Audience weighs in on state budget

While talk of touching the yearly dividend checks for Alaskans can be tantamount to cursing in some circles, the majority of the more than 200 people who attended a joint chamber luncheon and budget presentation in Soldotna on Wednesday seemed open to discussing the Permanent Fund earnings as a larger source of revenue to cover the state’s budget deficit.

A 21-question quiz rounded out a day of presentations — primarily focused on the budget and the state’s progress on the Alaska LNG project — by State Budget Director Pat Pitney, Sen. Peter Micciche, R-Soldotna, and Gov. Bill Walker.

Pitney and Micciche spent the better part of an hour telling the crowd at the Soldotna Sports Complex that the state’s budget problems are not going to be solved by cuts alone or even an unlikely increase in the price-per-barrel of oil.

According to their presentation, the state’s break-even price for its current spending would be about $109 a barrel.

“The probability of it coming back to $109 in the near future is essentially nonexistent,” Micciche said.

Further, the state would have be producing about 1.6 million barrels per day of oil — more than three times what it is currently producing.

“Oil is not going to bail us out this time,” Pitney said.

But, the solution is not as easy as cutting what the state spends on services to match what it brings in, Micciche said. The audience seemed to agree; when he asked if any in the audience believed that solution to be tenable, just three people raised their hands.

Pitney said the state administration has started 11 different interagency efficiency projects, like combining maintenance positions for offices in Juneau and working to reduce the number of people housed in the state’s prisons.

But those efforts, while necessary, are likely going to be in the margin of a larger budget plan, she said.

“This isn’t going to save us 50 percent in our government spending, but it could save one or two or five percent. So we’re working on those very actively,” she said.

In addition to the efficiency discussions, the state has 600 fewer full-time positions now than it did in December 2014, according to Pitney’s presentation. The state issued about 60 pink slips, but through attrition ended up laying off just over 30 people, she said.

“The more we can reduce our state employee base through attrition and through a more humanistic way of reducing our workforce, it’ll be better than pink slips,” Pitney said. “We’re at 600 fewer than we were at the end of last year and this is people being paid. I’m talking about bodies being paid and this is full-time permanent bodies, not seasonal workers.”

Among the other marginal contributions to the state’s roughly $3 billion dollar deficit would be so-called sin taxes, or those that would put a higher burden on people who drink alcohol, smoke cigarettes or marijuana.

Between alcohol, cigarettes, marijuana and e-cigs, 41 percent of the chamber luncheon guests who voted during the quiz ­— just over 150 of them — voted in favor of taxing marijuana. The next highest was a higher tax on cigarettes with 33 percent supporting it.

But Pitney said the money generated from a marijuana tax was a drop in the bucket next to the deficit.

“(Sin taxes) are the largest source of tax revenue, on an individual basis, that exists in the state but in the grand scheme it’s relatively small,” she said during a post-meeting interview.

The group also discussed a state lottery but voted in support at a much slimmer margin, 53 percent voted in favor to 47 percent against.

Pitney said a lottery would also be a small step toward raising revenues for the state but would likely not solve its problems.

“There’s just not enough of us to make a state lottery pay like it does in New York,” she said. “This could be maybe $50 million and then we could do gaming rooms and cards and whatnot, but it’s going to be small and it would change our society.”

The administration will continue soliciting advice on what should be done with the state budget, while the poll given to the chamber luncheon crowd will soon be available to everyone in Senate District O, Pitney said she hoped the budget discussions would look at the larger picture of what Alaskans would like to see in their state.

“What do they want their futures to be?” she said. “We have great opportunities in Alaska. We will always be a natural resource state … what is the appropriate share of the tax burden — because we’ve gotten it all from oil — and should mining be a bigger part of it? Should fishing be a bigger part of it? What about water? Water is going to be a really big resource coming forward, how will that work? What’s the balance across these natural resources in creating a stable standpoint and then what do we individually accept as our share to make the state we want to be in?”

Walker left most of the budget discussion up to Pitney and Micciche and focused his short speech on his recent trip to Japan and his discussions about the Alaska LNG project. He was upbeat about the project’s future.

After the meeting, he said the project had a lot of positive aspects for Japanese investors — despite the logistical problems posed by building an 800-mile pipeline to get gas from the North Slope to Nikiski.

“A big issue for us is the sailing time from Nikiski to Japan is seven days,” he said. “The sailing time from the U.S. gulf coast to Japan is 26 days. That’s a lot of money and time associated with shipping. We’re the closest to the market from the U.S., there’s no question about that,” he said. “Our gas is not shale gas, it’s already discovered, it’s the most proven reserve on the planet.”

In addition, Walker said, Japan trusts Alaska.

“The long-term relationship they’ve had with Alaska out of Nikiski for 42 years of on-time deliveries, that’s a big deal,” he said. “We have a five-star rating in that regard.”

 

Reach Rashah McChesney at rashah.mcchesney@peninsulaclarion.com or follow her on Twitter @litmuslens.