JUNEAU — Gov. Bill Walker’s proposal to reduce spending on oil and gas tax credits has been scaled by a state House committee, which also rejected Walker’s plan to raise taxes on the oil industry.
The action by the House Resources Committee comes as Walker and lawmakers spar over what steps need to be taken to address a multibillion-dollar state deficit exacerbated by low oil prices.
The committee rewrite advanced late Tuesday. It next goes to House Finance.
Legislative leaders have identified tax credits as an area of interest as they look to cut state costs, along with proposals to curb costs in the state Medicaid program and the criminal justice system. Legislative consultants have said that credits that go to companies with no tax liability, which are typically smaller companies developing and exploring on the North Slope and Cook Inlet, reached their highest point during the last fiscal year, $628 million.
Under current law, those credits could total $825 million next fiscal year, including newly earned credits and those not covered this year due to the cap that had been placed on them by Walker, according to a preliminary spring revenue forecast.
Walker last summer capped at $500 million the amount that could be paid for the credits during this fiscal year. The state Department of Revenue said total demand for the year is expected to be about $700 million.
In analyzing the tax credit bill, lawmakers have been asked to balance addressing a major state cost with concerns from an industry also hit by low prices. The head of the Alaska Oil and Gas Association, Kara Moriarty, told House Resources last month that increasing taxes now would mean fewer jobs and a reduction in oil and gas production.
In a release, House Resources co-chair Benjamin Nageak said these are tough times for the state and industries operating here. “We worked hard to maintain a balanced resource policy between exploration and production,” he said.
Minority Democrats on the committee said the rewrite doesn’t go far enough in making changes to a system they see as unsustainable.
“Alaska can’t afford the current oil tax credit system and the House Resources Committee has made the issue worse, not better,” Rep. Andy Josephson, D-Anchorage, said in a release.
As initially proposed, the department estimated $400 million in savings next year under Walker’s bill from repealing certain credits, closing loopholes and having companies wait to use credit certificates until they have a tax liability. It also estimated $100 million in additional revenue from raising the minimum tax on North Slope producers from 4 percent to 5 percent and hardening it so that credits could not be used to lower tax payments. The tax provisions are not in the rewrite.
In a preliminary analysis of the rewritten bill, the department said it would reduce spending by $45 million next year. The numbers were based on a revenue forecast that has since been updated.
The rewrite, among other things, reduces certain Cook Inlet credits and calls for a working group to recommend changes to the Cook Inlet tax regime to the next Legislature. It includes provisions sought by the administration that the department says would prevent artificially inflated net operating losses.