from people’s back pockets emanate from internet cowboys’ (and girls’) keyboards and legislators from both parties.
For a state filled with people who endlessly espouse the refrain of “it’s our oil!” it’s a small wonder that in the 39 years of oil flowing through the Trans-Alaska Pipeline System many have not bothered to think about what being an owner state means.
Owning the oil means owning the risk. If some Alaskans don’t want to ever feel the brunt of commodity price cycles then they should quit saying “it’s our oil!” and say what they really mean about the treasuries of the companies who produce it: “it’s our money!”
That’s what it looks like when the state constantly moves the tax levers to take in more at high prices and then take in more at low prices as if the oil companies are nothing more than a money printing press for the government.
The attitude of these Alaskans, reflected by a majority of the House and Gov. Bill Walker, are downright Venezuelan.
To put things in perspective, ExxonMobil finished 2015 with $3.7 billion in cash on hand. Even if the state could seize it all Hugo Chavez-style, it wouldn’t cover this year’s deficit. ConocoPhillips, the state’s largest oil producer, finished 2015 with $2.3 billion in cash on hand. That would cover a little more than half of next year’s deficit.
The state, meanwhile, has nearly $54 billion in the Permanent Fund and nearly another $8 billion in the Constitutional Budget Reserve. It will take in more than $1.1 billion this fiscal year from the oil industry despite the fact the producers spent a good chunk of this year losing money on every barrel.
Since the Swanson River discovery in 1957, the state has taken in nearly $116 billion in unrestricted petroleum income and has paid out more than $21 billion in dividends since 1982. But to hear the loudest voices tell it, we’re getting hosed by the oil companies.
You’ll never hear them talk about the 10 Democrats who controlled the Senate from 2006-12 and passed bloated budget after bloated budget and approved ever-escalating government union contracts that have raised the state payroll to some $1.4 billion.
Yes, Republicans controlled the House back then as they do now, but maybe someday the Democrats will be called to account for their spending habits as well, which included billions of dollars in tax credits under ACES that dwarfed PFD distributions in several years while production continued declining by 6 percent per year.
And what has the state done with that money? Alaska still has some of the worst education and health outcomes in the nation.Its state employees get generous raises every year for achieving nothing more than an “acceptable” review on their performance, if they’re evaluated at all.
The damage that will be done to the state from loss of oil production and loss of jobs will far outweigh the damage from distributing the historical average from the Permanent Fund as the Senate voted to do.
Media reports and Democrat talking points are that the PFD has been “halved” under this bill. Cutting it to $1,000 from a projected $2,000 is indeed cutting it by half.
It would also be accurate to say that the PFD has been capped for the next three years near the historic average of $1,089 per Alaskan. The average total distribution since 1982 has been $621 million compared to the $700 million that will be sent out this year.
To put it bluntly, the idea of spending $1.4 billion on PFD checks in the midst of a $4 billion deficit is insane, and those who advocate for the PFD being the No. 1 spending priority for the state are irresponsible.
The PFD was less than $1,000 in 2004, 2005, 2012 and 2013. It was less than $1,200 in 2003, 2006 and 2011.
In other words, the 2016 dividend will still be roughly equal to seven of the last 13 years even after being “cut in half.”
The sky didn’t fall then, and it’s not going to fall now from a PFD reduced from an all-time high to its historic average at a time of historic deficits. Anyone saying different is probably trying to get elected.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, May 18, 2016 - 4:07 pm
I want my, I want my, I want my PFD.
With apologies to Dire Straits, the demagogues in the Democrat ranks are back in their comfort zone after dismantling oil and gas tax credits they once championed under ACES by winning over enough squishes among a Republican-led Majority that now exists in name only.
Alaska has a new House majority full of Garas and Guttenbergs that are apparently capable of coming up with an endless series of convoluted matrices of tax levers creeping ever upward but who can’t or won’t read the daily production report from the Department of Revenue.
Most of the public obviously doesn’t know it — and Gov. Bill Walker, his commissioners and his fellow Democrats sure aren’t going to point it out — but North Slope production increased this fiscal year for the first time since 2002.
With the fiscal year nearing its end June 30, production will be in the range of 520,000 barrels per day compared to 501,500 barrels per day in 2015.
Not only is that a 4 percent increase in the midst of a historic price collapse over the last 18 months, but it is only 2 percent less than the 531,100 barrels per day produced in fiscal year 2014 when the average price was $107 per barrel instead of the current $42.
In the last three years of ACES while the price averaged $105 per barrel, production declined by 11 percent from 600,000 barrels per day to 531,600 barrels per day.
In the first three years of Senate Bill 21, production has declined 2 percent while the price has averaged $74 in the same period.
To hear Walker and Sen. Bill Wielechowski tell it, though, we didn’t get anything out of Senate Bill 21 that passed in 2013.
One thing we didn’t get was the 5 percent annual decline that took place in six years of ACES.
Had the 5 percent ACES decline continued, production would have averaged 455,000 barrels per day this year instead of the current 520,000. That’s an additional 64,500 barrels per day, or 23.5 million barrels for the year that all generate a 12.5 percent to 16.6 percent royalty.
In calendar year 2015, the state collected $715.3 million in royalty payments (plus 5.1 million barrels of royalty oil) and for fiscal year 2016 will collect some $1.1 billion in petroleum income from an industry that is losing billions.
It is patently dishonest for Democrats and Walker (but I repeat myself) to continually assert that the state is losing money from oil tax credits when the state is taking in more than a billion dollars this fiscal year.
Wielechowski was at it on Twitter claiming everyone in Alaska is on the hook for $1,000 apiece to fund the oil tax credits already earned by companies and owed by the state. Never mind that nearly every penny in unrestricted general fund revenue, in savings accounts, and the Permanent Fund was generated by the North Slope producers who can never pay enough as far as the Democrats and the new Republican members of their cohort are concerned.
It’s funny, but Wielechowski did not have a problem in fiscal year 2012 when the credits under ACES totaled $716 million and the funds appropriated for the Permanent Fund Dividend were $564 million.
In fiscal year 2013, ACES credits totaled $918 million and the PFD appropriation was $576 million. In two years that’s a half-billion more in credits than PFD payments.
Where were the Democrats then? They were defending the credits as evidence ACES was working while ignoring the fact production declined by 7 percent or more in three of the previous four fiscal years.
Walker won’t stop his mantra that the dividend checks are going to go away without adopting his plan to tap the Permanent Fund Earnings Reserve, but that’s exactly what’s going to happen to the PFD if the Legislature elects to fund it according to his proposal with royalty income from a resource destined to decline more rapidly under their assault against the industry they demand pays the state’s way.
