Posted Wednesday, June 07, 2017 - 1:35 pm
Here’s hoping House Speaker Bryce Edgmon hasn’t gotten too attached to his gavel.
The once high-riding Democrat-led Majority in the House had a stake driven through its heart on June 5 when it was abandoned by Gov. Bill Walker, its one-time ally on raising oil taxes and bringing back a state income tax.
By immediately rejecting Walker’s compromise package that did not include an income tax, increased oil taxes or their preferred amount for the Permanent Fund Dividend, the rookie leaders of the House have set themselves up as the fall guys if the government shuts down with no budget by July 1.
It may be just posturing, as Senate President Pete Kelly mused while his caucus took a more measured and conciliatory attitude toward Walker’s proposed compromise that came down heavily in favor of its position.
Are the House Democrats really so wedded to their demand for an income tax that they are willing to push the state to the brink of a shutdown?
So far, they sound like it.
Not that it was ever a great idea to hitch their policy wagon to raising taxes on an economy in recession, but House Democrats are quickly becoming Ahab to the white whale of taxes.
With the governor now essentially aligned with the Senate on the greatest issues facing the Legislature — including its plan to pay off nearly $300 million in old oil tax credits using the Statutory Budget Reserve — the House has set itself up as the odd man out.
No doubt it must be a bitter pill to swallow considering it was just seven months ago the new Majority held a celebratory press conference following the November election as Democrats took the reins of power in the House for the first time in more than a decade.
However, the Democrats have no one to blame but themselves for their current predicament.
They overreached by ratcheting up their usual attacks on the oil industry with a bill to double and triple effective tax rates between $50 and $75 per barrel, refused to cut the budget by any measure, set up an overly generous PFD and attempted to pay for it by extracting $700 million per year from Alaskans’ paychecks.
The House proposals would be disastrous for the economy and it appears clear that the Senate Majority won over the governor when we heard Revenue Commissioner Randall Hoffbeck essentially repeat the Senate talking point that the House income tax proposal could end up overfunding government and therefore remove incentives to spending restraint.
Who knows what ultimately won over the governor on oil taxes and credits, but two events in the prior week may have played a part.
First there was Interior Secretary Ryan Zinke doing more for Arctic oil development with a stroke of a pen than Walker has accomplished halfway through his third year in office.
Then there was the announcement by Caelus Energy that it was postponing its appraisal well at Smith Bay for this winter based partly on low oil prices and partly on the uncertainty about what the rules will be for tax incentives and the hundreds of millions in unpaid credits of which the company is owed at least $100 million.
There has been plenty of fallout from the governor’s veto of $630 million worth of credit appropriations in the past two budgets, but this was a highly visible and hardly encouraging development.
What we learned June 5 is that the governor has been listening, and that the House still has its ideological earplugs in.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, June 07, 2017 - 1:34 pm
The clock ticks.
The June 30 deadline to fund Alaska’s budget marches closer. A state government shutdown looms. Because I know Alaskans depend on state government services, I am working hard to avoid this calamity.
I’m advocating — as I have for years — for a comprehensive fiscal plan that protects our economy. I’m aiming to achieve not just one year’s budget, but also a long-lasting comprehensive fiscal plan that protects Alaskans and the thousands of jobs threatened by our lingering recession.
At issue are key differences between the House and the Senate fiscal plans. These significant differences amplify the competing visions of our bipartisan Alaska House Majority Coalition and the Senate Majority.
The Senate Majority is calling for lawmakers to ignore the experts and the data and just embrace its Permanent Fund Dividend-only solution.
This is a half-measure that leaves in place the fiscal uncertainty that has long plagued Alaska.
The decisions we make in the next few days will clearly demonstrate our priorities. When it’s all said and done, will the priority be inaction and dysfunction — politics as usual — or, as I hope, a commitment to putting Alaska on stable fiscal foundation with a sustainable balanced budget.
A prime example of the divide between the House and Senate is the debate about the massive liability facing the state of Alaska from continuing to subsidize the oil industry with cash payments and unsustainable tax credits.
Our coalition made reforming this flawed system a priority, and we worked diligently to craft a bill that ends cash subsidies, limits our current nearly-unlimited liability from excessive tax credits, and protects the state of Alaska during times of low oil prices.
The House passed House Bill 111 in April and sent it to the Senate for consideration. Instead of making HB 111 better, the Senate Majority made it worse by removing nearly every provision that ensures the state of Alaska receives a fair share for our oil at low prices.
Our version of the bill will bring in an additional $15 million in new revenue in fiscal year 2018, and the total positive fiscal impact will be over half a billion dollars by 2026. The Senate version of the bill does not bring in any new revenue in FY 2018, and the total positive fiscal impact is just $145 million by 2027.
Our bill hardens the 4 percent minimum tax floor so Alaska could expect some production tax revenue at low prices. The Senate is more concerned about oil company revenues, and would allow them to deduct a lot more expenses from their taxes than the House would, $800 million more by the end of 2027. Those deductions would also seriously impact our bottom line.
Perhaps the most telling difference between the competing fiscal plans is how they treat public education and higher learning. Our proposed FY 2018 budget funds K-12 and the University of Alaska at the same levels as in the FY 2017 budget. This provides some fiscal certainty to school districts and the University so they can hire and retain teachers and professors.
However, the Senate Majority chose to jeopardize our children’s education by cutting K-12 funding nearly $70 million, which could cost 700 to 900 teacher jobs statewide. They also proposed a $22 million university cut that university officials have called devastating.
The House carefully crafted our comprehensive and complete fiscal plan with input from Alaskans to be balanced and fair, with contributions spread out across every region of Alaska and every segment of our economy. In contrast, the plan from the Senate Majority bypasses fairness in favor of determining winners and losers.
The big winners under their plan will be the oil industry and the wealthy. Unfortunately, if they are successful the big losers will be the people of Alaska, who will lose half of their dividends and have a state government so crippled by budget cuts that nearly every essential service will be in jeopardy.
The people of Alaska and the members of the House and Senate have two clear choices in front of them. A responsible fiscal plan that incorporates the best available data and the advice of the experts who have studied our economic challenges, or a partial plan based on politics and fear that continues the uncertainty and worsens the recession.
The choices made in coming days will determine if Alaska goes into a deeper and darker recession or moves into an economic recovery that features more jobs, more opportunities, and more hope.
Posted Wednesday, June 07, 2017 - 1:34 pm
Last week, U.S. Secretary of the Interior Ryan Zinke spent time visiting our region in Alaska’s Arctic.
Throughout his trip, Zinke remarked about the potential of our state, the central role Alaska Natives must play in realizing that potential, and the need for government to “get out of the way” and allow local peoples to chart their own course. We couldn’t agree more.
Alaska Natives have become disheartened by pledges of consultation only to read about decisions affecting our region in national newspapers; statements advocating for economic opportunity in the Arctic while closing our region with the stroke of a pen; and agendas driven by the effects of climate change in the Arctic without regard for the people most affected by them.
We’ve grown weary of presidents, environmentalists and special interest groups doing things “for us.” In reality, their actions are often self-serving of their agendas and we are nothing more than a prop in their campaign.
As Secretary Zinke pointed out, it is the people of Alaska and the Arctic that are the real resource, not the polar bears that fund global environmental campaigns or the massive resource potential of our lands and waters.
We are worth protecting, and we appreciate the actions by the Secretary to finally give us a seat at the table. After all, it is our table.
We also appreciate Secretary Zinke taking the time to listen to us about the needs of our people. What we need is balance, consultation, jobs, a stable economy and a healthy environment. Most of all, we need and deserve the ability to drive policies and activities in our region instead of outside interest groups and policy makers in Washington, D.C., driving it for us.
Voice of the Arctic Iñupiat, or VOICE, was established to advocate for increased collaboration on activities in our region — like the National Petroleum Reserve-Alaska and the Arctic National Wildlife Refuge — reasonable regulations and mitigation measures, and maximum control over our subsistence way of life.
Too often, groups have attempted to act “in our best interests” without recognizing we are fully capable. We can and do speak for ourselves on behalf of our people, region and future generations of Iñupiat.
It is in our best interest to have a healthy environment and a healthy economy. We will not be victims of climate change but we will also not allow our people to return to the harsh way of life before the momentous discovery of Prudhoe Bay.
The Iñupiat are an adaptive people. We are and will continue to evolve to our environment and the opportunities and challenges it brings.
We want a sustainable future, and have always held that resource development and environmental protection can and do co-exist. After all, we’ve been orchestrating this balance since the discovery of oil in our backyard decades ago.
We cannot afford to ignore the benefits that resource development provides us. From jobs, schools, local governments, infrastructure investments, Alaska Native businesses and scientific research to simple amenities such as running water and fuel for our whaling boats — we recognize that modern and innovative resource development literally powers our region.
