The Institute of Social and Economic Research (ISER) recently released its FY 2015 update estimating how much Alaska’s state government can afford to spend from the unrestricted General Fund (UGF) in the coming fiscal year. In this year’s report, author Scott Goldsmith (NGP Photo) estimates that the state can afford to spend about $5 billion from the UGF in FY15.
Guest Commentary On Oil Tax Reform
by
Bob Berto
Alaska will sit at a critical crossroads when it is time to vote in this year’s primary election on the question of whether to repeal recently passed oil tax reform aimed at increasing North Slope oil production and investment for new oil.
I grew up in Ketchikan and have spent almost my whole life working in resource related industries. I started working in fishery supply and aviation to put myself through college and much of my adult life has been spent in the state’s maritime and tourism industries in Southeast Alaska.
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From "Keep Alaska Competitive"
Next door at Kuparuk, ConocoPhillips Alaska has submitted permit applications for a viscous oil development targeting the West Sak reservoir, the company said in a statement released Feb. 18. |
Oil tax reform is delivering even more good news for Alaska. BP will increase its capital investment in Alaska by 25 percent to $1.2 billion this year, Janet Weiss (NGP Photo), president of BP Alaska, told the Anchorage Chamber Feb. 10. All resource industries require stable fiscal climates, robust infrastructure and quality transportation systems to thrive. When resource industries in Southeast Alaska are booming local economies thrive — providing jobs and helping keep local taxes low.
There is a radio ad playing now across the state that says, in effect, that we all are in the oil industry. In Alaska, a truer statement was never made, no matter how far removed Alaskans are from the oil fields on the North Slope. We are all impacted by the industry’s success.
When the Legislature passed oil tax reform to rectify the problems with the old oil tax system, it took a strong step forward in securing the state’s long-term economic future.
The old tax system contained a provision that was punitive as it ratcheted tax rates so high it made Alaska unattractive to the oil industry to increase investment here. As a result, investment went elsewhere, while North Slope oil production continued an average 6-8 percent annual decline.
Why does it matter to Southeast Alaska that oil in our pipeline is only about one-fourth of its capacity?
Because even though it may not feel like it in Southeast, Alaska’s economy is fueled by oil production. Oil revenues to the state are based on production, and the State of Alaska gets 90 cents of every unrestricted general fund dollar it spends – from oil revenues. The industry is responsible, directly or indirectly, for about one-third of all jobs and about one-half of Alaska’s entire economy according to a university study. It is the state’s biggest private economic partner.
Alaskans need a healthy, vibrant oil industry for long-term, sustainable state budgets, economic growth and to maintain the quality of life Alaskans enjoy.
Oil production decline is a serious matter for every Alaskan, and to generate more production, the state needs to attract more investment, but that was not occurring under the old tax regime. Investment increased elsewhere. In fact, among the other oil producing states in the U.S., as of 2012, all had shown increases or were flat with the previous year. Alaska was the only state to decline. Punitive taxes drove away new investment. None of that is good for Alaskans or our economy.
The good news is the new oil tax system is working. We are already seeing increased investment on the North Slope as companies position themselves to work under an improved business climate created by tax reform.
Southeast Alaska residents, in my view, would be wrong to vote to repeal the new tax reform and return the state to the old tax, which has a proven track record of failure – failure to attract increased investments, and failure to increase oil production that come along with more investment. Already, the Southeast Alaska Conference, the largest economic development membership group in Southeast, has endorsed a “No” vote on the repeal measure because of the harm passage would inflict on our state economy.
We are at the crossroads. We must take the right path for the long-term. Join me in learning more at www.foraksfuture.com.
(We received the commentary above from a group advocating defeat of the referendum proposal to repeal last year's passage of SB 21, oil tax reform. We took a similar editorial position soon after repeal advocates announced their intent to repeal the new law. We have long said that tax reform is a huge incentive for gas pipeline success and that repeal of tax reform will lead to a dark new era of energy investment in Alaska. The author of this piece, Bob Berto, is a statewide co-chair of a group advocating defeat of the referendum. He is a small businessman involved in tourism and maritime services. Berto is a lifelong Southeast Alaskan and lives in Ketchikan. -dh)
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