The message the House and Walker just delivered to the oil and gas industry is that the state is going to raise taxes now and then even further as soon as prices reach a level that would allow the companies to begin recouping the billions they’ve lost in the last two years and the billions they’ve invested since SB 21 passed.
No sane company would attempt to increase production or investment in such an environment.
That won’t matter to the anti-oil Democrats in the Legislature or the Governor’s Mansion. They’ll just keep singing the same tune.
That ain’t working; that’s the way you do it.
You get the money for nothing and the checks for free.
I want my, I want my, I want my PFD.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, May 11, 2016 - 4:34 pm
Rep. Les Gara, D-Anchorage, and former Democrat Sen. Hollis French once boasted about spending $540 million on them in a single fiscal year.
As a candidate, Gov. Bill Walker said he wanted to use them on the North Slope the way they’ve been used in Cook Inlet.
Sen. Bill Wielechowski, D-Anchorage, touted them as a way for the major Slope producers to reduce their tax liability.
Revenue Commissioner Randall Hoffbeck called them investments in the future.
The Legislature’s consulting firm told them May 10 that eliminating them would be a “trade-off” between saving money and losing future private spending.
We’re talking, of course, about oil and gas tax credits offered by the state to incentivize development in one of the most expensive and challenging places on the planet to operate.
With the state in a $4.1 billion hole for the upcoming fiscal year beginning July 1, the Legislature has ground to a halt wrangling over the credit expenditures that are going to cost about $775 million no matter what changes are made going forward.
Republicans who fought through elections and a referendum defending their vision for tax policy and incentives have tucked tail and run over the issue as Democrats who supported these very incentives have been allowed to bank on the public’s amnesia over their past statements and ride on their tried-and-true playbook of demagoguing the oil companies.
In a 2010 op-ed, French and Gara wrote the following about their preferred tax policy known as ACES: “The credits reduce the tax a company owes, or, in the case of a company with no production, the credit can be sold. There is big money involved here: in fiscal year 2009 the oil industry made over $2 billion in capital investment in Alaska that resulted in $540 million of tax credits that lowered their overall tax burden.”
That’s right. Gara, who all but alleges oil executives are running around knocking bread out of Oliver Twist’s mouth, was bragging about the state laying out $540 million in credits, or about as much as would have been appropriated this year had Walker not vetoed $200 million in credit appropriations last June.
In 2011, Gara wrote another op-ed in which he stated that he proposed to “increase our tax credits for new exploration on the Slope, and for new processing facilities needed to put new oil in our pipeline.”
Under ACES, and before Senate Bill 21 repealed its overly generous 20 percent cap-ex credit, the state paid out $918 million in credits during fiscal year 2013 while French was a leader of the Bipartisan Senate Majority.
This is the law the Democrats fought to bring back in 2014 and the one they pine for to this day.
Here’s what Pat Forgey of the Juneau Empire reported in 2011 from Wielechowski’s defense of ACES: “The future of the North Slope is these smaller, wildcat companies, he said. Those incentives are available for any company, and the big producers such as ConocoPhillips Co., BP plc and ExxonMobil Corp. can lower their total tax rate by spending more on exploration, he said.”
You read that right. Wielechowski, who can’t finish a sentence without saying the word “giveaway” was advertising ACES credits as a way for the insidious big three producers to lower their tax obligations to the state.
Walker, who started this whole “conversation” with his veto last summer, said this at a Rotary Club debate on Oct. 28, 2014: “We need to level the playing field so smaller companies can come to Alaska. It’s very expensive to do business on the North Slope. We’re fortunate to have the large companies we do have, but we need to look for ways we can reduce the costs so it’s more economic for the smaller companies to come to Alaska, create jobs, create opportunity and drill for oil. We need more wells drilled outside the legacy fields to get more oil for the pipe.”
Holding diametrically opposed positions on a major policy issue within the space of a year or two is generally something the press finds newsworthy, but not many members of the media have bothered to hold Walker or Democrats accountable for their past statements — and votes — as they pound Republicans and the oil companies for supposedly trying to take away the Permanent Fund Dividend to line some fat cats’ pockets.
The credits under ACES were a way for Democrats to pretend they appreciate the mammoth contributions to the state economy from the oil and gas industry by claiming they supported small companies and incentivizing exploration with credits while bagging on the easy targets of the major multi-nationals who pay virtually every government salary in Alaska including the minority members of the Legislature and Walker’s anti-oil administration.
It’s no surprise politicians would cynically exploit the current fiscal state for their own gain, but it has been a useful exposure of the Democrats’ hypocrisy on the issue if anyone would bother to notice.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, May 04, 2016 - 8:08 pm
Sometimes a dead horse really does need another beating.
On May 4, we received a fresh reminder of the federal government’s rank and callous hypocrisy regarding the emergency access road from King Cove to Cold Bay.
Earlier in the week, we were treated to more of the rudderless Legislature’s trademark blend of incompetence and dysfunction that goes together like a jar of Goober Grape.
Before getting to the Republican-led Legislature’s ongoing and pathetic attempts to extricate itself from the embarrassment of its Downtown Anchorage office building, up for the first whack is the U.S. Interior Department led by Sally Jewell and a new rule proposed by its Fish and Wildlife Service agency.
The rule released May 4 allows for the killing of bald and golden eagles by wind farms and nearly quadruples the annual limit for killing bald eagles first proposed in 2009; it also acknowledges that human-caused mortality of golden eagles may be unsustainable because studies since 2009 indicate the population may be in decline.
The new rule out for public comment would allow the killing of 4,200 bald eagles nationwide by wind farms compared to the limit of about 1,100 proposed in 2009.
The limit on golden eagle kills remains zero, but the Fish and Wildlife Service knows that windmills will still be causing mortality and therefore it has come up with “compensatory mitigation” workarounds so that companies may pay some sort of fee to a conservation bank to make up for killing golden eagles.
This is the same Fish and Wildlife Service that denied approval — and was upheld by Jewell — for 11 miles of one-lane road to complete a connection between King Cove and Cold Bay through the Izembek Wildlife Refuge based on hypothetical impacts on Trumpeter swans and Pacific black brant geese whose populations have no conservation concern.
FWS estimates there are about 143,000 bald eagles in the U.S., with half of those in Alaska, and it believes as much as 5 percent or more of local area populations can be killed annually without impacting the species as a whole.
Of the Pacific black brant geese, about 160,000 gather in Alaska annually and thanks to warmer temperatures as many as 50,000 stayed through winter in 2014 to continue feasting on abundant eelgrass in the refuge lagoons.
