One of Earle Gray's books....

One of Earle Gray’s books….

CBC News.  The National Energy Board is giving Imperial Oil until the end of 2022 to start building the Mackenzie Gas Project.  …  Previously, Imperial Oil and its partners had until the end of 2015 to begin building the 1,196-kilometre, $16.2-billion pipeline. … Lisa Schmidt, a spokesperson for Imperial Oil, said in an email … the project participants “remain hopeful that they can assist in the development of Canada’s significant northern gas resources.  This extension will allow time to assess whether changes in the North American natural gas market, including the potential impact of numerous proposed LNG projects, will result in improved economics for development of Mackenzie Delta gas reserves.”…  If it’s ever in fact built, the Mackenzie Gas Project, also known as the Mackenzie Valley pipeline, would transport gas about 1,200 kilometres from anchor fields in the Mackenzie Delta and along the Mackenzie River Valley to a hub in northern Alberta.  (Note: Your publisher, and colleague, Earle Gray of Toronto, first worked on a version of this project in the early 1970s.  -dh)

Alaska’s Fiscal Crisis Unresolved

Time will soon tell how it is resolved 


Dave Harbour

Alaska budget/tax bills are being debated this week.

We note out of fairness the widespread opposition of republicans to new taxes / tax increases and the widespread support of democrats for keeping government whole at the expense of new and more heavily burdened taxpayers.

In Thursday’s House finance committee meeting, for example, the majority of republicans and democrats voted to pass a tax bill out that would increase costs on virtually all businesses and families in the state.

A democrat and two republicans voted against passing it out of committee.

Representative Les Gara, Anchorage, Alaska

Representative Les Gara, Anchorage, Alaska

Representative Les Gara said that (1) the state’s fiscal crisis cannot be solved with budget cuts and that new ‘revenue’ is needed.  He made a rather strange point in support of his position to the effect that (2) the citizens who live in big houses on Anchorage’s hillside were not contributing enough while their lobbyists work against corporate tax increases.

We believe that latter argument to be an emotional effort to demonize oil industry employees: a familiar tactic used by those in Washington and state capitals who wish to redistribute more and more income from wealth producers to their voting constituents.  The Governor has also used Gara’s first argument that Alaska’s giant deficit can’t be resolved by cuts to government operations alone.  Even assuming that’s right, it is noteworthy that the Governor has put the legislature to work trying to keep operations whole by causing additional economic angst and employee layoffs in the private sector — the sure result of fuel, mining, and other taxes and tax increases.

Some will say the Legislature and Governor have made significant budget cuts.  However, the Op-ed piece in the center column and the one in the far right column belie that assertion.

In fact, little effort is being made to cut waste and inefficient agency operating expenses, not to mention avoiding consideration of reasonable entitlement cuts, wage freezes, elimination of high ‘prevailing wage’ requirements for public works projects, etc.  (We welcome those with a well considered, opposite opinion to comment below.  -dh)

Representative Lance Pruitt, Anchorage, Alaska

Representative Lance Pruitt, Anchorage, Alaska

On the republican side, Lance Pruitt noted that he was only voting to pass the bill out of committee where he would vote against it on the House floor.  Most of his colleagues seemed to agree.  His reasoning: if the legislature didn’t vote on the Governor’s legislation, he could simply call them back into special session and more public dollars would be wasted.

We urge those with skin in the Alaska game to carefully absorb the analyses in the  columns to your right.

There will be winners and losers and the opponents could not be more clearly identified, nor could the issues be more clear.

Fewer cuts to government operations and programs means more costs to wealth producers and every family in the state and more job losses throughout the economy — which is 90% dependent on natural resource income and activity.

More logical and reasonable cuts to government operations and programs means fewer new and increased costs fall on the shoulders of ordinary Alaska citizens.

So far, we’re seeing and have reported herein, thousands of resource industry project and job losses and few actual losses of bureaucratic positions.

The result of Alaska’s fiscal crisis could well be the exodus, the outmigration of a significant number of citizens.  Will the majority of those refugees be unemployed private sector employees formerly retained by wealth producing companies; or, will the majority be those leaving be individuals who depend on redistribution of wealth to their special interests?

Time will soon tell.  Either way, the future economy and society and political structure of Alaska will be dramatically different than it was two years ago, when government and its citizens depended on $100/barrel oil.

Get ready for change!

Budget Cuts are Missing…!


                                        Representative Lora Reinbold                                          

Representative Lora Reinbold, Eagle River, Alaska

Representative Lora Reinbold, Eagle River, Alaska

The State House and Senate just passed the Conference Committee Operating Budget bill and, to no surprise, it reveals that little progress was made to reduce the cost of State government.

Despite continued claims of significant operating budget cuts, the budget numbers published by the Legislative Finance Division tell a different story.