As one of his last actions in Alaska, Secretary Zinke spoke about the importance of collaboration and consultation with Alaska Natives, and signed Secretarial Order 3352 providing for clean and safe development of energy resources in Alaska and beyond, while at the same time avoiding regulatory burdens that unnecessarily prevent development, and constrain job growth and economic development.
Thank you, Secretary Zinke, for your commitment to restoring trust among Alaska Natives and for taking concrete steps toward allowing decisions in our region to be driven by the local people. VOICE looks forward to working with you and the U.S. Department of Interior over the next four years to improve consultation, co-management and science-based action in the Arctic.
Sayers Tuzroyluk is the president of Voice of the Arctic Iñupiat, a 501(c)4 nonprofit organization established to provide direct input from the Iñupiat people in matters of Arctic policy. VOICE’s membership includes 20 of the 28 entities from across the North Slope including Tribal councils, municipal governments and Alaska Native corporations.
Posted Wednesday, May 31, 2017 - 12:46 pm
In a room full of the state’s business leaders dressed in sport coats and summer dresses, the visiting guest of honor looked and sounded as Alaskan as any of them.
Decked out in khaki pants and short sleeves, Interior Secretary Ryan Zinke, a retired Navy SEAL and former congressman for Montana, spoke passionately about President Donald Trump’s vision of American energy policy that goes beyond independence and into “dominance.”
Trump is a tweeting, Tasmanian devil of a president who makes sensational headlines daily for either real or manufactured outrages that overwhelm the sound decisions he’s made with cabinet picks like Zinke.
Alaska’s congressional delegation has not held back from criticizing Trump — its two senators officially withdrew their support for him last October after the infamous Access Hollywood tape was released — but they clearly recognize how greatly his presidency stands to benefit the state.
It’s safe to say no one is missing Zinke’s predecessor Sally Jewell.
“What a difference six months makes!” Sen. Dan Sullivan gushed at the Alaska Chamber reception for Zinke on May 30.
Zinke is also a geologist, and noted that not long ago in the early 2000s the trendy energy consensus position was the looming “peak oil” when the world would reach maximum oil production and start a gradual decline.
Boy, was that wrong.
If anything we’ve reached “peak OPEC” where the oil cartel’s ability to control world prices at its whim has been eroded by the U.S. shale revolution that is undermining current production cuts of about 1.7 million barrels per day from its member nations and Russia.
Now we have countries like Saudi Arabia nearly begging U.S. shale producers to cut back as prices have flattened out at about $50 per barrel and drillers are squeezing so many efficiencies out of their wells that some can make money at prices $34 or higher, according to Bloomberg.
OPEC thought they could break the shale drillers.
Boy, was that wrong, too.
The U.S. has become the world’s No. 1 energy producer and we can tell OPEC to go pound the abundant sand of the Middle Eastern deserts.
Zinke referenced his military career in the context of the goal of energy dominance.
The United States’ deep involvement in the Middle East and in particular the Persian Gulf has always been about preserving the steady flow of oil that’s led us into wars and uncomfortable alliances with some of the worst governments on the planet.
With the humility of one who has served, Zinke told the audience that he never wants to see anyone’s sons or daughters go to war and see the things he’s seen over access to oil.
There is renewed hope to finally open the coastal plain of the Arctic National Wildlife Refuge to oil development, as was intended when the so-called “1002” area was set aside under the 1980 Alaska National Interest Lands Conservation Act.
And before you hear the usual tropes about how ANWR production does nothing to change the U.S. energy picture — “drop in the bucket” often springs forth from the anti-development groups — it is worth realizing just how much that estimated million barrels per day figures under current domestic production levels.
Not only would that amount triple the current throughput for the Trans-Alaska Pipeline System, it represents 20 percent of our 2016 net imports of oil.
A million barrels per day is nearly the 1.1 million in imports from Saudi Arabia and would completely erase the 800,000 barrels per day from the deteriorating socialist wasteland of Venezuela.
All in all, since the lifting of the ban on crude oil exports last year championed by Sen. Lisa Murkowski, the United States has net imports of less than 5 million barrels per day with almost 60 percent of that total from our neighbors in Canada.
Energy independence is within reach. So, too, is energy dominance.
Trump truly found the right champion for that cause in Zinke and Alaska will be nothing but better for it.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, May 24, 2017 - 12:42 pm
By the time House and Senate members return to Juneau after Memorial Day weekend, they will have burned through 14 days of a 30-day special session without much, if anything, to show for it.
Two days later, pink slips will go out to virtually every state worker with the possible exception of troopers, corrections officers and Pioneer Home employees.
If only they could be sent to the 60 legislators as well.
Both bodies have passed operating budgets as well as bills to use Permanent Fund earnings and end the state’s cashable oil tax credit program.
That should be a plenty good starting point, but conference committees haven’t met on the budget or Permanent Fund bills, and the Senate hasn’t even named conferees to the oil tax credit bill.
Alfred E. Neuman would be proud.
What, me worry?
Both sides are blaming the other, and both sides are right for a change.
The Senate did indeed pass its budget and Permanent Fund bills with time to spare while the House took the full 90 original days to pass an income tax that had no shot in the Senate and was rightly shot down on May 12.
The House also took the full 90 days to send the Senate a bill ending the cashable oil tax credit program for which the state liability will top $1 billion by the end of the 2018 fiscal year.
Income and oil taxes are the obsession of the House this year despite the fact the economy is in recession and bleeding thousands of taxpayers annually, largely from the beleaguered oil sector that has led the job losses numbering in the thousands.
Members of the House have far exceeded their mandate on oil tax policy by not only ending the credit program, but getting way over their skis by proposing to double and triple production tax rates at prices between $55 and $75.
The House proposals are nonstarters for the Senate; likewise the House leaders say it is a nonstarter for them to pass a budget that doesn’t raises taxes on “the wealthy” and “the biggest corporations in the world” despite the fact that middle class earners will be bearing the brunt of the cost through either less takehome pay or no takehome pay.
There’s been plenty of press conferences staking out these positions, but rhetoric isn’t work and it won’t get the job done.
If the Senate really wanted to put pressure on the House it would be demanding conference committee meetings daily.
Show up to a committee room and sit there without them if you have to make the point, but adjourning for two weeks without even naming conference committee members to the oil credit bill shreds the Senate leaders’ credibility on the issue of time management.
Room for compromise can be found if the Senate will ease up on a few of its deeper budget cuts and the size of the Permanent Fund Dividend and if the House would drop its ridiculous attempts to tax everything that moves when the economy is hurting.
A good place to start would be splitting the baby on the $288 million in the Statutory Budget Reserve that the Senate has allocated to start paying down oil tax credits that Gov. Bill Walker has been allowing to pile up for the last two years by vetoing $630 million worth.
Take half of that and restore some education funding for the House Democrats and it would go a long way toward meeting the differences in the operating budgets.
The Senate likely has a winning hand with the public by standing firm on refusing to pass an income tax but they can’t believe they will win the argument on nearly $300 million in oil tax credits while cutting the PFD and education funding.
All of this could have been done in the first two weeks of the special session, or at least a healthy start before leaving for the holiday weekend that nobody in Juneau has rightfully earned.
Now we are likely headed toward another special session that could cross the end of the fiscal year and put the state in a place where no one wants to be.
Yet the Legislature whistles along past the graveyard.
What, me worry?
Andrew Jensen can be reached at [email protected]
Posted Wednesday, May 10, 2017 - 12:40 pm
The budget debate in Juneau this year focuses on questions of how big government should be, how much it should cost, and who should pay for it.
This has dominated our discussions for months, centering debates on government systems and numbers.
But the real debate is not about systems or numbers. It’s about us, the Alaskan people, and the kind of future we want for the state we call home.
Alaska is now firmly in recession, with over 9,000 jobs lost over the past year. Each one of those lost jobs supported a family, paid for groceries in local stores, funded charitable organizations, and financed local schools.
Take the opportunity to talk to some of your local shop owners and ask how business has been. What I’ve heard is concern, worry, and frustration, as the engines to our neighborhood businesses sputter to make ends meet, forced to lay off workers and make deep cuts in their spending.
We need more jobs, more Alaskans with those jobs.
Jobs aren’t created because we want them. People who own businesses create jobs, through investment and taking risks: the small neighborhood eatery, the niche shoe store, the mine in rural Alaska, the commercial fishing boat, and the family-owned sports lodge.
Every one of these businesses are job creation centers, opening the opportunity to someone for their first job, their career, their professional passion, their reason to remain in Alaska.
Alaska businesses grow our economy, grow opportunities for work, and grow the quality of life in our towns.
Strong local economies support government services we all agree are necessary: good roads, police and fire protection, and schools.
Some legislators propose an income tax, raising existing taxes, and continued growth in government spending.
Their proposals conflicts with reality: Alaska’s government is not Alaska’s economy, but bad government policies can and do harm the economy.
Some express dislike, even disdain, for businesses that employ thousands of our fellow Alaskans. That animosity clouds the source of our prosperity, of what made the last two generations of families and businesses in our state an astounding success.
