Alaska Politics

 

 Amid low crude prices, tax policy matters more than ever By: Dr. Margo Thorning Guest commentary http://www.alaskajournal.com date: Wed, 09/27/2017

   This summer, observers across the nation watched as lawmakers in the state of Alaska pulled together a buzzer-beating compromise that prevented a potentially catastrophic budget shutdown and kept the government funded through the coming fiscal year.
  For countless Alaskans who simply wanted their government to continue to operate, the compromise is a win. The alternative — an unprecedented shutdown — would have been untenable, resulting in significant upheaval for Alaskans seeking to utilize programs ranging from fishery permitting to cruise ship oversight to early education and Head Start services.
  For political and policy junkies, it was a budget showdown that checked nearly every box, complete with flaring tempers, bruised egos, high stakes, and the discussion of policy shifts that could send ripples through the economic landscape for years to come.  
  This is particularly true in the case of the oil and gas industry, a sector that is looking at increased taxes in the eye in Alaska while simultaneously facing extremely challenging market conditions across the nation and around the world.
  On the heels of a massive surge in domestic production driven by advances in extraction technology and finds from the Bakken to the Marcellus, fortunes have changed somewhat for the American oil and gas sector.
  Prices have fallen steadily in recent years, hovering around $47 per barrel, and analysts expect the price to remain in the $40 to $60 range for the next five years. The cost of producing a barrel of oil is also increasing alongside advances in extraction technology, with companies pursuing projects that are riskier, more difficult to access, and ultimately more expensive.
  The oil and gas industry is strong, and no one will mistake it for a struggling mom-and-pop operation. But these are no longer the boom times of the early 2010s – margins are thinner, profits are lower, and the challenges on the horizon are greater than they have been in some time.
  As the fight continues in Alaska, it’s essential that lawmakers keep these facts about the energy market landscape in mind as they debate their course of action, and that they focus squarely on reducing government spending in ways that won’t cut the legs out from under the state’s economy over the long term.
  The compromise measure includes language convening a special task force of legislators and advisors charged with consideration of additional changes to the overall tax system. The panel, once appointed, will make recommendations for additional tax changes in the coming legislative session. For oil and gas companies still struggling to adjust to a tax structure that has shifted significantly on a nearly annual basis in recent years, the prospect of even more change — and more uncertainty — is troubling and would represent an added hurdle for companies seeking to limit the risk inherent to the capital-intensive business of oil and gas development.
  This should be a source of serious concern for Alaskans, because the oil and gas industry’s outlook is extremely important to the state. No other industry is more heavily integrated into the state’s economy, with 35 percent of all wages and well over 100,000 jobs tied up in the oil business in 2016, according to a McDowell Group report. The sector also poured $2.1 billion into the state government via taxes and royalties in 2016.
  Higher taxes, like those under debate in Alaska, would only add to the challenges the industry faces.
  Such changes may sound insignificant, but the fact of the matter is that tax policy — and policy uncertainty in general — matters a great deal to companies choosing where to explore or where to invest their billions. Caelus delayed a major Alaska project this summer, for instance, citing tax uncertainty among the motivating pressures that led them away from their development schedule.
  In a state where the latest jobs report showed 7,500 lost jobs in the last year, with the deepest losses concentrated in the oil business, this should raise red flags.
  If Alaska continues to focus its policy efforts not on spending cuts and instead on harmful oil tax hikes, more companies like Caelus will rethink their investments. And if other states or jurisdictions consider similarly harmful policy in this market environment, the industry will likely be forced to contract there, too.
  Even amid low crude oil prices and a difficult market, the oil industry employs 10 million Americans and serves as a pivotal engine for economic growth. We simply can’t afford to let bad policy — in Alaska or anywhere else — add to the challenges faced by one of our nation’s most important job creators.
  Dr. Margo Thorning is the senior economic policy advisor with the American Council for Capital Formation in Washington, D.C.

Supremes rule on Dividend cut:
Legal to veto unless enshrined in constitution

Suzanne Downing August 25, 2017 Alaska News
  The Alaska Permanent Fund Dividend has been calculated in a nonpolitical formula by tradition since the first checks were cut in 1982. The amount of dividends was always tied to the actual performance of the Permanent Fund.
   But when Gov. Bill Walker sliced the dividend in half in 2016, he changed the course of Alaska history. The Permanent Fund Dividend can now be used as a blunt political instrument.
   The Alaska Supreme Court on Friday upheld Walker’s right to veto the dividend. In a unanimous decision, the court discarded the arguments made by Democrat Sen. Bill Wielechowski, and former Republican Sens. Rick Halford and Clem Tillion, who had sued the governor.
   The judges said that the dividend is like any other appropriation in the budget, which makes it subject to veto. Walker set last year’s dividend at $1022, when normally Alaskans would have received more than $2,050, due to the strength of the fund, which is now worth over $60 billion.
   The cut took $650 million out of Alaskans’ wallets in 2016 but the dividend was close to the historical average for dividends, which is $1,150.
This year the Legislature did the cut for him, by setting the amount at $1,100. Alaskans who qualify will receive their checks the first week of October.
The argument made by Wielechowski, Halford, and Tillion was that the 1976 constitutional amendment creating the Permanent Fund gave lawmakers constitutional authority to pass laws dedicating use of fund’s income without need for annual appropriations. Therefore, because the dividend is unlike other appropriations, it is not subject to a gubernatorial veto.
   But judges said that even if the constitutional amendment gave the legislature dedication powers over the dividend, the matter is part of the normal appropriation and veto processes that govern the budget.
   “We conclude that Governor Walker validly exercised his constitutional veto authority when reducing the transfer amount from the earnings reserve to the dividend fund,” the judges wrote.