Of the Trumpeter swans, 13,000 of the 16,000 or so in the U.S. reside in Alaska with Lower 48 populations raised mostly by eggs transplanted from here.
Examples of the federal government’s arrogant abuse of discretion can be found on a daily basis, but few could be more egregious than Jewell’s heartless disregard for 1,000 mainly Alaska Natives living in King Cove while giving special treatment to a favored “green” industry such as wind power to kill thousands of eagles every year even when her own data show one of those species may be in decline.
The proposed road would do no such harm, as Alaskans have a long history of building infrastructure in sensitive areas. And in any case, putting a few birds at risk cannot begin to outweigh the risks to residents with medical emergencies and the members of the U.S. Coast Guard who are called upon to rescue them.
The press release from the FWS regarding the new eagle kill rule — which it describes in Orwellian fashion as “eagle management” — commits sins of omission by not including the number of eagles it will allow the wind industry to kill every year. You have to read into the 162-page proposed rule to find that information.
Even more galling, though, is FWS Director Dan Ashe’s comment in the release that, “Eagles hold a revered place in our nation’s history and culture, particularly that of Native Americans.”
Frankly, it is disgusting that Jewell, Ashe, et al, can pretend to be concerned about Native Americans’ feelings when it comes to eagles while coldly disregarding their feelings about access to emergency medical care.
No more proof is needed that the federal government’s care for its trust responsibilities to Alaska Natives goes no further than the extent to which it aligns with its own agenda.
LIO saga continues
On May 2, the Legislative Council voted 12-1 to attempt to buy another office building in Anchorage for $12.5 million currently owned by Wells Fargo and rescinded its offer made just a month ago to buy the current Legislative Information Office for $32.5 million.
In an ironic twist, Wells Fargo was one of the construction lenders along with Northrim on the Downtown LIO and prepared an appraisal of $44 million that was used to justify the now-voided lease being below market value at some $3.3 million per year, which means it might end up getting a double payout from this whole fiasco because those notes were eventually consolidated into a longterm loan by EverBank.
The Legislature isn’t going to get away from its mess in Downtown Anchorage by moving to Midtown.
The Legislature is going to get sued by the developers and their lender and based on Alaska Supreme Court precedent they’re going to have a good chance of recovering their costs at a minimum regardless of the fact the lease was voided by a Superior Court judge.
This bunch in Juneau couldn’t boil water without messing it up, but then again, they can probably get a lobbyist to do it for them.
A microcosm of Republican leadership’s cluelessness was Senate President Kevin Meyer’s statement about letting lobbyists for the LIO owners buy his dinner at the same time he’s getting $213 in per diem.
“We could pay for our own way,” he said to the Alaska Dispatch News. “I’m just trying to think how that would work.”
They sure know how to eat.
They just don’t know how to pay.
Posted Thursday, April 28, 2016 - 10:52 am
ConocoPhillips posted a loss of $1.47 billion in the first quarter of 2016, including a $2 million net loss from its Alaska operations.
The state’s largest oil producer increased its output year-over-year by 4.3 percent, from 163,000 barrels per day in the first quarter of 2015 compared to 170,000 in 2016.
It also spent $320 million in capital expenditures in Alaska, down from the $402 million spent in the same period of 2015, which reflects the work done throughout last year to bring the CD-5 site into production last October.
Although ConocoPhillips said Thursday that it is lowering its full-year capital expenditures outlook to $5.7 billion from $6.4 billion, the company announced last week it will spend $190 million to fully drill out CD-5 this year and next, and reach its production target of 16,000 barrels per day this year.
Last fall, ConocoPhillips announced it has sanctioned development of the adjoining Greater Mooses Tooth-1 project that has potential to produce 30,000 barrels per day.
Before reflecting net operating loss credits now the subject of so much debate in Juneau, ConocoPhillips’ unadjusted result in the state was a loss of $52 million. Yet even with the upward revision to a net loss of $2 million after taxes and credits, the company reported paying an effective tax rate of 96.4 percent in Alaska in the first quarter. It was the highest effective tax rate for any jurisdiction where ConocoPhillips operates, ahead of 90.8 percent in the Asia Pacific/Middle East and 65.3 percent in North Africa/Europe. The company's consolidated average rate was 34.5 percent.
Besides production taxes, oil companies in Alaska pay a 12.5 percent royalty plus property and corporate taxes.
In the same period of 2015, ConocoPhillips paid an effective tax rate in Alaska of 35.2 percent on pre-tax income of $225 million.
Revenue totaled $5.02 billion, down from $8 billion a year ago. ConocoPhillips reported its average realized price for crude oil was $31.43 per barrel in the first quarter compared to $48 in the same period of 2015.
The Alaska Department of Revenue estimates that lease expenses and transportation costs on each barrel of North Slope crude are about $46 per barrel.
The company’s loss was less than expected by Wall Street. Losses, adjusted for asset impairment costs and one-time costs, came to 95 cents per share. This was better than the loss of $1.07 per share that analysts surveyed by Zacks Investment Research expected. Shares were up slightly by 88 cents to $49 as of 10:20 a.m. Alaska time.
Posted Wednesday, April 20, 2016 - 4:16 pm
Gov. Bill Walker has a funny way of showing that he’s looking everywhere for solutions to the state’s current $4.1 billion deficit.
In addition to reducing the Permanent Fund Dividend by redirecting earnings into paying for state government, he’s proposed raising taxes on oil and gas, fishing, mining, tourism, alcohol, cigarettes, fuel, and personal income.
He made a big show in January of claims he’s instituted a hiring freeze and restricted employee travel, although he couldn’t provide any estimate of how much money it would save.
Meanwhile, his Department of Administration was negotiating with the labor unions that represent about 87 percent of the employees covered by collective bargaining arrangements.
About 11,000 of the 14,400 or so employees covered by the current negotiations are members of the Alaska Public Employees Association and the Alaska State Employees Association.
Coincidentally, both unions endorsed Walker for governor in 2014. Also coincidentally, its members are giving up next to nothing in the contracts being presented to the Legislature for approval.
All together, the Administration Department estimates the current contracts tentatively agreed to will save a whopping $6.5 million in the next fiscal year from a couple furlough days per employee and a minimal contribution to the health insurance from the current 0 percent to 5 percent.
To put that in perspective, $6.5 million in savings represents about 0.5 percent of total state payroll of about $1.2 billion.
Out of the total deficit, $6.5 million is 0.1 percent.
In the accounting world these amounts are known as rounding errors.
