Who are the “friends” of SB 21?

After the thousands of Alaskans who turned out at the Backbone Rallies around the state Thursday, it’s especially hard to understand how Senate Bill 21 meets the regard of so many friends in the Alaska Legislature. This rings true so far not only in its actual provisions but the many amendments Velcroed to it.
The latest comes courtesy of Rep. Mike Hawker, R-Anchorage, who wants to change how the state audits oil company taxes. Instead of remaining with an independent audit by the state, oil companies will be able to report their own numbers. This changes a protective measure that was applied under ACES whereby the state made the final analysis.
Rep. Paul Seaton came up with nine amendments to SB 21 while it was in the House Resources Committee. All but one failed. This is the same committee who voted overwhelmingly, 7-2, in favor of Hawker’s amendment. But his more skeptical, less industry friendly riders didn’t meet with as much fanfare. One was a five-year sunset clause that would ditch the new tax formula if it meant too much loss of state revenue.
Another would have upped the amount of pennies added to the state’s spill response fund. The money is then paid out by the Department of Environmental Conservation in case of spills, such as the one at the Jakolof Bay last winter when two commercial fishing boats sank. It would have required 7 cents per barrel, up from 4 cents to be contributed.
To be sure, Gov. Parnell has backers in his ardent desire to see crude flow more plentifully through the Trans Alaska Pipeline. Increasing production in the face of dwindling state revenue is his worthy goal.

But his math looks like this:
< Less revenue – minus lower (arrow pointing down) revenue from taxes equals = even < less revenue.

What kind of a math teacher would have faith in that calculation? A huge tax break to producers with no promises isn’t good business sense and that was proven out in the form of the spring forecast on Friday.
The Department of Revenue looks two years ahead and finds Alaska’s got a fiscal fall around the bend. It anticipates about $320 million less in unrestricted general fund revenue. Oil revenue’s contribution to the state budget is expected at $4.4 billion this year. That compares to $6.1 billion in 2012.
Sobering news, hopefully, as lawmakers seek to finalize budgets for state government and infrastructure projects before the Legislature’s scheduled adjournment on Monday. The fiscal analysis for the governor’s proposed oil tax overhaul also is based on the revenue forecast for oil prices and production. That means, if this passes, we can already see what the governor’s own revenue people predict will be the results.
Here’s what it means: Remember when Gov. Frank Murkowski took office in 2002? He inherited a deficit during a time of declining oil prices and slashed whole programs to make the budget balance. Among them was Revenue Sharing, cut to the bone and slow to regain its spot, years later, in the budget. He also cut environmental programs for cost savings. Education funding suffered. During Murkowski years, it became regular practice to dip into the state’s savings account to make budget’s balance.
Are we back there again?
Hard to see where these friends of SB 21 are – other than in the towering glass buildings of Anchorage were oil industry employees work and deals take shape. They’re also no doubt in the support industry and in the state Chamber of Commerce, as well as in their own public interest groups.
Fair to say the foes of SB 21 are people who see other writing on the wall. The first programs to be sacrificed during hard times will be those to people – education funding, Head Start, revenue sharing for towns, agencies or programs that monitor the environment and roads.
Could it be that Gov. Parnell is onto a quirk of math and logic whereby you lose money now in order to make money later on?
Even if that proves the case, the question is: How much damage will be done in the interim?

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Posted by on Apr 10th, 2013 and filed under Editorial. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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