Commentary.  We predicted yesterday that lowered credit ratings for Alaska, due to the 49th State's dire fiscal condition, would result in higher interest costs.  We note that, today, Journalist Jeannette Lee Falsey, makes the same point (Link Below).

The state's fiscal condition is a direct result of several governors and many legislatures refusing to take austerity steps necessary to balance an unsustainable budget trend.  

This trend of declining oil revenue and increased government program spending was clearly anticipated by an extinct watchdog organization, Common Sense for Alaska, and Dr. Scott Goldsmith over two decades ago.

Had action been taken then, the pains of austerity would have been rather slight.  By the time Governor Sean Parnell was governor, and now, Governor Bill Walker, the pain of austerity necessary to achieve a responsible and sustainable budget has become extreme.

Parnell did not cut spending sufficiently.  Walker has shown no sign, post-election, of making serious budget cuts.  All signs point to Walker's "strategy" of increasing taxes and increasing spending.

Meanwhile, the rating agencies an New York are finally beginning to recognize Alaska's fiscal plight.  The Standard and Poor's negative outlook could soon spread throughout the investment community.  Investors will, accordingly, place a higher premium on an "Alaska risk factor" that translates to Alaska having to pay bondholders higher interest rates.

But the negative impact doesn't stop there.  Big investors that wish to borrow money for projects in Alaska will likely be told by their financial advisors and bond counselors that lenders will also foresee higher risk in private project investments.  This will make some projects uneconomic.

State or private investors planning participate in Alaska North Slope gas transportation projects (i.e. either in-state or LNG export)….

more coming….