Monthly Archives: February 2016

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

Each Tuesday morning at 7:15 am Alaska I join KBYR AM750‘s The Michael Dukes Show to discuss the latest in Alaska oil and fiscal issues. This week we discuss the current proposals for #PFD cuts, the legislative debate between those and spending cuts, why those going to Juneau say one thing but the #AKecon needs something else and how Alaskans can help tip the balance.  I join Michael shortly after 10:00 into the segment. Listen here or at the widget below and for past episodes, go here.

#AKBudget: Where I differ from the Governor, Sen. McGuire and Rep. Hawker …

Late last week I spoke to the Valley Republican Women’s Club (Thursday) and the Kenai Chapter of the Alaska Support Industry Alliance (Friday).  The subject for both was A Way Forward on the Alaska Budget.

As I have continued to speak to Alaskans about this issue over the last several weeks in both public forums and elsewhere I increasingly have come to realize that the current debate over Alaska’s fiscal situation ultimately boils down to two issues:  first, the outlook for future oil (and LNG) price and production levels, and second, the perceived ability to cut state spending further from current levels.

If you believe the out-years (beyond three years) of the price and production forecast reflected in the Department of Revenue’s Fall 2015 Revenue Sources Book (RSB) are undeniably accurate, or if you believe that spending cannot be cut significantly from current levels, then you come to one conclusion.

On the other hand, if you believe as I do both that the out-year forecast contained in the Fall 2015 RSB may be overly pessimistic and that state spending can be reset successfully nearer levels which are more reflective of the 11-year period extending from FY 1995 – 2006 (the last time Alaska went through a low revenue cycle), adjusted for inflation and population growth — in other words, on what economists refer to as a real (apples-to-apples) basis — then you come to different conclusion. Continue reading

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

Each Tuesday morning at 7:15 am Alaska I join KBYR AM750‘s The Michael Dukes Show to discuss the latest in Alaska oil and budget issues. This week we discuss the four fiscal proposals currently on the table in Juneau (three cut the PFD, one doesn’t) & the debate over oil tax credit reform.  I join Michael at 8:30 into the segment. Listen here or at the widget below and for past episodes, go here.

On Chris Story’s Alaska Matters Radio …

Tuesday after lunch I joined Chris Story on his weekly Alaska Matters Radio program to discuss the PFD, Alaska’s current fiscal situation and, as some call for changes, how SB 21, the 2013 oil tax reform bill, is working. In addition to his three Homer-based radio shows, Chris also is a regular Monday morning guest (and sometimes guest host) on KBYR AM 700’s daily Michael Dukes Show

It gave me great pleasure to be able to talk with Chris about the PFD in former Senate President, PFD co-founder — and strong PFD retention supporter — Clem Tillion’s home district, and to discuss the success of SB 21 with someone whom I had many discussions on the issue during the ultimately successful 2014 campaign to retain SB 21.  The podcast of my segment follows:

This week (Feb 9, 2016) on The Michael Dukes Show …

Each Tuesday morning at 7:15 am Alaska I join KBYR AM750‘s The Michael Dukes Show to discuss the latest in Alaska oil and budget issues. This week we discuss what I learned while in Juneau last week and what the #AKleg isn’t yet thinking (or at least talking) about but should‬.  I join Michael at around 10:15 of the following segment.  Listen here or at the widget below and for past episodes, go here.

A Sustainable Alaska Budget …

BGK (State Senate Affairs 2.4.2016)

Yesterday, Scott Goldsmith and I testified before the Senate State Affairs Committee on SB 128 (the Governor’s fiscal bill) and SB 114 (Senator McGuire’s fiscal bill, which GCI has been using in its presentations).  The video of the hearing is here.   Scott’s testimony starts at 17:05:00 into the video, mine at 1:10:00.

Both of us testified using the Goldsmith sustainable revenue model, and both of us concluded, though for different reasons, that the Legislature should not enact PFD cuts or broad based taxes this year.  Scott believes that such revenue measures may be needed in future years; based on the outlook I believe is appropriate to the state’s current fiscal situation I am not as certain.  The slide decks follow:

Based on my outlook (at slide 10) I conclude that the current sustainable revenue number is $4.3 billion (compared with a current, FY 2016 budget of $5.4 billion).  As I outlined in the testimony (at slide 11) I believe that spending can be reduced to or near this level with the effect of avoiding PFD cuts or taxes.

In his testimony Scott compares different approaches to deriving a number, using various inputs and timeframes (at slide 15).  Using a 3-year moving average, which is designed to smooth out what otherwise might be year-to-year jumps due to changing oil values, he concludes that the current sustainable revenue number is $4.39 billion.

Separately during my testimony I expressed significant concerns about the effects of cutting the PFD on Alaskans and Alaska’s private economy (at slides 16-18).  Scott did as well (at slide 18).

In its coverage of the hearing (For lawmakers, 3 options to tap Fund earnings) the Juneau Empire listed the approach as a third option before the Legislature this session (in addition to the Governor’s and Sen. McGuire’s proposals).  Alaska Dispatch News columnist Dermot Cole had his own take on the hearing, and another view from Alaska Commons — which confuses some of the testimony to create a conflict between Scott’s testimony and mine similar to what Dermot initially did in writing his column (until “Goldsmith and Keithley told me they do not believe there is a contradiction …”) — is available here.

To some degree the morning hearing was an opener for a subsequent hearing later in the day to take broader public testimony on the Governor’s proposed approach.  As several of the state’s media outlets reported, there was significant opposition to cutting the PFD during that hearing .  (Alaska Dispatch News:  “Governor’s budget plan picked apart as Alaskans debate Permanent Fund changes;” Fairbanks News-Miner, “Public testimony opens for new PFD plan;”  KTUU, “Alaskans weigh in on proposal to finance government with Permanent Fund earnings;” KTVA, “‘Don’t touch my PFD’ Public weighs in on Governor’s PFD proposal“).  In part the later hearing provided real life examples of the concerns Scott and I raised in the morning about the adverse effects on Alaskans and the private economy from cutting the PFD.

It will be interesting to see where this goes. I anticipate it won’t be the last time this session we have the discussion.