About a week ago, Alaskans received some outstanding news. North slope oil production rose for a third consecutive year. Since 1988 was the last time this happened, it’s worth stepping back to take in the larger picture.
Because Alaska gets the bulk of its revenue from oil, increased production means the state has a lot more money in its future than the Governor Walker has been telling us. It also means Alaskans chose wisely when they voted to keep in place the oil tax reform known as SB 21 – but that’s a topic for another day.
Remember, it was just last March when Governor Walker and the House Democrat Majority were desperate to justify an income tax. The Walker administration told us to expect a 12 percent decline in oil production this year that would result in a catastrophic loss of revenue.
As it turns out, we have a two percent increase. So, what unforeseen economic event accounts for this 14 percent turnaround? The answer is, nothing. It appears the sky-is-falling projection was never justified. Doomsday scenarios were useful, however, to the Walker administration as they worked to rationalize a tax and spend agenda.
Last year, when we in the Republican-led Senate Majority were confronted with Walker’s projections, they just didn’t make sense and our finance committee pushed back. After all, we had just experienced two years of increases after decades of declines. In addition, there was a barrage of good news about huge discoveries on the North Slope. Even though we didn’t have exact numbers, the anecdotal evidence was mounting, and it suggested the administration’s production estimates were nonsense.
Ultimately, Walker’s officials admitted their numbers were “stale,” and the senate told them to sharpen their pencils and provide us with more realistic information. About a week later, they came back and their new projections showed only a four percent decline. It was still off by about $600 million gross, but at least in the realm of reality.
This all happened in an environment where Governor Walker and the House Democrat Majority envisioned an Alaska IRS system under which working Alaskans would write a second check on April 15th. The Senate said, “No.” As a result, we were dragged into multiple special sessions as the governor and political left sought to wear down the senate’s resistance.
During this time, we were told repeatedly to “do our job”, but apparently what that really meant was “capitulate!” And do it quickly before anyone calculates the math.
When the Governor began talking about another special session on taxes in October, the Senate told him he needed to provide accurate oil production numbers before we would engage in any discussions about revenue. To the Governor’s credit, the new numbers didn’t help his position, but he delivered them anyway. It is these new oil production estimates that show a two percent increase instead of a 12 percent decline. That 14 percent change represents nearly an additional $1.5 billion circulating in our economy.
The senate does not believe our fiscal problems are over. However, these new oil production estimates suggest we may be dealing with a difficult but manageable problem, not a dire crisis.
The senate has repeatedly found that our reserves, if prudently managed, will earn enough investment income to fund government and ultimately close the fiscal gap without taxing Alaska’s wage earners. Our plan does not rely on draconian cuts, nor does it wipe out our budget reserves. It does, however, envision a state spending limit and continued downward budget pressure to reduce the size, scope and intrusiveness of government.
Governor Walker and the House Democrat Majority labor under the false impression that the senate will act counter to the best interests of Alaskans after we have been sufficiently leveraged, worn down or cajoled. The Governor can drag us back to Juneau, ad nauseam, and the leftists can pin every government ill on us, but it simply won’t work.
Here’s the deal, in the last two years, senators have spent more than a year living in Juneau hotels and sleeping in rented beds, but we will not be more easily leveraged just because we are tired. We won’t be leveraged because we’re unpopular with the bureaucracy, either.
The senate will support new revenues only when it is proven to be in the best interest of Alaskans as whole, not just their government.
Senator Pete Kelly, a Republican from Fairbanks, is President of the Alaska State Senate.
