This week (September 27, 2016) on The Michael Dukes Show …

Each Tuesday morning at 7:20 am Alaska, I join KBYR AM700‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues. This week Michael and I discussed (1) the Permanent Fund Board’s decision to block Governor Walker’s proposed use of the Permanent Fund to pay oil credits, (2) the Walker Administration’s decision to back off its proposed denial of the annual Prudhoe Bay Unit Plan of Operations, and (3) the significant adverse effect on the overall Alaska economy of Governor Walker’s #PFD cut. I join Michael at 15:15 into the segment.

Listen here or at the widget below and for past episodes, go here.

This week (September 21, 2016) on The Michael Dukes Show …

Each Tuesday morning at 7:20 am Alaska, I join KBYR AM700‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues. This week (which was on Wednesday due to travel) Michael and I discussed the issues surrounding Sen. Wielechowski’s PFD suit; if it comes to that, the extent to which Alaska can focus any income and sales taxes on Outsiders; and the Walker Administration’s renewed focus on potentially issuing pension obligation bonds (“POB’s”).  I join Michael at 14:30 into the segment.

This is not the first time the Walker Administration has floated the idea of POB’s.  My thoughts the last time it arose are collected here.

Listen here or at the widget below and for past episodes, go here.

Why the #AKLNG hearings have us thinking about Don McLean’s “the day the music died”

As readers will know, in addition to this blog we also regularly publish more frequent, shorter pieces on our Facebook, Linked In and Google+ pages.  Links to those pieces are available in a box down the right hand column of this page, but on infrequent occasions we also have published them here when we believe they have more than the usual significance and want to ensure they have the widest possible distribution.

Yesterday’s piece summarizing our view of the two days of legislative hearings this week on the #AKLNG project is one such instance.  The piece follows:

Friday’s “First Post” from Alaskans for Sustainable Budgets: We are considering nominating Don McLean’s “The Day the Music Died” (official title, “American Pie”) as the official theme song for the last two days of hearings before the Joint Senate and House Resources Committees on the#AKLNG project.

For those of you that weren’t born when the song was popular (a larger segment of the population than used to be the case), the song is McLean’s early 1970’s reflection on the day three idols of late-1950’s pop music died in an Iowa plane crash. It was, in his terms, “the day the music died.” Continue reading

There are two state fiscal issues that matter this election cycle and many candidates are getting one badly wrong …

fiscal-cliff-pulling-backAs we close in on the end of the first round of this election cycle — the primary is this coming Tuesday, August 16 — it is important to remember that there are two state fiscal issues that matter this year.

The first is how the candidate stands on state spending levels.  The second — injected into this cycle by the Governor and the Senate — is how the candidate stands on cutting the PFD.

Some try to minimize the second, arguing to one degree or another that the state’s financial condition is too far gone to be salvaged without permanently cutting the PFD and converting the difference to support state spending.

But that attempt to minimize the importance of maintaining the PFD is wrong and overlooks the fundamental reason both issues are important. Continue reading

Alaska’s Fiscal Situation: Past, Present & Future — an update

As regular readers will realize, at the request of Daniel Hamm, its Chair, we occasionally brief the Alaska Republican Assembly on the current status of state fiscal issues and our thoughts on how to deal with them.

We did that again this week, with a focus on what happened this past session(s), where that leaves the state’s fiscal condition, what the current outlook is as we start to think about FY 2018, and alternatives for dealing with that, admittedly somewhat initially dismal, outlook.

As explained in the presentation, I continue to believe there is a solid fiscal future ahead for Alaska — without resorting to permanent PFD cuts or significant taxes.  But it requires taking steps to implement Jay Hammond’s vision for Permanent Fund earnings and getting immediate control over what has become one of the biggest current expenses in state government — reimbursed oil credits.

This coming session may provide the last great chance to bring the state’s fiscal situation under control before more drastic measures become necessary.  The presentation outlines how we think that can be accomplished.

The update is above, or also available here (video) and here (slidedeck).

Why we need to halt the reimbursement of oil credits — and how …

Fiscal CliffThis column will not be popular with some readers. But it needs to be written.

As readers realize, Alaska is facing a significant financial challenge.  Part of that is self-inflicted by not tapping all available revenue sources.