The Senate opposes an income tax on families and struggling business owners in this recession. Every dollar taken out of our communities to fund government programs is another dollar not funding a small business Alaskan job.
Alaskan families and businesses made hard choices these last two years, cutting wherever possible, and putting themselves under a hard spending cap. The Senate supports a spending cap for government budgets.
We have some of the highest funded yet underperforming schools in the United States. We have a public university system that remains a large part of our budget, yet students still can’t transfer basic credits between campuses.
We have some of the highest healthcare costs in the country, yet government programs still get duplicate funding for duplicate programs.
We must transform our government, which won’t happen without a spending cap putting pressure on operations to force change.
Alaska’s state savings, used wisely, guarantees a dividend for Alaskans and a stable, sustainable government budget without new taxes. The Senate supports wise use of our savings to solve our budget gap and protecting Alaskans’ dividends.
Importantly, the Senate supports overhauling Alaska’s government budget without harming our state’s families, businesses, and jobs.
With a stable and sustainable government budget in place, Alaskan businesses can invest in their communities. Families can rest assured that the plan is focused on them and their future. Investments creating family supporting jobs can be made with confidence.
We all want our state’s families, businesses, and jobs strong and vibrant. That’s a future I’m proud to support.
Cathy Giessel is chair of the Senate Resources Committee and represents District N in Anchorage (Northeast Anchorage, Anchorage Hillside, Indian, Bird, Girdwood, and Portage).
Posted Wednesday, May 03, 2017 - 12:36 pm
The Alaska State House passed the “Education Funding Act” as House Bill 115 on April 16 by a unanimous vote of all 22 House Coalition members. However, none of the other 18 members of the House voted for the bill. The measure advanced to the Senate where it will likely stall.
The Speaker of the House refers to House Bill 115 as a “tax for schools;” the co-chairman of the House Finance Committee characterizes the bill as a “school tax;” and Rep. David Ortiz calls the bill “an education income tax.” Further, the House Majority Coalition claimed in an April 26 press release that the “money collected from the Education Funding Act would be used to fund K-12 education in Alaska.”
The phrases “tax for schools,” “school tax,” or “education income tax” do not appear in the bill.
Also missing from House Bill 115 is any requirement to fulfill the claim of the House Majority Coalition that “the money collected from the Education Funding Act would be used to fund K-12 education in Alaska.”
Instead, lines 26-30 on page 22 of the bill require the tax proceeds to be deposited into the State General Fund; allow (but do not require) the legislature to appropriate the proceeds for education; and, most importantly, expressly declare that the tax proceeds are not dedicated funds.
In other words, the legislature would be free to appropriate the tax proceeds for any public purpose. House Bill 115 is a state income tax — plain and simple.
The characterizations of House Bill 115 as a “tax for schools,” a “school tax,” and an “education income tax,” and the assurance that the tax proceeds would be used for education are disingenuous. Alaska’s constitution strictly limits the dedication of state taxes.
The legislature might, in its discretion, appropriate for education all $687 million in annual tax revenues expected from House Bill 115 if it becomes law. However, it is equally possible that all $687 million in new taxes would simply supplant $687 million of the current $1.2 billion in state funding appropriated for education.
School funding could remain the same or even decline despite enactment of the so-called “school tax.”
The House Finance Committee is spending the week of May 1 examining Alaska’s fiscal policy. Representative Seaton, Co-Chair of the Finance Committee, states, this “weeklong series of meetings will allow us to compare and contrast the competing fiscal plans that have passed the House and Senate … our plan is the best choice … because it’s complete, comprehensive, and fair.”
The characterization of the House’s fiscal plan as “complete, comprehensive, and fair” ignores significant long-standing failings in the state’s fiscal and political policies that should have been addressed long ago, but would remain if House Bill 115 became law. The lack of a remedy renders the Coalition’s plan incomplete and unfair.
Ironically, while House Bill 115 cannot be properly characterized as a “school tax,” the state has levied a genuine school tax (albeit one of highly questionable legality) for more than a half century.
The long-standing state school tax has raised several billions of dollars over time. As observed by Alaska Supreme Court Justice Daniel Winfree just last year, the state mandates that organized boroughs “raise specified funds for the State’s public schools system; it is a revenue source for the state — and a tax by any other name remains a tax — and the revenues are dedicated to the state’s public schools system even though they never enter the State’s treasury” (see State v. Ketchikan Gateway Borough, Op. No. 7075, page 40 (Alaska January 8, 2016)).
The critical flaw in the tax to which Justice Winfree referred stems from its application to just Alaska’s 34 municipal school districts — the legislature has allowed 19 districts in Alaska to be exempt from the tax simply because residents of those districts have chosen to remain unorganized. (Many regions in Alaska never had a choice as they were forced by the State legislature and governor to incorporate as boroughs in 1963; these include Anchorage, Fairbanks, Mat-Su, Kenai, Ketchikan, Kodiak, Juneau, and Sitka).
There is no rational basis for the exemption of the 19 districts (e.g., fiscal capacity). The current system allows Alaskans in those 19 districts to escape taxation for local services while benefitting indirectly through higher school funding from the State made possible by the school tax levied on the 34 municipal districts.
Now, the House Majority Coalition wants to impose a bogus school tax on all of Alaska. Thus, if House Bill 115 becomes law, residents of Alaska’s 34 municipal school districts would be subject to two school taxes: one, the school tax referred to by Justice Winfree which will take more than $250 million from municipal school districts this year alone and, two, the bogus school tax in House Bill 115 that will take an estimated $687 million from all Alaskans.
The House’s fiscal plan is incomplete and unjust.
Dan Bockhorst lives in Ketchikan.
Posted Wednesday, May 03, 2017 - 12:36 pm
There’s a very important bill stuck in the Democrat-led House Majority Coalition that needs to be on the books in order to stop corruption in the Capitol.
Senate Bill 5 is sponsored by Sen. Kevin Meyer, R-Anchorage, and has already passed the Senate unanimously.
SB 5 prohibits groups controlled by legislators or legislative staff from soliciting and accepting contributions or from making certain contributions and expenditures during a regular or special legislative session; and prohibits lobbyists from making campaign contributions to groups controlled by legislators who live outside their districts.
SB 5 was introduced by Meyer after the Alaska Public Offices Commission ruled on a complaint filed by the Alaska Democratic Party against the formation of Gabby’s Tuesday PAC, a group controlled by current House Rules Chair Gabrielle LeDoux, R-Anchorage.
The problem with groups controlled by a legislator is that it provides yet another way for lobbyists, unions and other moneyed-interests to funnel large amounts of money towards certain legislators and legislative candidates.
As it is, lobbyists are prohibited from making contributions to campaigns of legislators and legislative candidates outside their districts.
APOC stated they couldn’t prohibit LeDoux’s group because existing campaign finance and lobbyists laws and regulations needed to be changed by legislators to address such groups.
Fortunately, Meyer heard their call for action and drafted SB 5. His decades of experience as an elected official on the Anchorage Assembly, House of Representative and Senate has shown him that it’s best to curtail the power and influence of lobbyists and moneyed-interests.
Meanwhile, the lack of controls on LeDoux’s group has created a monster.
Before session began this year there were rumblings from lobbyists who received calls from LeDoux. She squeezed them to contribute to her group… or else. They understood they needed to pay in order for their clients’ interests to get any play in the legislature. LeDoux’s “pay-to-play” scheme is fundamentally corruption at its most basic level.
Then, LeDoux was elected into a leadership position by House Democrats to control the flow of bills as House Rules chair, a powerful position.
The lack of controls on LeDoux’s group also gums up the works in the legislature as she hurls threats at fellow legislators and others. Such a sordid culture of intimidation has not been seen since the 1990s when another representative from Muldoon ruled the House.
The late former House Speaker Ramona Barnes was renowned for her heavy-handedness. Nothing happened in the House without her say-so. Barnes was generous to her political allies and a menace to her foes.
The seeds of the VECO corruption scandal, when the FBI raided legislative offices in 2006, were planted with the rise of Barnes to leadership positions in the early 1990s. Barnes’ power grew through the years as her relationship with VECO CEO Bill Allen, lobbyists and other moneyed-interests solidified.
Do we truly want to go back to a time when lobbyists and moneyed-interests dictated what happened in our Capitol in Juneau?
SB 5 is currently stuck in the House Community and Regional Affairs committee, one of three committees the House Speaker Bryce Edgmon, D-Dillingham, assigned it — in order to kill the bill.
The other committees include State Affairs and Judiciary.
Multiple communications to the committee chairs have been sent.
Repeated emails to CR&A co-chairs Rep. Zach Fansler, D-Bethel, and Rep. Justin Parish, D-Juneau, to hear the bill have gone unanswered. Obviously, they don’t seem to want to prevent and stop corruption in our Capitol.