Out of the $457 million in higher taxes proposed by Walker — which amounts to more than 10 percent of the deficit — $6.5 million is 1.4 percent.
The furlough days, minimal as they are, generate even less when Administration estimates that about three-quarters of employees will cash in leave rather than take an unpaid day.
What remains are escalating and generous pay increases for “merit” and what is simply known as a “step” increase of 3.25 percent every two years. The definition of merit, under the state’s current contracts, is “acceptable or better.”
Under this definition, according to Administration Commissioner Sheldon Fisher, about 95 percent of employees qualify for the 3.5 percent “merit” raise for each of their first five years on the job.
To be fair, the Administration has removed the cost of living allowance increases, or COLA, from the current deals. A 2.5 percent COLA for the current fiscal year totaled about $30 million, which the Legislature offset with a corresponding cut to executive branch budgets.
That is difficult to count as “savings,” though, as elimination of the COLA will be more than offset by the near-automatic merit and step raises still in the contracts.
It is also worth noting that the Consumer Price Index has increased by just 0.5 percent and 1.6 percent in Anchorage in 2015 and 2014, respectively, thanks largely to the collapse in oil prices that is driving the deficit.
The most fantastic statement in the Department of Administration’s presentation to the House Finance Committee on March 14 was from the slide titled “Bargaining Priorities” that read “Current fiscal climate requires modest reductions.”
Modest? We know Juneau is off the road system but until now it wasn’t clear that it is actually on another planet.
As usual, though, the Republican-led majorities are botching their response.
Rep. Craig Johnson, R-Anchorage, introduced House Bill 379 that would eliminate the merit and step increases until oil reaches $90 per barrel for a full fiscal year. It would also change the qualification for a merit increase from “acceptable” to “good.”
This is in direct opposition to a legal opinion from the Legislature’s own attorneys that declared unequivocally it is outside the body’s constitutional powers to engage in collective bargaining, which Johnson’s bill clearly does with its specific requirements for a labor contract.
The memo concludes that the Legislature holds the power of the purse, and can simply refuse to appropriate money to fund raises if it doesn’t approve of them.
All it should take is some firm statements from legislators to the Administration Department that they will not fund raises if they’re included in a contract.
Instead they are taking what appears to be an unconstitutional path to achieve what they already have the power to do by other means.
It’s no wonder the majorities find themselves in their current mess.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, April 13, 2016 - 3:18 pm
As legislators attempt to cram their final week with major changes to how the state pays oil credits and uses its Permanent Fund earnings while filling the budget deficit with savings accounts, they may be tempted to go home to seek reelection feeling like they did their jobs.
Public polling conducted by Dittman Research for the Alaska Chamber in the last week of March suggests they won’t face a lot of citizens who’d agree.
When asked whether they had a favorable opinion of various state industries including oil and gas, tourism, mining and timber, the only segment of the economy to receive a negative rating was state government with just 42 percent having a “very” or “somewhat” favorable opinion.
The Legislature fared even worse, with only 33 percent having a favorable opinion.
That may not make the difference in the makeup of the body next year in Juneau, as voters in Alaska aren’t much different than those around the country that routinely give Congress a sub-20 percent approval rating yet more than 85 percent of incumbents are typically reelected.
“Everybody else is an idiot, but my (fill in the blank) is OK,” seems to be the sentiment, which calls to mind an expression by Alaska pioneer Clem Tillion that goes along the lines of, “Nothing will make you think worse of your neighbors than seeing who they elect to represent them.”
What Alaska’s fiscal crisis has exposed is how poorly so many state government functions and programs perform. In fat budget times not many in Juneau were overly concerned with throwing money at capital projects, prisons, education and oil tax incentives.
Now that they have been forced to examine all spending — and as their constituents who’ve gotten hooked on it lobby to preserve the status quo — it’s clear that oversight and accountability have been sorely lacking.
Starting with oil credits, the Legislature is missing a huge opportunity to fix the program beyond simply reducing outlays.
While some tweaks to credits at low prices are not unreasonable, it is indisputable that oil companies have responded to Senate Bill 21 passed in 2013 and upheld by referendum in 2014.
Daily production for this fiscal year is now forecast to be about 520,000 barrels per day compared to 500,000 barrels per day last fiscal year. That’s a real number that can’t be disputed by those legislators who criticize SB 21 to this day with the same tired talking points they’ve belched out for the last three years.
Even next year, knowing BP plans to shut down some rigs at Prudhoe, the forecast is for 507,000 barrels per day. In the fall 2012 Revenue Department forecast, production in fiscal year 2017 was supposed to be only 484,000 barrels per day.
The 2012 forecast was for just 8,300 barrels per day in Cook Inlet. We’re now nearly 10,000 barrels per day greater than that.
One Hilcorp platform that was producing just 600 barrels per day when the company took it over is now paying $6 million per year in royalties to the state and as a producer of more than 50,000 barrels per day it is no longer eligible for many of the credits it is advocating to preserve.
The Cook Inlet Recovery Act and SB 21 worked to reverse declines on both the Slope and the Inlet. They aren’t perfect, but looking at the bottom line of production, SB 21 has far outperformed ACES, which had its own issues with declining output and ballooning credit payments that were on pace to top $1 billion per year before the overly generous 20 percent capital expenditure credit was repealed under SB 21 and replaced with credits tied to barrels produced and not merely money spent.
That ACES cap-ex credit would have put the state on the hook for $800 million at Point Thomson alone, which is greater than the entire proposed fiscal year 2017 appropriation for tax credits and incentives.
Transparency measures have been stripped out of the current oil tax credit bills, and that’s a shame. Keeping confidential credits related to actual tax liability and production is understandable.
Keeping confidential the rebates paid out to companies exploring that have no tax liability is not.
A simple fix would be to set an annual appropriation amount the state is willing to invest in exploration projects. Companies would have to seek pre-approval for projects, and therefore know what they can expect in rebates, and the state would know what its outlays will be and whether a prospect is worth exploring based on input from the Natural Resources and Revenue departments.
Companies have been quite willing to disclose what they expect from state rebates to secure private investor funding, so if they want the state’s help they should have to do it on the state’s terms.
That should mean the public knows the projects the state is investing in. It’s impossible to defend a program you can’t explain, and House Speaker Mike Chenault couldn’t be more wrong when he says the average Alaskan doesn’t care where the money is going.
The state needs companies investing and exploring at times of low prices so that when the inevitable price rebound occurs the state will be positioned to benefit. But instead it once again appears poised to chase out companies with its never-ending quest to find a “heads we win, tails you lose” tax policy that jacks up taxes at times of both high and low prices.