Untapped revenue

As we have previously discussed on these pages, part of the Permanent Fund earnings stream always has been intended to be used to support government.  As former Governor Jay Hammond said when discussing his vision behind the Permanent Fund:

“I wanted to transform oil wells pumping oil for a finite period into money wells pumping money for infinity.”  Once the money wells were pumping, “[e]ach year one-half of the account’s earnings would be dispersed among Alaska residents …. The other half of the earnings could be used for essential government services.”

Inexplicably, instead of establishing a mechanism for doing just that, Governor Walker instead has done the one thing Governor Hammond strongly cautioned against — tapping the Permanent Fund Dividend, the portion of the “account’s earnings [otherwise to] be dispersed among Alaska residents.” This year the result is to have left roughly $1 – $1.25 billion in potential new government revenues on the table (50% of FY 2016 statutory net income), while at the same time taking roughly $650 million out of Alaska’s private economy.

The larger part of the problem

But the much larger share of the problem is driven by continued overspending.

As most readers will know, some legislators have claimed that the budget passed this Continue reading

Rick Halford & Brad Keithley on protecting the PFD …

Talk of Alaska (5.24.2016)

Click here for a link to the program.

Earlier this week, former State Senate President Rick Halford and Keithley Consulting President Brad Keithley appeared on Alaska Public Media’s “Talk of Alaska” to discuss why the Permanent Fund Dividend (PFD) should not be changed or “replumbed” as has been proposed this session by the Walker Administration.

Their joint appearance carries with it a significant amount of irony.

Following Walker’s 2014 election as Governor, Halford was selected to serve as Co-Chair of the Walker-Mallott Transition Team based on his deep understanding of and connections throughout the state, and Keithley was selected as the opening speaker at the first meeting of the full transition team following the election.  Keithley’s role was to outline the economic situation that Alaska faced and potential ways for dealing with it.

The irony is that each bases his opposition to the Administration’s “replumbing” proposal on the very reasons they were chosen to be part of the transition effort.

Halford believes that a PFD cut will have a deep, adverse and unjustified effect on the people of the state, and Keithley believes not only that it is unnecessary in the face of ongoing developments in oil markets, but also has the worst adverse impact on the overall Alaska economy of any of the fiscal options currently under consideration.

The website for this edition of Talk of Alaska is here.  A podcast of the discussion is available by clicking on the small speaker icon half way down the page.

Spending caps (or at least spending cap “guidance”) …

HFIN Hearing (4.13.2016)Last Tuesday afternoon I was sitting in my home office in Anchorage (working on taxes, actually) when I received a call, telling me that HB 311, this session’s version of a bill first introduced by Rep. Charisse Millet in 2013, was up for hearing before the House Finance Committee at 8:30am the following morning.  The bill, which requires the Governor to submit as part of his annual budget the “sustainable budget” number calculated consistent with the “Goldsmith/ISER” approach, had received two hearings in the prior legislature (2013-14) (here and here) but hadn’t received any attention from the Committee this session prior to the call.

As I described in my subsequent testimony, the approach contained in the bill could be used as a fiscal plan (which I have advocated in the past), as a spending cap (which I also have advocated) or as a spending guide.

Never one to pass up an opportunity to talk about sustainable budgets, by 8:30am the next morning I was in Juneau, with a presentation which combined my thoughts with those that Dr. Goldsmith previously had submitted in support of the bill (the slidedeck is below). Continue reading

Given my shot, what I think is important for Alaskans to understand about the #AKbudget and #AKoil …

At the invitation of Greg Huff, the Director of the Alaska Council on Economic Education, I was the evening’s guest lecturer at yesterday’s session of this year’s “Economics Spring Forum,” an annual 3 credit course for teachers focusing on economic and financial issues. The Forum is sponsored by the Council in conjunction with UAA’s Center for Economic Education. Continue reading

This week (September 13, 2016) on The Michael Dukes Show …

Each Tuesday morning at 7:20 am Alaska, I join KBYR AM700‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues. This week we started the discussion with this month’s International Energy Agency’s (IEA) Oil Market Report, released this morning.   The report revises some of IEA’s previous work by concluding that current oversupply conditions in global oil markets (and thus, price softness) are now expected to continue into 2017.