THE DANGER WITH THE DECISION

   Amy Demboski, who hosts a conservative talk show on KVNT, cautioned, “Well, there you have it. Your PFD will forever more be subject to the political whim of the Legislature and governor. The only way to protect it is a constitutional amendment.”
   Sen. Mike Dunleavy, a Republican candidate for governor, has been calling for a constitutional amendment for a while, and he left the Senate Republican majority caucus earlier this because he disagreed with his fellow Republicans over their decision to set the dividend lower than it would be if calculated in the traditional method.
  “We need to constitutionalize the Permanent Fund Dividend, sooner, rather than later,” he said today. “That was overlooked when they constitutionalized the Permanent Fund. If we don’t do this, the politicians will spend all that money in the blink of an eye. This coming session, like-minded people will need to work together to protect the dividend for future generations.”
The court decision is here.

 

How about a say on tax, Permanent Fund?

Added by Editor on August 18, 2017.
Saved under Editorial

Here is a refreshing notion: Alaskans should have a say in whether they will consent to an income tax or the state monkeying around with the Alaska Permanent Fund.

That audacious idea comes from Republican Sen. Mike Dunleavy of Wasilla, who says both questions should go to a public advisory vote.

A gubernatorial candidate, Dunleavy told the Associated Press he thinks such a vote would reveal Alaskans do not believe government spending has not been cut enough and that they are not ready to allow government into their wallets and purses.

He could not, in our view, be more right.

“What I’m concerned about is that, right now, the discussion is how do I take a dollar out of your pocket and give it to your neighbor’s pocket as opposed to creating brand new money, brand new wealth, brand new jobs,” Dunleavy told the AP.

During the last, contentious legislative session, Dunleavy – a supporter of deeper budget cuts – was among those who floated the ballot idea, but it went nowhere as the debate raged over using the fund’s earnings and imposing an income tax. In the end, the Permanent Fund dividends were cut, but no tax or plan to use fund earnings was implemented.

There, indeed, should be a vote of the people on whether they will pay an income tax or allow the Permanent Fund to be used in some way to bridge the state’s chronic multibillion-dollar budget gap. The last time the state asked, the answer was a resounding “no.”

Dunleavy is right, too, that such a vote likely would again rock those who believe Alaskans are anxious to have government take their money while refusing to downsize.

Whether Dunleavy’s proposal gains traction will say a lot about whether state government in the future will work for Alaskans or vice versa. Having such a vote is a good idea. The only reason to oppose it is fear of the answer.

 

Trump puts Alaska projects on ice?

lisa

Alaska energy projects, and even the road to King Cove, may be put hold by the Trump Administration.

While Alaskans debate the wisdom of Alaska Sen. Lisa Murkowski opposing President Donald Trump on Obamacare and at seemingly every juncture, Secretary of the Interior Ryan Zinke is said to be calling business leaders from around the state, with a message that Trump is ready to put a lid on Alaska projects until Obamacare reform is passed.

Our sources in Washington say that Sen. Murkowski has received a frank call from Zinke, with the same message — that she has miscalculated one time too many in her opposition to Trump on issues of major importance, and her state will pay the price.

We are told that Sen. Dan Sullivan received a courtesy call today from Zinke. Sullivan is said to be “concerned” about Alaska’s economy as a result of the call.

Murkowski was quoted in the media today, defending herself against Trump: “How about just doing a little bit of governing around here?” A message to her press secretary this evening was not returned.

Meanwhile, rumors are swirling that all movement on off-shore oil development, ANWR and King Cove are about to come to a standstill after Murkowski voted to not move forward on a simple procedural vote that would bring Obamacare reform forward for debate.

Vice President Mike Pence had to cast the deciding vote after Sen. John McCain of Arizona left his treatment for brain cancer and came back to Washington to vote for the motion to proceed.

For her part, Murkowski has threatened to hold up confirmations of the president’s appointments. She has cancelled confirmations that were scheduled for tomorrow.

Trump criticized Murkowski today on Twitter, “Senator @lisamurkowski of the Great State of Alaska really let the Republicans, and our country, down yesterday. Too bad!”

Rep. Buddy Carter, a Georgia Republican, defended Trump’s criticism of Murkowski, saying “I think it’s perfectly fair,” “Let me tell you, somebody needs to go over there to that Senate and snatch a knot in their ass. I’m telling you, it has gotten to the point where how can you say ‘I voted for this last year, but I’m not going to vote for it this year’?”

All of this is very much in the heat of the moment. Alaska’s other congressional members, Sen. Sullivan and Congressman Don Young, are close with Zinke and are in good standing with the president. Rather than putting all of Alaska’s economy at peril, the Trump Administration may just put its relationship with Murkowski on ice, and award any “wins” to Sullivan and Young. We can hope.

The timing was especially awkward, since today Murkowski joined 35 senators in sending a letter to Zinke in support of the Department of the Interior’s new Outer Continental Shelf Five-Year Oil and Gas Leasing Program for 2019-2024.

The plan has the potential to boost Alaska’s economy, keep energy affordable, and reinforce the United States’ position as an energy dominant superpower. But that is now in peril, along with other agenda items important to Alaska, as our senior senator’s deteriorating relationship with the White House continues to fester.

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For Murkowski, a crisis of her own making (more on Lisa Story)

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