State Affairs chair Rep. Jonathan Kreiss-Tomkins, D-Sitka, has also shown no interest in corruption prevention as he’s also not responded to emails.
Surprisingly, Judiciary chair Rep. Matt Claman, D-Anchorage, responded with encouragement to push for SB 5’s passage — if it ever got to his committee.
It’s time for the Democratic-led House majority to oust LeDoux as Rules chair.
Then they need to do everything possible to put SB 5, a very important and much-needed bill, on the books before LeDoux and her “pay-to-play” scheme further destroys their ability to effectively legislate and appropriate without more undue influence, intimidation and threats this session.
Andrée McLeod lives in Anchorage and moved to Alaska more than 35 years ago. She is a registered Republican who believes in the power of the citizen to keep politicians in line.
Posted Wednesday, April 26, 2017 - 12:34 pm
It wasn’t a surprise that last week’s column drew a response from self-appointed PFD guru Brad Keithley.
Nor was it that he would go back to the well of the Institute of Social and Economic Research study that purports to show the most negative impact on jobs out of the current budget deficit-filling proposals is the one that relies on using Permanent Fund earnings rather than an income tax.
Resorting to the internet version of shouting by going to the all-cap font, Keithley repeated four times that ISER believes using Fund earnings costs more jobs than an income tax.
The oft-cited ISER study ties not a single direct job in the state to the payment of PFDs. Rather it relies on the economic multiplier effect for measuring impacts of using Fund earnings or collecting an income tax. The only scenario in which it can estimate job losses directly is from budget cuts to the state government.
Everything else is theory, although it would be nice to know how many small business owners will be hit by the income tax and how that will affect their ability to hire and grow in the name of preserving an artificial PFD level.
Where the ISER conclusion about jobs and reduced PFD payouts falls short is that it doesn’t match what we’ve actually seen.
In the two years after Alaska has paid out a dividend of $2,000 or more (2008 and 2015), the state lost a combined 12,500 jobs in 2009 and 2016.
ISER has estimated thousands of job losses will result from a reduction of $600 million to $700 million in the PFD payout, again, based on an economic multiplier effect and not on actual, direct jobs tied to dividend spending.
Yet were this actually the case, we should have seen it happen from 2009 to 2010.
The dividend payout shrunk by $450 million from 2008 to 2009.
According to ISER, that $450 million reduction should have cost the state 2,500 to 4,000 jobs, but in the 12 months following that reduction the state gained 7,400 jobs. That’s 10,000 jobs better than the low end of the ISER estimate.
By 2013, the PFD was $900 and the total payout was down another $280 million from its 2008 high.
There was no corresponding job loss.
Jobs were down by a rounding error of 500 a year later, and still up 17,000 overall from the 37 percent cut in the PFD payout from 2008 to 2009.
ISER acknowledges the point that actual job data compared to the size of the PFD doesn’t reflect its conclusions.
“The answer is that we likely would have seen the economy expand (under larger PFDs), if other changes — including significant losses in federal spending and losses in the oil industry — hadn’t been costing the state jobs. At any given time, many factors are affecting the state economy. Positive effects of one factor may be offsetting negative effects of others. That makes it hard to see the effects of both kinds of factors — but it doesn’t mean they aren’t happening.”
In other words, the PFD is not the be-all, end-all of the Alaska economy and it shouldn’t be treated as such.
Yet Keithley keeps using large letters and the ISER study to prop up his argument because the real world results don’t.
Citing Permanent Fund Corp. projections, he asserts the PFD should grow by $1,000 per person over the next 10 years, from an estimated $2,373 this September to $3,338 in 2026. That would have the state paying out more than $2 billion in dividends annually.
It’s baffling that an economist can really believe the PFD will grow unchecked for a decade when we have recent history that tells an opposite story.
The dot-com and housing crashes cratered Fund earnings and impacted dividends for years; just last fiscal year the Fund returned less than 1 percent even while markets did relatively well.
We’ve seen all-time highs in the markets once again, partly fueled by the cheap money policy of the Federal Reserve since the last financial crisis that is only now being tightened. A correction is inevitable, and the Fund and the PFD will be affected.
Claiming otherwise is the sort of irrational exuberance that creates bubbles as well as bad policy.
Policymakers can go with theory, or they can go with reality.
The data show that the state jobs picture over the last 15 years moves independently — and in fact nearly inversely — from the size of the PFD.
No amount of capital letters changes that.
Andrew Jensen can be reached at [email protected]
Posted Wednesday, April 26, 2017 - 12:34 pm
The debate in Juneau is about what kind of state we want to live in. I want an Alaska we can all believe in, not one where too many of our neighbors are talking about leaving.
I think the Alaska House Majority Coalition and the GOP-led Senate, despite divergent views, can find common ground. Your views matter. I believe legislators will listen if you speak up. Here’s where we are today.
On one side, the GOP-led Senate is standing by major additional cuts to public education and our university.
These cuts also hit Alaska’s abused and neglected children, and seniors and Alaskans born with disabilities who battle every day for a life with dignity.
Alaska is already facing a dwindling ability to battle and prevent crime with inadequate troopers, prosecutors, and police. That’s not the Alaska I believe in.
Then there’s the economy, the recession, and the job losses we face. Our neighbors are talking about leaving Alaska. They see little commitment to the schools where they send their children, or to supporting the economy their businesses rely on.
According to the University of Alaska’s Institute of Social and Economic Research, cuts beyond the $3.4 billion in budget cuts since 2013 will kill more private and public sector jobs, extending a recession we should fix instead.
Studies show that each extra $100 million in budget cuts, by circulating less money to our businesses, the housing market, and the economy, will cost us another 1,000 – 1,500 jobs lost, mostly from the private sector.
That’s on top of the 6,500 jobs Alaska lost last year.
Let’s get one red herring off the table. We all believe in cutting waste. But since 2013 the Alaska Legislature has cut over 40 percent from the state’s budget.
We have the second smallest per capita budget in the past 42 years, when adjusted for inflation.
The Senate effectively conceded there’s not a ton more waste to cut to fill the $2.6 billion budget deficit, when they aimed the bulk of their proposed budget cuts at public schools and other Alaska priorities.
Many legislators of all parties privately admit we’ve cut too far.
This makes the Senate proposal more perplexing. Our Senate colleagues have passed $65 million in public education cuts, which will likely lead to the loss of 400 – 600 more teachers, counselors, and support staff statewide at a time when our schools have already been losing counselors and student support.
The Senate has proposed over $5 million in cuts to the Pioneer Homes, which they now concede was a mistake. They have proposed $39 million in cuts to the department that protects our seniors, disabled Alaskans, innocent children who’ve been victimized by child abuse and neglect, and many others living on the edge.
The Department of Health and Social Services, which has already been cut by roughly $200 million since 2015, cannot absorb those additional cuts, beyond the $30 million in careful efficiency cuts the governor and the Alaska House Majority Coalition found, without hurting our most vulnerable neighbors.
Our only state mental health institution is already so underfunded that people are shorted on treatment for mental illness and to prevent suicides. Thirty percent of released patients are readmitted within six months.
The Alaska House Majority Coalition found another $81 million in cuts this year, without harming these Alaskans.
There is room for consensus. The Senate says they need make these cuts because we have a $2.6 billion budget hole. But they only partially fill that hole, with a plan that cuts the PFD to $1,000.
We shouldn’t do only part of the job or put it on the backs of the poorest and most vulnerable Alaskans. We can find a fair resolution. The Alaska House Majority Coalition has said part of the plan must be a fair share for our oil and an end to unaffordable oil company subsidies.
We propose an increase from last year’s dividend to $1,250, instead of the Senate’s $1,000.
And we proposed a very modest school tax that seeks a contribution from those most able to pay, with the funds going to public education. If approved, the school tax would be the fourth smallest income tax in the nation.
Under that proposal, a joint filer, for example, would pay no income tax on their first $31,000 in income, and would only pay $25 on each $1,000 in income above that.
Rates would modestly rise on Alaskans with greater wealth and a greater ability to contribute.
I wish there were a magic way to end job losses. All legislators want a bright future for our residents. We need a balanced approach that fully solves our deficit.
We can’t kick the can down the road anymore.
Rep. Les Gara, D-Anchorage, is the vice chair of the House Finance Committee. You can find legislator e-mails by calling 269-0111.
Posted Wednesday, April 19, 2017 - 2:36 pm
Today I’d like to share with you the Senate’s vision for Alaska’s next steps forward into the 21st century. We now face a harsh economic reality where world energy sources are cheaper and more diverse than ever before.
Oil prices are low, and may stay that way.
Thanks to the statesmen of the 1970s, Alaska remains rich in a more universal commodity, cash. With over $60 billion, Alaska’s capital resources can earn more than all our oil wells combined. And I suspect that cash, unlike crude, won’t ever fall out of favor with the cultural elite.