First, when looking at total funding for the State’s Operating Budget, the Governor’s amended budget request for Fiscal Year 2017 (FY17) was $8.97 billion, compared to the Senate approved budget of $8.73 billion, and the House approved budget of $8.66 billion.  The Conference Committee landed on a compromise with the minority, with an operating budget of $8.83 billion. Unfortunately, the compromise budget is higher than budgets approved by either the Senate or House!

Compared to the $9.30 billion FY16 Operating Budget, the compromise Conference Committee budget represents a reduction in total State Operating costs of $470 million or 5.1%.  At this level, that doesn’t sound so bad…to some…BUT, there’s more to the story!

The operating budget is broken into two categories: “Agency Operations” (i.e., the cost of the day-to-day operations of the State’s departments) and “Statewide Items” (i.e., operating costs not associated with a particular department such as debt service, state retirement assistance and fund capitalization).  Although Agency Operations account for about 90 percent of the State’s operating costs, the $470 million reduction occurred almost entirely in the “Fund Capitalization” portion of Statewide Operations.

“Fund Capitalization” appropriations are made to various State funds (such as the Disaster Relief Fund, Community Assistance Fund, Public Education Fund, Oil & Gas Tax Credit Fund, etc.) was reduced from $536 million in FY16 to $66 million in the Conference Committee budget.  This $470 million reduction in “Fund Capitalization” does not represent a reduction in the fundamental operating cost of State government.  It simply means that certain funds may become under-capitalized or underfunded, and therefore may not be able to meet their obligations.  Setting aside money in these accounts is a decision that Legislators makes every year.  Reducing appropriations to these funds is a tool that has been used to create the appearance of lower operating budgets.

Now, let’s take a closer look at “Agency Operations”, the fundamental cost of operating State government.  The FY16 Enacted Budget included $8.20 billion for Agency Operations.  The Governor’s FY17 amended budget requested $8.31 billion for Agency Operations, compared to the Senate’s budget of $8.07 billion, and the House’s budget at $8.17 billion.  The Conference Committee landed on a compromise budget containing $8.21 billion for Agency Operations, again above the level approved by either chamber, a $13.6 million increase over the FY16 Budget.

The Governor’s Plan to fund future budgets is similar to the plan being promoted by the AFL-CIO, GCI and others, calling for a combination of budget cuts, new taxes, and restructuring of the Permanent Fund to pay for State government.  Unfortunately, the data is clear, there has been no real progress made this year in reducing the fundamental operating cost of State government in Alaska. 

Many are in a very big hurry to lock down a funding source for big government, despite failing to make real, sustainable reductions in the fundamental cost of State government.  Budget cuts were supposed to be part of the solution. Despite this failure, many continue to call for new taxes (HB 4001), and a restructuring of the Permanent Fund (HB 245).  We are rapidly approaching a vote on both.


Until we demonstrate responsible government spending, there should be no new taxes imposed on Alaskans and no change to the Permanent Fund! Alaska spends almost 3 times the national average per capita on state government. Shifting the burden of big government t0 Alaskans is the wrong solution.  We must fix government spending first!

June 1, 2016

From Brad Keithley

Brad Keithley, NGP Photo by Dave Harbour

Brad Keithley, NGP Photo by Dave Harbour

Can you say “accounting tricks”? From Alaska Public Media’s Rachel Waldholz. “Lawmakers are touting a $4.4 billion operating budget this year, compared with about $5.2 billion last year. That sounds like a big cut — UNTIL you realize that this year’s total doesn’t include hundreds of millions of dollars in oil tax credits that have already been earned by companies throughout the state. The Department of Revenue estimates Alaska will owe about $775 million in cash payments to oil companies this year; the budget only allots $30 million. … [L]awmakers included about half the amount owed, $430 million, in a separate section of the budget (which, through a combination of ACCOUNTING MANEUVERS and the use of leftover funds from previous budgets [i.e., what otherwise was headed for savings], will show up as an expenditure in last year’s budget, not this year’s.)”

Alaska State Budget Observation


James Squyres

Even Walker realizes that the Legislature is being “shifty”. This restating of last years books is a great new trick! Next year, what will they try to restate to this year? From the article… “Republican legislative leaders described their spending plan for next year as less than $4.3 billion, with a $3.2 billion deficit.

But Walker’s administration said the true deficit was more like $3.8 billion. That’s because, administration officials said, lawmakers stuck more than $600 million in additional spending outside of next year’s budget. One example was $430 million for cash subsidies for oil and gas companies which the Legislature placed into the 2016 budget, expiring in 30 days, rather than in the 2017 spending plan.”

Alaska Policy Forum

There is monkey business happening in Juneau with the governor’s personal income tax bill. Now fiscal note shows a virtual no-cost of implementing the tax. Read more:

From Petroleum News