Category Archives: Thought Pieces

Bill Walker is becoming the new Sean Parnell …

how-keep-job-recession-e1452010557125Late last week we wrote a column analyzing the state of Alaska’s overall economy and the effect that Governor Walker’s PFD cut was having on it (“Yes, Alaska is now formally in a recession and Bill Walker singlehandedly is making it much worse …,”

In response a regular reader offered the observation that, reading the column, they were struck by the irony of what this Administration was doing compared to the last.

Through government overspending the last Administration (and legislatures) created an economic bubble, breaching fundamental economic policy at the high end of a commodity cycle by creating a level of economic activity (and expectation) that was unsustainable over the long term, hyping the then-current government economy at the expense of those to come. Continue reading

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

Alaska Oil| Is the Governor undermining SB 21 …

Fiscal CliffAs thoughts begin to turn to the now-certain referendum on SB21 it is important to understand that there is one scenario  under which the Governor himself could end up significantly undermining a key argument for maintaining the statute.

The scenario relates to the interplay between SB 21 and the budget.  Interestingly, the Governor likely has complete control over whether the adverse scenario develops.  Unfortunately, current indications are that he is headed down the wrong path.

The Reasons Supporting SB 21

On the surface, there are two major arguments supporting SB 21.  The first is that it produces greater long term value to Alaskans from oil than ACES, the Continue reading

Alaska Fiscal Policy: Is This Generation of Alaskans Failing the Next? (from the August 2013 Alaska Business Monthly)

August 2013 Alaska Business Monthly

In addition to pieces on this page and elsewhere, I write what began as a bi-monthly, and now has evolved into a monthly, column on oil, gas and fiscal policy issues for the Alaska Business Monthly.  This is the eighth column, originally published in the August 2013 print edition and available online here.

In 1976 Alaskans passed a constitutional amendment establishing the Permanent Fund. The amendment provides in pertinent part that “at least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund.”

Those here during that period attribute the passage of the amendment to two things. Continue reading

Alaska Oil Policy| Understanding Investment (the sixth in the Alaska Business Monthly Series, from the May 2013 edition)

As noted on these pages previously, I write a bi-monthly column on oil & gas issues for the Alaska Business Monthly.  This is the sixth column, originally published in the May 2013 print edition and available online here.

Petoro Investment Cycle Slide 2Alaskans heard the word “investment” a great deal during the recent legislative session.  They likely will hear more of the word in the months and years ahead as the state continues efforts to bring increased investment to the North Slope, and others evaluate whether those efforts are successful.

In that context I thought it would be useful to write a column on oil investment.

The Chart

To do that, I have borrowed a chart from a company called Petoro.  Those who read my January column (“Alaska Oil Policy:  Achieving Alignment,” Alaska Business Monthly, Jan. 2013), will recognize Petoro as the arm of the Norwegian government engaged in co-investment with industry in the development of that country’s oil and gas resources.  I chose to use a chart from Petoro because it is viewed largely as a neutral entity, not likely to tilt the information playing field one direction or another. Continue reading

Five takeaways from the Governor’s proposed budget …

Five takeaways from the budget ... (12.18.2012)Last Friday (December 14), Governor Parnell announced the Administration’s proposed state budget for Fiscal Year 2014. The full speech is available here. Later in the day, the Administration’s Office of Management and Budget released a more detailed summary of the budget and the Executive Summary of the 10-year forecast, required by the Executive Budget Act, that will accompany the budget submission at the start of the legislative session.

The proposed budget is the first in a constitutionally (Art. IX) and statutorily (AS 37.07) outlined process – normally containing three steps – that ultimately will determine the final state budget for the coming fiscal year. The second step is review and revision of the Governor’s proposed budget by the Legislature, ultimately leading to the passage of its own version of the budget. The third step is subsequent review of the legislatively approved budget by the Governor and, if appropriate, vetoes of various appropriations contained in the Legislature’s budget (the so-called, “line item veto” provided by Art. II, Sec. 15 of the Alaska Constitution). In extreme cases, there is some potential for a fourth step should the Legislature decide that the Governor’s vetoes are excessive; the Legislature can (but very seldom does) override any of the vetoes by a two-thirds vote, reinstituting the specific appropriations otherwise stricken by the Governor. Continue reading

Five things to look for in oil tax reform …

Politico, a mostly online newspaper that covers national political affairs — and with which I often open my mornings — routinely attempts to provide readers with a guide to significant upcoming events with a list — usually five — of what they consider the most important things to look for as the event unfolds.

As Alaska begins to consider  changing its approach to oil taxes in the upcoming session, I have developed a list of five characteristics that I will look for in evaluating various proposals.  I share them for whatever value that may have to others. Continue reading

The Third in the Alaska Business Monthly series: “Alaska Oil Policy| Out of Alignment” (from the November 2012 Alaska Business Monthly)

As noted on these pages previously, recently I agreed to write a bi-monthly column on oil & gas issues for the Alaska Business Monthly.  This is the third column, originally published in the November 2012 print edition and available online here.

 As Alaska finishes this year’s election cycle and starts looking toward the coming legislative session there are several steps which are needed to restore Alaska as an attractive location for oil investment. Continue reading

It’s time to cut state spending: The numbers show future has arrived

(Reprinted from the Fairbanks News-Miner, October 7, 2012)


James Carville is known for many things, but the one that always comes first to mind is the line he used to keep Bill Clinton on message during the 1992 presidential campaign. Carville summed up the campaign this way whenever Clinton threatened to wander off topic: “It’s the economy, stupid.” Clinton got the point and won the election.

A significant number of Alaska legislative candidates are in need of a similar mantra this coming election, except the appropriate theme this time should be “It’s the spending …” Continue reading

The Next in the Alaska Business Monthly series: “Oil Reform Requires Fiscal Reform” (from the September 2012 Alaska Business Monthly)

Alaska Business Monthly (Sept 2012)As noted on these pages previously, recently I agreed to write a bi-monthly column on oil & gas issues for the Alaska Business Monthly.  This is the second column, originally published in the September 2012 print edition and available online here.  

Most Alaskans are familiar with efforts by Governor Parnell the last two years to reform Alaska’s current oil tax structure. The most recent effort ended earlier this year, when the Governor withdrew the revised oil tax reform bill that he had submitted at the beginning of the special legislative session.

What many are not aware of is something that happened at the end of the special session, immediately before the Governor withdrew the bill.

The Office of Management and Budget is the state agency responsible for preparing and administering the state budget. In an appearance before the House Resources Committee, the head of OMB, Karen Rehfeld, testified that if the Governor’s tax reform bill passed, the reduction in revenues could cause the state budget, which otherwise was projected by OMB to run a surplus for several more years, to turn to a deficit virtually immediately. Continue reading