The education lobby wants funding preserved for K-12 and the university system, but there has been precious little examination of what the state is getting for its money despite spending more per pupil than every state other than New York.
The idea of defunding the Alaska Performance Scholarships in order to pay for retired teacher pensions appears backward on its face — cutting spending on the future in order to pay for promises of the past — but it has shone a light on the shortcomings of the state education system.
A full 50 percent of students enrolling in the University of Alaska system need remedial education, including 20 percent of the students who receive scholarships, and three out of four students who enroll at the UA won’t graduate within six years.
Neither of those numbers are acceptable, yet nothing that’s happening in Juneau is addressing the chronic problem of poor results at every level of education. Critics are harping on subsidies for the oil industry that pays the freight for virtually everything in Alaska (and is once again being called to pay more), yet few have questioned the wisdom of subsidizing unqualified students and therefore the tuition rolls of the University system.
On Medicaid reform, a great irony of the bill headed for passage is that most of the savings come from more federal dollars for Tribal care. The Legislature is also quietly funding the expanded class of Medicaid recipients the majorities are currently suing the governor to overturn.
For the most part, legislators are papering over problems with the apparent main goal of preserving the PFD at $1,000, an amount greater than the 2012 and 2013 payouts, which were $876 and $900, respectively, in the hopes they can return to Juneau next year.
A better example of election year politics is hard to imagine than setting a minimum PFD that is actually larger than recent year payouts at a time of multi-billion-dollar deficits.
If lack of leadership creates a vacuum, Stephen Hawking should be studying Juneau for its resemblance to a black hole.
Andrew Jensen can be reached at [email protected]
Posted Monday, April 04, 2016 - 12:57 pm
A long-awaited and expected announcement came Monday by the U.S. Air Force that two squadrons of F-35 fighters will be deployed to Eielson Air Force Base in Fairbanks.
A total of 54 new aircraft and an estimated 2,765 personnel will be part of the deployment, with construction to begin in fiscal year 2017, which begins Oct. 1.
The two squadrons of F-35s will join the F-16 Aggressor squadron and the 168th Air Refueling Wing currently assigned to Eielson. The first jets are scheduled to arrive in 2020.
"Alaska combines a strategically important location with a world-class training environment,” said Secretary of the Air Force Deborah Lee James in a statement released by the Public Affairs office for the 354th Fighter Wing. “Basing the F-35s at Eielson AFB will allow the Air Force the capability of using the Joint Pacific Alaska Range Complex (JPARC) for large force exercises using a multitude of ranges and maneuver areas in Alaska. This, combined with the largest airspace in the Air Force, ensures realistic combat training for the (Defense Department)."
The announcement made formal what had long been anticipated, especially after construction began last year on a F-35 simulator at Eielson AFB.
A release from the Alaska congressional delegation applauding the decision stated that construction activity associated with the siting of the F-35A Joint Strike Fighter is expected to create a total of 2,339 new construction jobs and generate $453.4 million in economic output over the next four years.
That’s on top of some $1 billion in spending at Clear Air Force Station near Nenana and Fort Greely at Delta Junction currently planned or underway for upgraded missile defense radar and additional interceptors.
"The decision to base two F-35 squadrons at Eielson AFB, Alaska, combined with the existing F-22 Raptors at Joint Base Elmendorf-Richardson, will double our fifth-generation fighter aircraft presence in the Pacific theater," said Air Force Chief of Staff Gen. Mark A. Welsh III. "Integrating that fifth-generation force with Navy, Marine, and allied F-35 forces will provide joint and coalition warfighters unprecedented survivability, lethality and battlespace awareness in contested environments. It's an exciting time for Pacific airpower."
Members of the congressional delegation and Gov. Bill Walker noted in their official comments that it wasn’t long ago that Eielson was targeted for closure, and then the reassignment of the F-16 that would have essentially done the same.
The Air Force dropped the plan to move the F-16s out of Eielson in late 2013.
More recently, the delegation challenged a U.S. Army proposal to cut the 4th Infantry, 25th Brigade, also known as the 4-25, from Fort Richardson in Anchorage. Citing the state’s strategic Arctic location, emerging threats in the Pacific theater and the 4-25 status as the only Airborne Brigade in the region, the delegation convinced the Army to delay any force reduction.
“It's clear DOD understands that Alaska’s strategic value — its vast training areas, proximity to the Asia-Pacific, and our commitment to serving our military — is unmatched anywhere else in the world,” said Alaska U.S. Rep. Don Young. “From the beginning, my case for bringing the F-35 to Alaska has focused on fulfilling the mission. While I’m proud to have played a role in this process, having secured language in each of the last two National Defense Authorization Acts that emphasized Alaska’s immense military value and the benefits Eielson offers the Air Force, I’ve always said that Alaska’s contributions to our military sell themselves.”
Posted Wednesday, March 16, 2016 - 2:24 pm
With operating budgets passed in the House and Senate but not yet funded, at least one thing is now clear: Gov. Bill Walker’s proposals to raise taxes on individuals and businesses by nearly $460 million in the next fiscal year aren’t going anywhere.
Senate Finance Co-Chair Pete Kelly, R-Fairbanks, couldn’t have been more blunt — or, frankly, rude — in response to a question about how the Legislature plans to pay for the fiscal year 2017 spending that figures to outpace revenue by $3.7 billion.
At a Finance Committee press conference March 15, Kelly took the opportunity of a question that did not mention taxes to state unequivocally that he has no intention of plumbing a well to the private sector to fill whatever gap remains once some means of drawing from Permanent Fund earnings is chosen.
Kelly noted he was speaking for himself, but with all but one of Walker’s proposed tax hikes still sitting in committee or yet to receive a hearing, there can be little doubt his opinion represents the Republican majorities.
The only tax proposal that has moved out of its original committee is the doubling of the fuel tax from its current national low of 8 cents per gallon that is projected to raise about $49 million per year.
The increase has received a large amount of support from stakeholders in the transportation industry who recognize the importance of maintaining the infrastructure on which their livelihoods depends. Of all Walker’s tax proposals, it’s also the fairest and most broad-based, especially at today’s depressed fuel prices.
The Legislature still has a heavy lift ahead to select a means to use the Permanent Fund earnings and because it won’t raise additional revenue through taxes, the majority in the House is going to have to cut some deals with the minority Democrats in order to draw from the Constitutional Budget Reserve, or CBR.
And just as an aside, Kelly and fellow Finance Co-Chair Anna MacKinnon, R-Eagle River, attempted to argue that a budget paid for with the Earnings Reserve and the CBR is “balanced.”