On March 15, the Senate passed Senate Bill 26, a modified version of the Governor’s Permanent Fund restructuring plan. On April 12, the House of Representatives passed the bill with some changes to the details. Dividends under our version would be about $1,000 and, under the House version, about $1,250.
But on top of these variations, the House included completely new requirements. In order to transition our capital resources onto a modern sustainable Percent of Market Value foundation, they’re demanding that we in the Senate institute new taxes.
Apparently, it’s not enough to use a portion of dividends to keep the lights on. You, the working public, need to be hit where you will feel it even more: your paycheck.
There may come a day when maintaining effective government requires invasive taxation. War, fire, floods and earthquakes litter Alaska’s past and may strike again at any time.
Thankfully, that’s not today. By leveraging our reserve accounts wisely, Senate Bill 26, without any new taxes, will fund our government beyond the horizon of reasonable predictions. Here’s how:
First, our Senate Bill 26 covers about 88 percent of the present fiscal gap, intentionally leaving a small budget deficit of about 12 percent, easily covered by our reserves for a decade. This small deficit ensures that there is continued accountability on government to seek new efficiencies and streamline operations.
It is my position that if you are paying half your dividend to government, it had better be kept away from the all-you-can-eat buffet of public money.
Second, our version of Senate Bill 26 actually begins growing the Constitutional Budget Reserve after 2022, according to the nonpartisan Legislative Finance Division.
A growing CBR equals sustainable government: keeping schools open and roads cleared, indefinitely and without new taxes. The Alaska IRS can remain where it belongs: a progressive dream and a collective nightmare.
So, if the Senate’s plan leads to a replenished CBR and fully-funded government operations, why would we want to hire 65 new Alaska IRS bureaucrats to come after you?
I have no idea.
When progressives want to reduce smoking or super-sized sodas, what do they do? They raise taxes on them with the stated intention of stamping out consumption.
But when those same groups advocate for taxes on the income from jobs, they insist that employment will not go down and that jobs will not be lost. How are both possible?
We believe just as taxes on tobacco reduce smoking, taxes on labor must inevitable hurt workers, reduce job creation and trip up our stumbling economy.
With Alaska jobs under pressure, this is precisely the worst time to enact a needless tax on employment. Yet, in a press conference this Tuesday, the House Rules Chair stated, “If the Senate think we are going to get out of here (Juneau) with just Permanent Fund changes (no income tax) they have another thing coming.”
I expect the rhetoric will get worse before it gets better. You will read in the papers that the Senate is stonewalling, that we are obstructionist. The TV will say we eat puppies and squash ladybugs. The bureaucrats will grumble that our plan is “incomplete”, that our Senate Bill 26 wouldn’t actually work the way Legislative Finance says it does.
You will hear many things about us, and most of them won’t be pleasant.
But we aren’t working for popularity with the beautiful television people, the cynical press, or the bureaucratic institutions who will never be satiated by more public spending.
The members of the Alaska Senate majority are fighting for you, for your paycheck and for your job.
The only thing standing between you and an income tax is the Senate.
Sen. Pete Kelly is the president of the Alaska Senate and represents Fairbanks.
Posted Wednesday, April 19, 2017 - 2:26 pm
Alaskans have long recognized the importance of Cook Inlet producers and the energy and economic opportunities they create. With ongoing investments, the region has flourished and southcentral Alaska’s energy production has reached new heights.
Energy development in Alaska, and across the Cook Inlet is a big reason why the Alaska Support Industry Alliance exists today. Our members understand the necessity of safe and environmentally sensitive development and know the importance of accessibility to affordable Alaskan energy sources.
Natural gas production in Cook Inlet provides heat and electricity to over 80 percent of the Southcentral region. Many Alaskans, myself included, remember just a few years back when the threat of brownouts was a great concern for everyone in Anchorage.
Fortunately, through a coordinated effort of the legislature, the utilities and the producers the threat was eliminated. In contrast, southcentral Alaska now has a valuable supply of energy today, which can be attributed directly to the investments made in the last few years.
Production in Cook Inlet has risen dramatically since 2010, with 75 new oil and gas wells drilled. This increase has brought numerous benefits to the region and its people. Benefits such as affordable energy and regional infrastructure can all be directly attributed to producers entering and conducting exploration projects in Cook Inlet.
These projects have led to added investments such as refinery and port infrastructure that continue to add value to Alaska and its economy. Additionally, many Cook Inlet producers are smaller or independent operators who have weathered the oil price downturn when others had to stall their investments. The companies remaining in Cook Inlet deserve recognition for the jobs and revenue their responsible development continues to provide.
Sadly, environmental groups seek to mischaracterize these producers and downplay their investments in an attempt to emphasize their own agenda. Such is the case occurring right now with attacks on Hilcorp Alaska’s operations.
The company recently discovered and quickly reported two small unrelated leaks in their Cook Inlet operations. One has been assessed at less than three gallons of oil, an amount too small to allow for response equipment use. Activists groups, however, do not focus on the company’s quick response or their past contributions to Alaska. Instead, they turn the story into a rallying cry for why all offshore drilling should be banned. Opportunism at its worst.
Hilcorp Alaska has been the largest operator in Cook Inlet since they acquired Chevron’s platforms and associated infrastructure. Obviously it would be a major blow to our communities and the state if those investments were never made.
Communities in Alaska and the members of the Alliance rely on the investments energy companies bring to the state. From communications, to finance, to oilfield services, our members constantly receive new business from Cook Inlet operations. These operators also hire our members as contractors, providing vital jobs and tax dollars to the region.
The Alliance is proud of the new heights energy producers in Cook Inlet have reached in the last few decades. Discounting these achievements based on minor incidents is unproductive and damaging to the economic future of the state.
Outside activists should first speak with the companies who support these Cook Inlet producers on a daily basis to hear their testaments before issuing ridiculous press releases disparaging Alaska’s top industry. If they did so, they might realize the value of these producers who keep the lights on in Southcentral Alaska.
Rebecca Logan is the president of the Alaska Support Industry Alliance.
Posted Wednesday, April 19, 2017 - 1:08 pm
It is time to speak up to support the University of Alaska.
By 2025, 65 percent of the jobs in Alaska will require some form of postsecondary education. The last time this was measured, just 37 percent of Alaskans held a degree and only 50 percent had some form of higher education.
Alaska is facing large workforce gaps today and these will only grow if we can’t educate and train our own residents to compete in an economy that increasingly demands, and rewards, higher education.
The university has historically been a major economic driver and a primary source for developing Alaska’s workforce. So when UA President Jim Johnsen asked us to co-chair the Alaska Public Higher Education Roundtable, we quickly agreed.
We know that the university solves real world problems, produces an informed citizenry, and helps propel Alaska forward.
We want our young people to study, work and stay in Alaska. A strong state university helps ensure that happens, and positions our people to build innovative new enterprises that will serve our state well into the future.
Maintaining our global leadership in Arctic research also is essential. The university is the number one Arctic research institution in the world, but it needs our support to remain competitive.
There is a direct correlation between educational attainment and income. Education builds a stronger, more diversified economy and healthier, more engaged citizens who give back to the communities in which they live and work.
That’s great for families, businesses, and our state.
However, our university faces a series of challenges: Alaska’s low high school graduation and college going rates, the university’s land grant deficit (only Delaware received less than we did), recent state budget cuts, and a rapidly changing economy, which will demand a more highly educated workforce.
The University of Alaska is facing these issues head on, but it is being hit by year-over-year budget reductions. Over the last three years the university’s budget has been cut by $52 million dollars.
As a result, there are 927 fewer people working at UA today than in 2015, 50 academic programs have been suspended or discontinued, fewer classes are offered, less research is being done, and fewer Alaskans are being educated.
Through our engagement with the university, we know that it is proactively pursuing several worthwhile strategies to diversify and increase its revenues, reduce its costs, and gradually moderate its reliance on state funding. These include:
• Increasing enrollment through aggressive recruitment and online programs
• Building stronger partnerships with Alaska’s school districts
• Growing research capacity and investments
• Eliminating unnecessary redundant programs and services
• Cutting administrative overhead
• Increasing public/private partnerships
• Increasing philanthropic support
• Addressing its land grant deficit
• Looking out 10 years to make sure Alaska’s long term education needs are met
However, the university still relies on the state for an important part of its funding. The legislature should give the university ample time and the funding needed to continue the progress it is making to pursue these worthwhile strategies.
The Alaska Public Higher Education Roundtable agrees that it takes a great university to build a great state. The University of Alaska changes lives and creates economic opportunity at a time when our state desperately needs it. Let’s show our support.
Aaron Schutt and Ed Rasmuson are the co-chairs of the Alaska Public Higher Education Roundtable.
Posted Wednesday, April 19, 2017 - 1:08 pm
I am disappointed that the Walker Administration has given in to the fear tactics and misinformation of the Department of Homeland Security and the Transportation Security Administration by putting forth legislation to make Alaska implement the Federal REAL ID Act and pay for it ourselves. It is my duty to set the record straight and make sure people have the facts they need to defend their rights.
