Monthly Archives: March 2014

I am addressing the MatSu Business Alliance today as part of their regular lunch forum.  The general topic for today’s forum is the “Amusement Park of Economics.”   As described in the invitation to today’s program, my role is to discuss “the economic wheel of the state budget” and, given my recent focus on the area as part of the Alaska House Sustainable Education Task Force, “provide individual conversation around education funding.”

As I have thought through it, I have divided the topic into three pieces:  where we are (on the state budget), where we are headed and what that means for Alaskans and the state’s economy.  My conclusions two months in to the current legislative session:

• The state budget is in for some rough – potentially very rough – economic seas ahead.  If oil goes to $90 (as some have projected), the situation will become seriously difficult.

• While the proposed spending levels currently being proposed for the FY2015 budget are lower than the last three years (and compared to three years ago, significantly lower) , they nevertheless remain at alarmingly high levels which are not sustainable and continue to spend the next generation’s money.  At these levels, the state is continuing down the path that the University of Alaska’s Institute of Social and Economic Research (ISER) previously has identified is leading to a “fiscal crisis [and] economic crash,” which in turn will lead to the need for the  “ … institution of a broad-based tax, and use of a portion of the earnings of the Permanent Fund.”

• If Alaskans want a different course, they need to tell Juneau that they will accept serious cuts.  Right now, that isn’t the message Juneau is hearing.

The slide deck reflecting the analysis and conclusions is available here.  I am looking forward to the opportunity — and more importantly, the questions following.

Last month I outlined some concerns about the proposed Alaska LNG project and suggested that the legislature look more deeply to the experiences of other, successful projects elsewhere in the world to evaluate whether Alaska was applying global best practices.  (See The Legislature should rethink the Governor’s LNG proposal, Feb. 18, 2014)

As I have listened to the testimony and presentations about the Alaska LNG project in the intervening period my concerns have only deepened, and, disappointingly, the legislature still has not appeared to turn to the lessons learned from other, successful projects to determine whether Alaska could be doing better with this one.   As Alaska discovered with AGIA and ACES, sometimes — oftentimes — its not productive to create new approaches when others already have proven successful.  I am concerned that Alaska is going down the same road again.

As I outline in the attached (a copy also can be downloaded here),  I believe this project is going wrong in three critical areas.

• Fails to achieve the “alignment” which the earlier Alaska North Slope Royalty Study found critical to successful efforts,
• Unlike successful, similarly situated projects elsewhere in the world, does not provide Alaska with an active role in the critical upstream segment of the project, and 
• Something I know a little bit about, potentially creates significant fiscal policy issues for the state and, by transferring a profitable segment of the project to a Canadian entity, does not maximize return to Alaskans.

Sometimes these things are better captured in a slide deck than by an extended essay.  I developed this slide deck in the format I would use if asked to testify or speak further on the issue.