We followed that discussion by focusing on what that revised outlook means for Alaska, and then in the second segment while discussing the need for continued state spending reductions (a needed step regardless of the IEA’s outlook), we discuss a recent analysis that shows the Alaska legislature is spending way, way more (i.e., more than double) on the University of Alaska (UA) compared with what other states are spending on UA’s self-defined “peer institutions.”  I join Michael at 14:45 into the segment.

Listen here or at the widget below and for past episodes, go here.

One last day guest hosting The Michael Dukes Show (Sept 8, 2016) …

As regular readers know, most Tuesday mornings at 7:20 am Alaska, I join KBYR AM700‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues.

This week has been a bit different.  As I have explained in previous posts, with Michael off on assignment I have been sitting on the other side of the microphone as the show’s guest host.

Because some of the resulting discussions have touched directly on oil, gas and fiscal policy issues I have posted excerpts here (Sept 2) and here (Sept 6/7).

This post covers yesterday (Sept 8), the final day of my stint as guest host.  The relevant segments from the show are as follows:

  • Interview with Dean Westlake (D-House District 40, North Slope and Northwest Arctic Boroughs) about issues important to that district and the views there on state fiscal issues (6am block at 14:20),
  • Interview with Nils Andreassen, the Managing Director of the Institute of the North about Alaska’s Arctic issues, which touch on both oil and fiscal issues (6am block at 31:35),
  • My comments on spending levels at the University of Alaska (7am block at 3:15) (for the statement that triggered my comments see In lean times, supporters of Seawolves sports make their pitch to university president,” quoting UA President Jim Johnsen as saying: “We are the most dependent university system in the United States on its legislature for funding — No. 1.”), and
  • Interview with candidate David Eastman (R-House District 10, Wasilla & Susitna River Drainage) about issues important to that district and the views there on fiscal issues (7am block at 30:52).

Listen here or at the widget below for the podcasts of the show, and for past episodes of my regular Tuesday discussions with Michael on these issues, go here.

This week on The Michael Dukes Show (Sept 6/7, 2016) …

As regular readers know, most Tuesday mornings at 7:20 am Alaska, I join KBYR AM700‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues.

This week is a bit different.  With Michael off on “assignment” (hahahaha — most people call it a vacation, but I am learning that journalists call it an “assignment”), last Friday and most of this week I have been sitting on the other side of the microphone as the show’s guest host.  As a result, instead of applying my experience to respond to questions from Michael, I have been using it mostly to develop  context and frame questions during discussions with others.

Because I think the resulting discussions are informative on the issues we address on these pages I am posting the podcasts of the discussions from Tuesday (Sept 6, 2016) and today (Sept 7, 2016) here.  (We already have posted the ones from last Friday’s show here.)  The relevant segments are as follows:

Tuesday (Sept 6, 2016)

  • My take on the Administration’s proposal to use the Permanent Fund to pay for oil credits (8am block at 33:30 into the segment).

Wednesday (Sept 7, 2016)

  • Interview with Rebecca Logan of the Alliance and news and opinion source AKHeadlamp on #AKLNG, the dispute between the Administration and BP over the Prudhoe Bay Plan of Development & the use of the Permanent Fund to pay oil credits (6am block at 32.35 into the segment),
  • Interview with House District 18 Republican candidate Mike Gordon on #AKLNG & #OilCredits (7am block at 13:15 into the segment), and
  • Interview with KTVA’s Liz Raines on the proposed use of the Permanent Fund to pay #OilCredits, Sen. Wielechowski’s suit to restore the full PFD and what happens next in the House District 40 race (8am block at 14:10).

Listen here or at the widget below for Tuesday and Wednesday’s episodes, and for past episodes of my regular Tuesday discussions with Michael on these issues, go here.

Fiscal Friday on The Michael Dukes Show (September 2, 2016)

As most readers know, each Tuesday morning at 7:20 am Alaska, I join KBYR AM700‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues.

With Michael off on assignment, this past Friday I also sat in as guest host for the show.  Usually on Fridays the show revolves around firearms, with Michael calling them “Firearms Friday.”  With me sitting in as guest host, this past week the show transformed into “Fiscal Friday,” with parts of the first and second hours focused on Alaska fiscal issues.