The Department of Administration has been reporting that if we do not agree to comply with REAL ID we will not be allowed to use our state IDs to get through TSA checkpoints or to get on base. In reality there is no existing or proposed federal law or regulation requiring ID to travel at all.
A recent reply to a four-year-old Freedom of Information Act request to the DHS has shown that 77,000 people per year fly without ID, and only 2 percent who try are ever turned away. Not only that, it is the Pentagon and individual base commanders who decide what ID is required to get on base.
The Department of Homeland Security does not have authority over the Pentagon. That is why the DHS instead uses fear tactics and misinformation to try and force REAL ID on the states.
As background, the REAL ID Act was never debated by Congress, but rather was hidden in a 2005 emergency appropriations bill. It is barely six pages long, but it opens the door for the Department of Homeland Security, the TSA, and outside private organizations to control the identification cards we need to exercise our inalienable rights of work, travel, gun ownership, and privacy. But only if we give them that power by putting REAL ID into our state laws.
Alaskans are being told that under the governor’s bill, they will be allowed to choose between a REAL ID and a regular ID, but this is inherently false. Under the REAL ID Act, noncompliant IDs must marked “NOT FOR OFFICIAL PURPOSES.”
The old ID will be gone forever, and if you can’t come up with the required paperwork to get a REAL ID, you will be stuck with a bogus ID.
Regardless of which ID you get, your personal data will be entered into a private nationwide database where you will no longer be able to obtain any information about it or have any control over it.
The REAL ID Act requires each state to “provide electronic access to all other States to information contained in the motor vehicle database of the State.” For years it was impossible for states to comply with this requirement until a private organization, the American Association of Automobile Administrators, or AAMVA, and a private company in Midlothian, Va., named Clerus Solutions created a private national database called SPEXS to satisfy this mandate.
Since then DHS has left it to AAMVA to set the standards for the national database.
Surprise, surprise. Clerus Solutions is made up of former AAMVA executives. The founder and chairman of the Board of Clerus Solutions actually helped Congress write the REAL ID Act. He and the president and CEO, the senior vice president, and the senior business analyst all were top executives at AAMVA before forming Clerus Solutions and the SPEXS database.
In January of 2017, without permission from the Legislature, the Department of Administration uploaded almost every Alaskan’s personal ID data including much of our Social Security information to the SPEXS Database.
The Social Security Administration expressly warns against using social security information in this manner, and the REAL ID Act does not specifically require that such information be shared, but the Administration has defended the practice because it is an AAMVA requirement.
AAMVA and its subcontractors are not subject to the Freedom of Information Act or any other state or federal public information laws. There is no way to correct mistakes or obtain information about the data they have compiled on you. In addition, they can change the data requirements and the states must give it to them or lose REAL ID compliance.
Neither DHS nor the TSA will appear before any of our committees or truthfully answer any of our questions about the REAL ID Act. It is almost pointless to try because they can expand or change the requirements of the REAL ID Act at any time by publishing them to the Federal Register, which they have done numerous times.
Rest assured, I would not be standing up to DHS and the TSA like this if we did not have a much better alternative available to us. For $55 anyone who can get a REAL ID can get a passport card. 65 percent of Alaskans already have a passport or passport card.
A passport card is actually better than a REAL ID because it will get you access to everywhere a REAL ID will and more. A passport card can be obtained through a post office and only requires two pieces of documentation, whereas a REAL ID requires four pieces of documentation and a personal visit to a DMV, which many communities don’t even have, and a passport card is protected by federal public records and privacy laws.
If you or someone you love has ever been wronged by the TSA, you know it is a bad idea to hand over control of our identity cards to the DHS and private organizations. Please join me in calling upon Gov. Walker to withdraw his legislation and instead sue the federal government to defend our state and federal constitutional rights to travel freely, to have privacy, and to manage our own affairs.
Rep. Chris Tuck is the Majority Leader in the Alaska House of Representatives.
Posted Wednesday, April 19, 2017 - 1:08 pm
The PFD is not a suicide pact.
The Alaska House and Senate are now engaged in a high-stakes game of chicken as the session has gone into overtime with less than 30 days to go before the mandated adjournment.
On one side is the Senate arguing it is protecting pocketbooks the most, while the House has taken the position of picking the most pockets.
At the center of it all is the Permanent Fund dividend.
The Senate would cap it at $1,000 for three years; the House at $1,250 for two.
The Senate Majority is adamant that it will not institute an income tax or raise oil taxes while the state is in a recession, and it does not favor the more generous amount of the PFD proposed by the House.
The House is equally adamant that using Permanent Fund earnings to fill the budget gap and reducing the amount available for dividends means they have to hit Alaskan workers with an income tax in the name of fairness and continue their neverending quest to keep plucking the state’s golden goose in the form of raising the burden on the oil industry.
Protectors of the PFD at all costs, which include the generally ideological opposites in Sens. Mike Dunleavy and Bill Wielechowski and statehood pioneers such as Clem Tillion, believe that the state’s top spending priority is the annual check in spite of ongoing deficits between $2 billion and $3 billion.
Nearly all rely on University of Alaska Institute of Social and Economic Research studies that count the PFD reduction as the costliest option to low-income Alaskan families.
Indeed the numbers bear that out, but the problem with the ISER study is that it uses a $2,000 PFD as the baseline for evaluating the impact of either the Senate or House plans.
Using a $2,000 PFD as a baseline unnaturally skews the numbers, however.
Since the first PFD of $1,000 was paid in 1982, only twice — in 2008 and 2015 — has the PFD been $2,000 or greater.
It would have been larger than that in 2016 as well, but Gov. Bill Walker vetoed half of the appropriation from $1.3 billion to $665 million to result in a PFD of $1,022.
We’ve heard time and again that the PFD is the best way for the state to spend money because it puts the decisions in the hands of the people rather than the government.
However, looking at the years following the largest PFDs in the state history shows big checks didn’t make a big impact on the Alaska economy.
In 2008, the PFD was $2,069.
The state lost 3,300 jobs from September 2008, the month before the checks were issued, until September 2009. The unemployment rate went from 6.8 percent to 8 percent.
In 2015, the PFD set a new high of $2,072.
This time the state lost 9,200 jobs in the following 12 months.
So much for propping up the economy.
In looking at the intervening years, the best thing for the Alaska economy is jobs, not the size of the PFD.
After the 2008 peak PFD, the size of the check declined every year for the next five (the 2012 and 2013 dividends were roughly equal at $876 and $900, respectively).
Over those same years, from 2009-2013, the state saw its population increase by 53,000, added 15,000 jobs, and the state gross domestic product grew by 20 percent from $50 billion to $60 billion.
Conversely, from 2014-15 as oil prices have crashed, the state paid out about $2.5 billion in PFDs with no corresponding uptick in economic activity and certainly not enough to offset the loss of thousands of six-figure paying jobs in the private sector across oil and gas, construction, transportation and professional services such as engineers.
Unlike an income tax, which reduces earned take-home pay, setting a dividend amount that is reasonable given the budget circumstances is the most prudent thing the government can do.
Under the Senate plan the PFD would be roughly equal to the historic average — which would be a much better baseline to use and would in fact show the low income Alaskans are being held largely harmless under the plan — and it would be larger than four of the dividends paid since 2003.
Under the House plan the PFD would be larger than half of the last 13 checks not counting 2016.
When ConocoPhillips lost $4.4 billion in 2015, one of the major steps it took was to reduce its dividend by two-thirds from 75 cents per share to 25.
That allowed it to keep investing while finding cost-cutting measures elsewhere.
It’s about time the state learned a lesson from the private sector instead of trying to bleed it dry.
Andrew Jensen can be reached at [email protected]
Posted Friday, April 14, 2017 - 12:29 pm
Change is hard… even when everyone agrees that change is necessary. It’s easier to do nothing than it is to affect change. But every once in a while you bump into something that’s just so utterly broken that change is the only option. That’s where we’re at with Alaska’s workers’ compensation system.
In 2004 Alaska was the second most expensive workers’ compensation state in the country. It took us almost a decade, but in 2012 we finally dethroned states like California and Illinois as the worst in the United States.
When it comes to getting hurt people back to work, we’re no longer dead last in the nation. But we’re close enough to remember the feeling.
The Alaska Chamber has been working alongside Sen. Cathy Giessel and the Workers’ Compensation Committee of Alaska to tackle our broken workers’ compensation system. The introduction of Senate Bill 112 is the first step in addressing the problem and we look forward to working with all parties to fix the system.
The argument for reform
The obstacle that derails many reform attempts is that frequently there are opposing constituencies on either side of an issue. That’s not the case with workers’ compensation. Alaska’s current system is broken and it’s not serving anyone.
In 49 of 50 U.S. states, litigating attorneys are compensated based on a set percentage of settled claims. In Alaska, attorneys invoice for their time and preferred hourly rate, in some cases exceeding the settlement amount.