A budget is balanced when revenue covers expenses. A budget that relies on savings is funded. There’s a huge difference, and as far as spin goes it can’t turn a pinwheel in a hurricane.
Nevertheless, the majorities are correct that it is far better to make a relatively small draw from the CBR than it is to kick Alaska’s economic drivers in the guts while they’re down.
The oil industry that’s propped up Alaska’s government spending for nearly 40 years is always a juicy target — for this governor in particular — but no knowledgeable observer could look at the daily stream of news about layoffs, delayed projects and idled rigs and think raising taxes on its members by some $100 million as Walker has proposed is anything but a terrible idea.
Alaska’s most valuable fishery with the greatest number of workers — salmon — is in the midst of its own price crisis yet Walker wants to extract $18 million out of the industry by raising every fish tax.
Minerals prices have also trended lower, and global sluggishness is reducing demand along with other factors such as transitions away from coal that caused Usibelli to halt exports last year.
The governor and his Revenue Department asked the University of Alaska Institute of Social and Economic Research to study the effects of budget cuts on the broader economy. That ISER’s original analysis did not consider the impacts of private sector job losses was a glaring omission that still managed to be revealing.
What we can see from the ISER study is that government job losses have a multiplier effect of less than one. A loss of 900 government jobs results in a loss of about 700 indirect jobs.
ISER may not have looked at private sector losses and their multipliers, but the McDowell Group has done plenty of work in this arena over the years.
What McDowell Group has found is that every direct job in oil production creates an additional nine in the private sector. When the role of oil taxes are accounted for, each oil industry job pays for another 10 state and local government jobs.
Mining and fishing have 2-to-1 job multipliers according to various McDowell Group studies.
Breaking it down, the Legislature’s priorities should be clear: Preserving private sector jobs is more important than preserving public sector jobs. As a business publication, we don’t want anyone to lose their job, but this is the tradeoff the state faces.
Walker may not like it — and he’s certainly welcome to go out and advocate for taxing Alaskan incomes at a $400 million annualized rate — but refusing to raise taxes during an economic downturn is the right call from the Legislature.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, February 17, 2016 - 4:29 pm
It was the Seinfeld of press conferences.
One might think that a gathering of the five most influential figures in the massive Alaska LNG Project would have had more news to share, but in the end it was a press conference about nothing.
And that’s bad news for everyone involved.
Standing shoulder-to-shoulder with the state’s project partners whose taxes he’s proposing to raise dramatically at a time when their costs are nearly double the price per barrel, Gov. Bill Walker had no answers for where AK LNG is headed.
As the Journal first reported Feb. 10, the project is now officially off schedule and most likely delayed from undertaking the more advanced work for at least two years.
The state and its producer partners will finish the preliminary-front-end engineering and design, or pre-FEED, this year as planned but there will be no vote on a constitutional amendment in November because there will be no fiscal contracts to present to the Legislature for approval.
The next time the state’s residents could vote on an amendment to set tax policy for the project will be 2018.
Ostensibly, the delay in the project is related to the failure among the three North Slope producers who own differing shares of the gas at Prudhoe Bay and Point Thomson to reach the lynchpin gas balancing agreement governing offtake from the two fields once the project goes into production.
But the “elephant in the room,” as Walker put it, is the price per barrel that has hovered in the mid-$20s or low $30s since the start of the year.
As anyone who’s been following along knows, the oil companies on the Slope and around the world are hemorrhaging cash in the current price environment. Contemplating a spend of $2 billion or more among the state and its three partners for the full front end engineering design, or FEED, stage is simply not a viable option.
ConocoPhillips, for example, burned through $2.7 billion of its $5 billion in cash during 2015 and was compelled to slash its dividend by two-thirds from 74 cents per share to 25 cents per share.
From this vantage, then, the best way to slow-walk the project without obviously slow-walking the project is to hold off on sealing the deals that would force the companies to make the FEED decision sooner than is fiscally responsible to their shareholders.
That is certainly disappointing to Alaskans who have seen the concept of commercializing North Slope gas advance further than it ever has, but with the state in deficit spending with a budget hole approaching $4 billion it doesn’t exactly have a lot of cash to throw around either.
Between the Alaska Gasline Inducement Act subsidies to TransCanada, the subsequent buyout of that company’s interest in AK LNG this past November, and the state’s obligations for its share of pre-FEED spending, Alaska is blowing past a half-billion dollars spent on its last two efforts to monetize North Slope gas.
The state does have more to show for its money in the current effort, with export permits in hand and a refined cost estimate to result from pre-FEED, but anything would look good compared to what Alaska got out of AGIA.
With a desperate need to hold this project together through a brutal price cycle nobody saw coming, Walker must rethink his proposals to hike taxes on our project partners.
Walker wants to raise the tax floor from 4 percent to 5 percent, and restructure the system so that producers are always paying taxes even when they are losing money. Walker cannot have it both ways. He cannot endlessly repeat that Alaska should act like an owner state while expecting to be insulated from depressed markets.
It has always been well known that such a capital-intensive project with much thinner margins would require a healthy oil business to support it, yet Walker is proposing to drain the Slope producers’ cash at a time when they have none to spare.
With or without AK LNG, the state and the Slope producers are in this boat together. We shouldn’t be the ones trying to sink it by weighing our partners down with more taxes.
Posted Wednesday, February 03, 2016 - 2:53 pm
Moda Health went all in on Obamacare, and it is now short-stacked and heading for the rail.
On Jan. 29, the Alaska Division of Insurance followed suit of its counterpart in Oregon by suspending Moda from operating in the state due to its rapidly deteriorating financial condition caused by massive losses incurred operating in the health insurance exchanges created by the ill-named Affordable Care Act commonly known as Obamacare.
Moda’s suspension leaves Alaska with only Premera Blue Cross Blue Shield offering individual health insurance policies.
The Oregonian reported this past October on Portland-based Moda pulling out of the insurance markets in Washington and California after the company announced it would receive only $11 million of the $90 million it was expecting from the federal government to cover its losses from the exchanges.
As the company sought a 25 percent premium increase in Oregon, it had also asked for and received a 39.6 percent increase for its Alaska policies. Premera received approval for a similarly large increase of 38.7 percent for 2016, citing losses from the policies sold in the state.
In 2014, Premera lost $9 million serving the individual Alaska policyholders, and a similar loss of $9 million was projected for 2015 based on claims cost data in the first three months.
“The bottom line is that we see another year of significant losses,” Premera spokeswoman Melanie Coon told the Journal last August. “It’s not getting any better.”