Because I think they are informative on the issues we discuss on these pages I am posting the first and second hours of the show here.  In the first hour we were joined by Todd Moss, Chief Operating Officer and Senior Fellow of the Washington-based think tank, The Center for Global Development.  In addition to other works, Todd has published two books which center on fiscal programs similar to Alaska’s PFD.  The books are “The Governor’s Solution: How Alaska’s Oil Dividend Could Work in Iraq and Other Oil-Rich Countries (An Oil-to-Cash Reader)”  and “Oil to Cash: Fighting the Resource Curse through Cash Transfers.” 

In my experience, Todd has the best grasp of anyone of the significance of PFD-like programs to the strength and success of resource based economies.  He joined us at 13:00 into the 6am hour.

Then, Rep. Tammie Wilson joined us in the second hour to discuss her perspective on what are the most important fiscal issues that will be facing the legislature this coming session.  Standing for reelection this year for her fifth term, Rep. Wilson has served on House Finance since 2011, earning a reputation as one of the most fiscally conservative members of both the Committee and the legislature.  As always, the discussion with her was enlightening. She joined us at 14:15 into the 7am hour.

Listen here or at the widget below for Friday’s episodes, and for past episodes of my regular Tuesday discussions with Michael on these issues, go here.

The Alaska economy is headed toward a shock: This week (August 30, 2016) on The Michael Dukes Show

As most readers know, each Tuesday morning at 7:20 am Alaska, I join KBYR AM700‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues.

This week’s discussion is a bit different than most.  One of the reasons we use the sustainable budget model developed by Dr. Scott Goldsmith to analyze state fiscal issues is because it is an excellent tool for identifying the consequences of current decisions on Alaska’s future fiscal situation — and by extension, overall economy.  Looking at the consequences through the lens of that model, I believe Alaska received at last week’s #AKLNG hearings before the Joint Senate and House Resource Committees some very, very … very … bad news about the outlook for the state’s fiscal situation and economy .

In a sound bite, I believe both Alaska’s state budget and economy are headed to a very difficult place if the direction that emerged from those hearings comes to pass.

I outlined the reasons why in a piece posted on the blog over the weekend — “Why the #AKLNG hearings have us thinking about Don McLean’s ‘the day the music died’”.  This week’s conversation with Michael Dukes expands on that piece, and in the second segment focuses on what I think that means also for the current debate around cutting the #PFD.

Some — especially in the current election cycle those wanting to minimize the effect of continuing down the current road — will suggest that my concerns are overblown.  In response I offer this recent observation from Casey Reynolds’ political blog, The Midnight Sun:

Fiscal conservative advocate Brad Keithley spent … his own money two years ago in a campaign to convince lawmakers that the state was on the verge of a budget crisis, only to see Republican candidates and radio hosts alike declare loudly he was being an alarmist. They of course then acknowledged he was right the day after the election.

Based on last week’s hearings, I believe we are headed to an even more difficult place than I thought then.  For the reasons I believe why — and what that place may look like when we arrive — pick up my discussion with Michael at 15:00 into the segment.

Listen here or at the widget below and for past episodes, go here.

This week (August 23, 2016) on The Michael Dukes Show …

Each Tuesday morning at 7:20 am Alaska, I join KBYR AM700‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues. This week we discuss what the results from last week’s primaries mean for #AKfiscal policy going forward, and my view that the #AGDC is taking a huge step backwards on the #AKLNG project. I join Michael at 14:55 into the segment.

Listen here or at the widget below and for past episodes, go here.

This week (August 16, 2016) on The Michael Dukes Show …

Each Tuesday morning at 7:20 am Alaska, I join KBYR AM700‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues.  Because today is the Primary Election Day edition, we started at the top of the hour (the 7:00 am segment).  I join Michael at 1:00 into the show.

Since it is election day, the discussion focused on what I think is the most significant issue facing voters this year — how we go forward on the PFD.  While the issue itself isn’t on the ballot, it is showing up in various ways in several primary races because of the positions various candidates have taken.  We discussed how the old Hickel v. Hammond debate is resurrecting itself in the current PFD debate, the role of the PFD in the Alaska economy and the importance of this election to the future of the PFD.

The recent piece by Charles Wohlforth on the differences between Hickel and Hammond on the role of Permanent Fund earnings that Michael and I use to start the discussion is here.  The guide to candidate positions on the PFD that I reference in the second segment is available here.

Listen here or at the widget below for today’s discussion; for past episodes, go here.