Ten years ago when the Chamber started advocating for reform, you’d mention workers’ compensation in a room full of people and everyone’s eyes would just glaze over.
There are a lot of moving parts to the system, and it’s taken a long time to get everyone up to speed on why it’s failing Alaska workers. But we’re there now. Over that last three or four years, Alaska has flirted with incremental improvements. Progress has been frustratingly slow, particularly if you’re an injured worker floundering in a bungled system or an employer hemorrhaging money at activities that don’t help your employees.
We’ve made small improvements, particularly with the medical community stepping up to accept certain payment controls on common procedures. And now we’re finally ready to tackle the foundational flaws in Alaska’s failed workers’ compensation system.
So what has to change?
Make wise choices
Alaska needs to adopt options for employees to direct their own care. Currently, if an Alaska worker is uncomfortable or dissatisfied with their doctor, they can switch once. Then they’re stuck. It’s worse for employers. If there’s a talented specialist or experienced out-of-state option, our Alaska companies or their employees don’t have that option.
Use what works
There are medical treatment guidelines that help ensure treatments for injured workers are both reasonable and necessary. Alaska doesn’t use those guidelines and we should. Similarly, we need to adopt official disability guidelines and utilization reviews to make sure our provider community is getting our workers the care they need.
Pull the rest
Re-employment benefits pay for training so injured workers can move into a new field. Re-employment training sounded pretty good as a concept; however, in practice, re-employment benefits don’t do anything and need to be repealed.
Between a Department of Labor commissioned study and one from California, we find that nearly no one completes their re-employment program and they return to their old profession. Instead of giving people a lump sum for training they’ll never get, we should implement a voucher system that will go towards a person’s re-employment program.
The inner workings of workers’ compensation are legitimately challenging, but the goal of the system isn’t. Many states have success models that we can use to improve our system. Alaska can make wise workers’ compensation choices, use what works, and get rid of programs that don’t.
Curtis W. Thayer is lifelong Alaskan and serves as president and CEO of the Alaska Chamber.
Posted Wednesday, April 12, 2017 - 12:38 pm
It was Alaska House Majority Leader Chris Tuck for the win during a recent episode of “Democrats Say the Darndest Things.”
Amid the debate on the House floor April 10 over the oil tax policy rewrite hastily introduced and passed within three days by a single vote, the Anchorage Democrat uttered the most fallacious argument among the many offered by his cohort.
First the runners-up.
There was Rep. Scott Kawasaki, D-Fairbanks, describing 2016 Alaska profits of $85 million by BP and $265 million by ConocoPhillips as “gigantic.”
What’s gigantic is the ongoing ignorance about the oil industry displayed by House Majority members like Kawasaki.
BP and ConocoPhillips Alaska profits totaled $350 million in 2016.
Their combined payments to the state came in just shy of 10 figures at $959 million. That’s 27 percent for BP and ConocoPhillips and 73 percent for the state, but asking Democrats to do math is probably an unrealistic expectation at this point.
Then there was Rep. Justin Parrish, D-Juneau, whose head seems best suited as the home for the Legislature’s best gathering of hair and little else, stating that a bill doubling and even tripling the effective tax rate at prices between $55 and $75 per barrel “doesn’t go nearly, nearly as far” as he’d like.
Parrish wasn’t the only Democrat to say the bill didn’t extract enough new money from the industry, and several others including Resource Committee Co-chairs Andy Josephson and Garen Tarr actually claimed the bill is “modest” in its impact.
The ghost of Jonathan Swift could sue for copyright infringement, if only the Democrats’ modest proposal was also a satire.
Credit to Tarr for at least saying what Democrats believe, though, when she asserted that the companies aren’t going anywhere because Alaska has great geology. In other words, Democrats have carte blanche to pass any tax hikes they like and it won’t change production or investment at all.
Nevemind we have recent history under the previous regime known as ACES to know that policy does matter no matter how great the North Slope rocks.
But just when you thought Democrats were at peak self-parody, along came Tuck to plant the flag.
In answer to repeated statements by Republicans that the current policy is working, as evidenced by an increase in production through the Trans-Alaska Pipeline System for the first time in 14 years, Tuck said we should be thanking ACES for spurring the growth.
“Oil production is going up, but when you look at how long it takes to explore and develop, it takes seven to 10 years, so Senate Bill 21 isn’t playing a factor,” he said. “At this point it’s ACES that’s playing a factor in new production. Eventually some components of Senate Bill 21 might make that happen, but you can’t give credit to Senate Bill 21 when it’s only been in effect for about three years.”
With that, Tuck proved why he’s the captain of the Democrat canoe.
Tuck’s nonsense echoes the canard regularly uttered by Rep. Les Gara, D-Anchorage, that no increase in production on the North Slope can be attributed to the current policy passed in 2013 and upheld by voters in 2014.
Their only evidence to support this is CD-5, which ConocoPhillips started working on way back in 2004, and the fact Repsol started exploring on the Slope in 2011.
Just like their myopic focus on production taxes to the exclusion of all other sources of oil revenue, the Democrats are attempting to mislead the public about the current tax policy when they discount the growth in throughput and new projects.
For starters, there is Greater Mooses Tooth-1 in the National Petroleum Reserve-Alaska.
ConocoPhillips applied for those permits in July 2013, two months after former Gov. Sean Parnell signed the More Alaska Production Act into law. The company sanctioned the project in November 2015 and first production is expected next winter.
Drillsite 2S was sanctioned in October 2014 by the Kuparuk River field owners ConocoPhillips, BP and ExxonMobil and was the first new drillsite in 12 years.
ConocoPhillips, which operates the Kuparuk field, didn’t drill a single exploration well anywhere on the Slope from 2010 to 2012.
The price of oil during those three years averaged $94 per barrel.
Just to help out the Democrats again with the math, that’s about $40 more than the current price.
Same rocks, nearly double the price, and the state’s biggest oil producer wasn’t even exploring.
But sure, Rep. Tarr, tax policy doesn’t matter. The companies may not be going anywhere, but their capital certainly can and it has before.
Back to Tuck’s comment about crediting ACES for production growth, which was so farcical it resembled internet trolling. That would be preferable to the reality that Democrats truly believe this.
Tuck should take a look at the 2016 Prudhoe Bay Plan of Development, in particular the Division of Oil and Gas approval document issued last September:
“In 2015, (BP) again conducted a high level of drilling and wellwork in the IPA (Initial Participating Area) with 8 grassroots wells and 52 sidetrack wells. BPXA also performed 413 rate adding jobs and ~1,400 non-rate adding jobs. Rig Workovers have continued to increase over the past four years with 27 RWOs in 2015. Drilling and wellwork in all categories has been increasing for the last four (Plan of Development) periods in the IPA.”
Note the timeframe mentioned twice in that paragraph: the past four years.
That would be from 2012, when Parnell first introduced a tax reform bill, to 2015.
In 2012, BP performed 315 rate adding jobs at Prudhoe. That number increased to 485 by 2014.
In the Analysis section, the Division of Oil and Gas puts it even clearer:
“The activities conducted in the IPA over the last four years have seen record levels of drilling, RWOs, and rate adding jobs along with heavy investment in facility upgrades, pipeline replacements and inspections, and TARs (turnarounds). The IPA experienced an average daily production decline of only about 7,000 barrels of oil per day in 2015.”
After noting that Prudhoe Bay has exceeded its original recovery estimate by 2.7 billion barrels, the division stated BP is “progressing and developing new reservoir projects.”
Record levels of drilling.
New reservoir projects.
Rate adding jobs.
In. The. Past. Four. Years.
The current policy was designed to encourage both new oil, which would take longer to develop, and “old oil” from the legacy fields that it was known would result in additional production sooner.
And it worked.
So here come the Democrats demanding to tax these profitable fields more and thinking this will somehow encourage new development elsewhere when it is those very profits that are reinvested for new projects like Mooses Tooth or new reservoirs within existing fields such as the Sag River work at Prudhoe.
At $70 oil, the Democrats’ plan would increase taxes by about $2.5 million per day at current production levels. That’s about $900 million in a year, or about what it will cost ConocoPhillips to build Greater Mooses Tooth-1.
What is most troubling about the House action is the message it sends to industry. The bill itself will die a rightful death in the more sane Senate, but by insisting this bill is moderate, or doesn’t go far enough, tells the industry that if the Democrats ever get ahold of the upper body again things will get a lot worse.
Combine that with a governor perfectly willing to hike taxes on the industry while refusing to pay what the state already owes and you have the ingredients for chilling the Alaska investment climate once again.
Andrew Jensen can be reached at [email protected]
Posted Monday, April 10, 2017 - 12:18 pm
There is an old saying: “Just because you can, doesn’t mean you should.”
One of the biggest issues emerging this legislative session is whether the state should pass a fully balanced budget, where revenue exactly matches expenses for a zero-sum gain.