Insurers across the country are warning they will consider pulling out of the insurance exchanges next year if the situation does not improve. The nation’s largest, UnitedHealth Group, is among those, and Aetna recently reported that it lost $100 million last year from its exchange business.
Herbert Stein’s Law states: “That which cannot continue, won’t.” Insurers are not going to sit back and continue to lose hundreds of millions of dollars, which should be of grave concern in a state with one company that is currently losing money in the Obamacare exchanges.
So what’s going on here?
It starts with the way the Obama administration got insurance companies to buy in to the law in the first place. The ACA created a “risk corridor” by which the companies agreed to pay the government for profits in excess of their estimates for the year and if they lost money, the government would bail them out.
Remember, Obamacare was sold as deficit-neutral at worst, and a deficit-reducer at best. Over and over we heard the pitch that it was going to save the country money (part of those “savings” came from the government taking over the student loan business, but that’s a whole ‘nother column).
Well, Republicans in Congress led by presidential candidate Sen. Marco Rubio inserted language into the 2015 and 2016 spending bills that prohibited the Department of Health and Human Services from using discretionary funds to bail out insurance company losses from the exchanges.
In other words, they held the Obama administration to its pledge that the ACA would not add to the deficit.
Here’s how the Fiscal Times reported the results in December: “Last year, the insurance companies paid just $362 million into risk corridor program while submitting $2.87 billion in claims for reimbursement … The fiscal 2015 budget package approved last year specified that payments made to insurers under the risk corridors could not exceed collections. That is why the (DHHS’s) payouts this year were equivalent to just 12.6 percent of the claims.”
President Barack Obama signed every bill with these spending restrictions, so while he may have vetoed the bill to repeal his namesake law, he did sign the bills that may have started its death spiral.
Moda entered the Oregon market with the lowest premiums in 2014, betting on getting its losses covered by the federal government and gaining 100,000 customers in the process. It even signed a 10-year, $40 million naming rights deal for the basketball arena in Portland just a couple years after only clearing $10.4 million in net income.
Barely two years later its bet went bust.
Moda may be one of the biggest losers so far to gamble on Obamacare, but it will surely not be the last.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, January 20, 2016 - 1:49 pm
Since oil first started gushing through the Trans-Alaska Pipeline System nearly 40 years ago, the Alaska has repeatedly failed to learn the lessons from the troughs in the price cycle.
Now facing a yawning budget gap nearing $4 billion annually with crude collapsing to less than $27 per barrel as of Jan. 20, there is near-unanimous support to shift from oil income to tapping the investment earnings from the Permanent Fund to bridge the gap.
Gov. Bill Walker’s proposal to use a so-called “sovereign wealth model” using the Earnings Reserve where the Fund income flows anticipates an annual rate of return of 6.7 percent essentially in perpetuity allowing yearly draws of more than $3 billion to pay for state government.
At the beginning of the fiscal year, the value of the Permanent Fund was just more than $55 billion. As of Jan. 18, the value of the Fund was $49.2 billion.
Rosy predictions of future returns are how governments get into trouble, particularly when they are facing looming unfunded liabilities such as pension obligations — of which the state has more than $12 billion — or budget deficits.
After yet another rout on Wall Street Jan. 20 as the markets are off to their worst ever start to a year, we are now officially in a correction, which is defined as a drop of 10 percent or more from the high point in the indices.
It wasn’t that long ago, back in 2009, when the Permanent Fund lost money for the year as the Dow dropped into the 6,000 range. The markets nearly tripled since then, creating a situation where the state was earning more money from its investments than from its oil income. Now that the bulls ran for more than half a decade, the bears are roaring back.
Multiple investment firms are forecasting oil could keep dropping to less than $20 per barrel, some as low as $10 according to a Jan. 12 article in The Telegraph, as OPEC refuses to cut back production and Iran has stated it intends to start pumping 500,000 barrels per day into the market now that it has been relieved of sanctions.
While there is consensus that oil prices will keep falling, whether the United States will enter a recession is still being debated. There can be no doubt, though, that the reeling energy sector that fueled so much of the economic expansion will drag down growth.
More than 70,000 oilfield workers have been laid off — including hundreds so far here in Alaska — and more pink slips are coming. Hundreds of rigs have been idled and the ripple effects through the broader economy will be felt from everyone to contractors to homebuilders.
There is also no doubt that lower fuel prices benefit multiple sectors of the economy, but industrial output is dropping as well.
This from a Dec. 16 Reuters report: “U.S. industrial production saw its sharpest decline in more than three and a half years in November as utilities dropped sharply, a sign of weakness that could moderate fourth-quarter growth.
“Industrial output slipped 0.6 percent after a downwardly revised 0.4 percent dip in October, the Federal Reserve said on Wednesday, marking the third straight month of declines.”
Alaska’s great gasline hope for economic growth and new revenue will also face major hurdles beyond the enormous cost.
Prices in Asia have been halved since 2013, and current demand forecasts are being revised downward. Since shutting them down after the 2011 earthquake and tsunami, Japan has restarted nearly all of its nuclear reactors and is actually reselling LNG shipments; ditto for China amid its own economic growth slump.
Korea is also lowering its demand forecasts as nuclear power is still a cleaner alternative when it comes to meeting lower carbon emission commitments.
To say it’s rough out there would be the understatement of the year.
Strong leadership from the governor and legislators is critical right now, but even if the competing sides can come together with a fiscal plan they must do so knowing that the fight for Alaska’s future is far from over — and that putting our faith in investment earnings may be just as risky a bet as counting on oil prices.
Posted Wednesday, January 06, 2016 - 1:58 pm
Bob Penney is now 0 for 2 at the Alaska Supreme Court in his efforts to reallocate Cook Inlet salmon stocks at the ballot box, but he’s not giving up the fight against commercial fishermen.
It’s past time that he did after some three decades of dividing the community with his nonstop efforts to drive his neighbors out of business and turn the Kenai River into his personal playpen.
After the court emphatically rejected his ballot initiative that would ban setnetting from Cook Inlet beaches on Dec. 31, Penney released a statement that, “Maybe it’s time the federal government looked into this issue.”
Later, Clark Penney, the executive director of the Alaska Fisheries Conservation Alliance started by his grandfather to push the initiative back in November 2013, said the group is looking into pursuing an Endangered Species Act listing for Kenai River king salmon.
Anyone can petition for such a listing, but AFCA will have no better luck with the ESA than it had at the Alaska Supreme Court.