While a balanced budget is normally a good idea, I would argue it will be detrimental in our case because it includes instituting an income tax. I advocate that carrying a modest deficit going forward is instead in the best interest of our state.
The Alaska Senate recently passed Senate Bill 26, a bill that restructures the annual draw from the Permanent Fund’s earnings. Using earnings of the Permanent Fund to help cover the budget deficit is the single most important action this legislature can take.
It is exactly in line with the vision of the original trustees of the Permanent Fund who wrote, “The earnings from the Permanent Fund can and should help level the peaks and valleys of the Alaska traditional boom and bust economic cycles,” as long as Alaska has “sane and reasonable levels of government.”
SB 26 reduces Permanent Fund dividend amounts to $1,000 per Alaskan, which is just short of the 30-year average, and applies the remaining earnings toward reducing our substantial budget deficit. It is a solution that closes the gap substantially.
The next place to focus is budget reductions. But, defining a “sane and reasonable” level of government is quite a challenge. There are groups calling to trim what they feel is still a bloated bureaucracy. Other factions say our state government is right-sized and not to make any additional cuts.
So far, the Senate Majority is looking at a 5 percent reduction for most agencies (which is 5 cents on the dollar) and I am pleased to say many of the departments met the challenge and offered specific areas where their agencies could scale back.
The latest budget presented by the Senate for fiscal year 2018 has general fund spending reduced to about $4.1 billion, which meets the spending cap the Senate placed within SB26. This spending cap grows by inflation each year, and if adhered to, will stop the wild fluctuations in the operating budget and keep government growth in check.
Is there room for additional reductions? You bet, and the Senate continues to advocate for health care reform, a freeze on state salaries, and shared service consolidation across departments.
With a draw on the Permanent Fund earnings, together with spending reductions, where does that leave us? There is still a gap of about $500 million dollars remaining to a balanced budget. I urge lawmakers not to try to fill it with an income tax.
If we institute an income tax now, we will be kicking our economy while it’s in a recession. In about five years, many small businesses and working families may leave Alaska and move to the Lower 48 where the total cost of living (health care premiums + energy + transportation + income taxes) is much lower. The result will be higher unemployment rates where only a skeleton crew of die-hard working Alaskans remain, and private entrepreneurial innovation and economic expansion is cut off at the knees.
Instead of an income tax, I urge my fellow lawmakers to allow the Constitutional Budget Reserve to absorb the deficit for the next few years. Modeling shows that the CBR has the capacity to cover a modest budget deficit for the next decade. Meanwhile, we can monitor the price of oil, work to increase oil production, look for additional economic opportunities, and pursue legislative reform that further reduces government spending.
I have many takeaways from my first few months serving as a legislator. The largest is that there is no “perfect” or “easy” way out of our problems, and every decision we make has major consequences. So far, the suite of bills presented by the Senate Majority ensures the longevity of the PFD for all Alaskans, caps government growth, does not tax the income of hard-working Alaskans, and keeps private dollars available for economic investment.
Coupled with a 5 percent decrease in spending, this is the best path out of our financial quagmire.
We must each remember that choices we make now will have both short and long-term repercussions. Furthermore, budget solutions are intertwined, where one affects the other. It’s imperative that we make responsible decisions to ensure a safe, thriving, and accessible state with a great future.
Natasha von Imhof is a freshman State Senator with a financial analysis background. Senator von Imhof sits on the Senate Finance, Resources Committee and the Health and Social Services Committee.
Posted Friday, April 07, 2017 - 3:08 pm
One hundred years ago, Alaska’s leaders came together around a vision to create an institution of higher learning. They gathered on a hill near downtown Fairbanks and pledged their support for this new undertaking, now called the University of Alaska. Few institutions generate the kind of economic benefit or impact on our communities as does our university, and in this time of enormous change and challenge the need to support our university has never been greater.
I believe that it takes a great university to build a great state. Since its founding 100 years ago, the University of Alaska has developed into a high quality, affordable choice for those looking to create opportunities and improve their lives. Alaska has always had ambitious goals and it’s the university’s job to help our state achieve them. In serving Alaska for 100 years the university has:
• Grown from one campus in 1922 to 15 campuses today, from Ketchikan to Kotzebue.
• Graduated one person in 1923 and 4,700 this last year.
• Become the number one producer of Alaska’s workforce.
• Risen from a remote territorial college to the world’s leading Arctic research university and the number one research organization in the state providing real solutions to real problems.
Alaskan values are reflected in the fabric of the broad university community: grit, perseverance, work ethic, commitment, shared learning and mutual respect. These values drive faculty and staff every single day as they work to serve students and our state.
Students seek skills, knowledge, and a brighter future full of opportunity; faculty have committed themselves to discovery, teaching, and serving civil society; UA staff give their best every day to support the educational mission; and, alumni carry the UA flag out into the world, working all across our state and around the globe, creating new businesses, solving the state’s problems, and giving back to the university that moved them forward in life.
The university’s partners – parents, employers, the communities, public agencies, researchers – are critically important to helping advance the university. Its growing base of private donors are generously contributing their own resources to help students to realize their dreams and to help them strive for excellence.
These are just some of the people and programs that will be impacted if higher education funding is cut.
In this centennial year of the university’s founding, there is no doubt that UA has the power to change Alaska’s destiny – it changes lives, create opportunities and promotes economic prosperity.
Please tell your legislators that you care about the university, about growing our own, right here in Alaska, and to fund the university’s operating budget at the level requested by the governor and passed by the House.
Arliss Sturgulewski is a former member of the Alaska State Senate, Republican Party candidate for Governor and a Trustee Emerita for the University of Alaska Foundation.
Posted Friday, April 07, 2017 - 2:18 pm
For 14 years Rep. Les Gara has skewed the facts to support his personal agenda: Tax the oil industry out of existence to pay for more and more government.
In his latest interpretation of “the facts,” he calls Alaska’s production tax rate “mythical” and again strikes out at the tax credits that have proven to be one of the best investments Alaska has ever made.
It galls him that Alaska’s production tax is a 35 percent tax on net profits — and that there is a difference between a statutory tax rate and an effective tax rate, as the tax counsel for a major producer had to explain to him a few days ago.
“The calculation is based on 35 percent,” the attorney testified. “If I have a $100 profit, my tax is $35 on that. It may get reduced by credits …my effective tax rate may come down. But it’s calculated at 35 percent.”
Gara wants to change our tax system to a gross tax, which is a totally different tax system that our state has rejected — for good reason.
When Gara talks about fair share he also has a habit of conveniently forgetting that the production tax is just one part of the entire tax bill that industry pays. The other includes royalties, state and federal income taxes and property tax.
What that means is that Alaska takes in more than the oil industry earns in profits regardless of the price of oil. In fact, at lower prices, the state’s share gets proportionally bigger than the industry share. At $30/barrel oil, Alaska takes in $1.9 billion per year while the oil industry loses more than $1 billion.
When the price of oil is high, Alaska still earns significantly more than the industry. At
$100/barrel oil, Alaska takes in about $5.5 billion in revenues while the industry earns less than
On the subject of incentives, Gara ignores the fact that from fiscal years 2007-2015, the state collected
$62.1 billion In total petroleum revenue while paying out $3 billion in cashable/refundable credits to North Slope and Cook Inlet producers and explorers.
That’s right, Rep. Gara. Alaska dispenses $3 billion in credits and collects $62 billion in revenue. Not a bad return, especially when you consider that that investment Jed to the discovery of the three largest oil fields on the North Slope in 30 years, doubled Cook Inlet oil production and turned a natural gas deficit into a surplus. Maybe you would have preferred that we froze in the dark.
That said, we aren’t quarreling with the need to look at cash credits to figure out alternative
Incentives that the state can afford with today’s low oil prices but still attract the investment we need to keep production levels stable and bring our exciting new discoveries to production. All that requires a staggering amount of investment: $3-5 billion a year to maintain existing production levels in Cook Inlet and on the North Slope, and the $10 billion or so just to develop Caelus’ new discovery at Smith Bay.
We can count our lucky stars that oil has paid almost all our bills for decades. And that in these days of low oil prices and declining production, it still provides double what we collect from all other sources of unrestricted revenues.
In fact, oil accounted for $966.9 million in FY 2017, or about 72 percent of our unrestricted revenue stream.
But that isn’t enough for folks like Gara. They want to jack the production tax up even more on an industry even when it is losing millions each day - not because it makes sense or Is good tax policy but because they think the oil companies will continue to develop our oil resources with higher tax rates. The practical result is thdat any investment will require higher and higher oil prices for a field to become economic.
Gara likes to accuse businessmen like me of being lackeys for the oil industry. The truth is we are just doing what business people are supposed to do -support our major source of revenue and jobs by encouraging investment.
Our goal is to keep jobs growing and having more oil flowing through the pipeline-just a very straight forward common sense approach to a bright future.
Patrick Reilly is the owner of Rain Proof Roofing.