Abundance of the late run of Kenai River kings is no doubt at a low point, but the stock has never failed to meet its escapement goal and in fact returned in strong enough numbers to allow all user groups more liberal harvest opportunity in 2015.
The early run of Kenai River kings, on the other hand, has failed repeatedly in recent years to meet minimum escapement goals and was closed to all sportfishing in the past two years.
Notice it hasn’t been closed to commercial fishing. That’s because commercial fishermen haven’t been in the water during the early run for decades as the stock abundance cratered under heavy pressure from the guided angler industry.
That’s something Penney and his like-minded friends don’t ever talk about because they can’t blame it on commercial fishing.
Oh, but they can spin a fish tale, though, and never was Penney’s win-at-all-costs mentality more evident than last legislative session when his advocacy outfit led a misleading smear campaign against a well-respected member of the Kenai Peninsula community who’d been nominated to the Board of Fisheries.
The successful effort by the Kenai River Sportfishing Association to defeat Soldotna habitat advocate Robert Ruffner by a single vote based on a made-up criteria about not living in Anchorage and a ridiculous accusation that he was some kind of Manchurian candidate of the commercial fishing industry was the last straw for many in the community who saw his candidacy as an opportunity to break up what had become a polarized board dominated by factions instead of facts.
KRSA, which is based in Soldotna, claims to be a conservation organization. The words “Kenai River” are in its name. Yet they waged a public relations war against a neighbor and conservationist despite his widespread endorsements from the local legislative delegation, municipal governments, and chambers of commerce.
And they won, as they often have in the Cook Inlet fish wars they keep fueling.
A similarly dishonest campaign was waged two years earlier, and succeeded in getting board member Vince Webster booted by an identical 30-29 vote.
At both the 2011 and 2014 Upper Cook Inlet meetings, KRSA was able to essentially write the management plan for the Kenai River. In 2011, the group’s proposal severed the historical split between setnetters and drifters, turning what had typically been a 50-50 ratio into a 2-1 gap amounting to millions of dollars in reallocation.
In 2014, KRSA was able to go further, getting the board to adopt a plan that removed almost all discretion from the day-to-day fishery managers in favor of the arbitrary hours and so-called “paired restrictions” designed to render setnetting uneconomic.
One of the most damaging provisions KRSA was able to push through was a rule that after Aug. 1 the Department of Fish and Game must still restrict commercial fishing if the king salmon escapement is projected to be less than 22,500. That is the mid-point of the escapement goal, or 50 percent above the minimum.
Last year, with the king salmon escapement goal ensured of being met, the sockeye run showed up in force at record late dates, and millions of dollars worth of fish went unharvested in August because of a rule in the management plan that has no basis in science but instead reflects the political muscle of KRSA to get what it wants at the Board of Fisheries.
Penney couldn’t influence the Supreme Court with campaign donations and a Kenai River Classic perk package, though, and this time he’s going to have to take “no” for an answer.
Andrew Jensen can be reached at [email protected]
Posted Tuesday, December 29, 2015 - 3:46 pm
With just a couple weeks to go until the next legislative session begins, Alaska’s elected officials have a hefty to-do list.
In no particular order, here it is:
• Restructuring the Permanent Fund earnings in order to use a portion to pay for state government, and possibly reducing the annual citizens’ dividend.
• Considering whether to raise or institute new taxes.
• Cutting spending.
• Reaffirming approval for the sale of pension-obligation bonds; and deciding whether to fund the capital budget with general obligation bonds subject to voters’ approval.
• Allocating $15.7 billion in payments-in-lieu-of taxes, or PILT, between the state and municipalities for the Alaska LNG Project.
• Reforming the oil tax credit program, and possibly raising or hardening the production tax floor.
• Dealing with the Anchorage Legislative Information Office hot potato.
• Funding the expanded class of Medicaid recipients that the House and Senate majorities are currently suing the governor to overturn.
• Approving Alaska LNG Project fiscal terms, commercial agreements and a constitutional amendment securing those terms to be presented to voters in November.
Any one or combination of the above items would bog down a Legislature that has gone down to the last minute or overtime just to pass budgets in healthy fiscal years.
Taken in total mere months from a statewide general election, it would be wildly optimistic to expect a series of profiles in courage to be written from the halls of the Capitol in Juneau.
Both sides are going to have to be realistic. Republicans should know they can’t cut enough, and Democrats should drop their incessant insistence on raising oil taxes. Reforming the credit program or hardening the tax floor is one thing; pretending that there’s some vast supply of money on the Slope that can be tapped at $35 per barrel is not.
Republicans have stated Gov. Bill Walker’s budget doesn’t cut operating spending enough, by only $100 million compared to their desire for a $400 million reduction. If they can cut operating spending by another $300 million compared to Walker’s budget, it would eliminate the need for $200 million in revenue from a state income tax.
Whether they have a plan or the wherewithal to execute such a reduction remains to be seen.
If the Republicans can’t propose a budget that balances, or choose to move some of the Constitutional Budget Reserve into the Permanent Fund Earnings Reserve as part of the restructuring to fund government, then the House minority Independent Democrat caucus will still have the same leverage it exerted last session to protect its members’ funding priorities such as education or Medicaid expansion.
Senate President Kevin Meyer, R-Anchorage, has said some in the majorities could be comfortable with a budget that doesn’t fully close the $3.5 billion gap, which could be a preferable compromise between not slashing state spending to the bone while reducing the annual draw from the CBR to a much smaller level.
With a 15-5 advantage in the Senate, Meyer can pass such a plan without Democrats; such is not the case in the House.
If the Republicans don’t want to raise or create taxes to fully close the deficit, the House majority is going to have to work far more constructively with the minority than it did last year when, at an impasse, the leadership proposed to transfer the entire Earnings Reserve into the Permanent Fund to eliminate the requirement for a three-quarters vote to pull from the CBR.
Democrats are correct to be concerned that new taxes, higher taxes and a reduced dividend will impact low income Alaskans disproportionately. Taken in total, Walker’s fiscal plan would remove some $1.15 billion — $500 million in taxes, $650 million from the dividend payout — from the private economy to help fund government.
But funding government is also a Democrat priority, and they’re not going to be able to have it both ways.
Republicans are also correct that taking money out of the private sector and disrupting the oil tax system for the fifth time in 10 years is likely to chill investment and economic output at a time when state government can least afford it.
None of the options are good, but legislators will have to remember what Hyman Roth said in The Godfather Part II: “This is the business we’ve chosen.”
If they’re not ready to make the hard choices and compromise, the voters may send them into another line of work.
Andrew Jensen can be reached at [email protected]