Thoughts on Alaska Oil & Gas

Wednesday the full House Finance Committee, and last night the full House passed CSHB 72(FIN), the Committee Substitute for the Operating Budget submitted earlier this session. As readers of these pages know, I have followed and commented extensively on state fiscal matters generally, and the progress of this year’s Operating Budget specifically.  My comments on this year’s Operating Budget have been reflected most recently here and here,  My thoughts on the votes taken this week — and even more importantly, where we go from here — are captured Continue reading →

The House Finance Committee this week is scheduled to mark up and take action on a Committee Substitute for the proposed Operating Budget.

Given the state’s current fiscal situation, this is a critically important week in Alaska’s history.  As proposed by the Governor, the Operating Budget stands at $5.47 billion, 97 percent of proposed state spending this year and as a result, responsible for driving the budget not only well beyond sustainable levels, but even well beyond the first step the Governor previously has said must be taken in the near term to reduce spending to sustainable levels.

Through substantial efforts, collectively the House Finance Subcommittees early last week proposed substitutes which bring the total within sustainable levels.  But public testimony Wednesday and Thursday was filled with those affected by various of the proposed cuts, seeking reinstatement of “just their piece” of course, but in the aggregate proposing to drive spending back over sustainable levels. Continue reading →

After following and reviewing closely the collective work of the House Finance Subcommittees last week, as finalized and presented early this week to the full House Finance Committee, I sent the following note this morning to the Chairs of the Subcommittees.  The results of their efforts are available here; a  good summary is here. Continue reading →

Juneau’s Pat Race, aka Twitter’s @alaskarobotics and one of the most perceptive of Alaska’s up and coming generation, has started a new podcast series on his blog called “Boring Talk.”

As Pat describes it:

Boring Talk is a podcast where I’ll be exploring Alaska politics through long, boring conversations. This is a personal thirst for understanding but I’ll be sharing my (largely unedited) conversations because I think civic discourse is important in the age of Twitter and maybe there’s some information here that will be valuable to other Alaskans.

At his request, I sat down with him while in Juneau last week for a discussion on state fiscal issues and a few questions about what I perceive as my role in them. The result is available here.  It should come with a warning — it’s 30 minutes and likely lives up to the title (“Boring Talk”) unless you are either my mother, or really into these things.

If Pat does what he is capable of doing — asking penetrating questions and bringing interesting people into the studio (present company excluded, of course) — it’s a series that will be well worth following.   The one he posted a couple of days ago with Katie Moritz, the Juneau Empire’s new — and very good — political reporter is an excellent example.

You can follow the series on his website — alaskarobotics.com — or, again, by following his posts on Twitter @alaskarobotics.

The following ran as a Community Perspective piece in both the online and print editions of the Fairbanks News-Miner (Wednesday, January 28, p. A6)   under the headline “Gov. Walker on track to sustainable budget,” as a Commentary in both the online and print editions of the Anchorage Dispatch News (Thursday, January 29, p. B4) under the headline “The urgent need for a sustainable Alaska budget,” and as a My Turn piece in both the online and print editions of the Juneau Empire (Tuesday, February 3, p. __) under the headline “Urgent need for a sustainable budget.”

During the fall, a large number of candidates campaigned on the theme of putting in place a sustainable budget.  For example, on his campaign website Governor Bill Walker said this, “I will make the hard choices necessary for a sounder fiscal future, including putting in place a sustainable budget.”

When asked during the campaign what they meant by sustainable budgets, most candidates, including Governor Walker, referred to work on the subject by Dr. Scott Goldsmith of the University of Alaska-Anchorage’s Institute of Social and Economic Research (ISER).  According to Goldsmith, a sustainable budget is a spending level which, if implemented today can be maintained indefinitely into the future, adjusted for inflation and population growth.

In other words it is a baseline revenue level which both current and future Alaskans can count on indefinitely without resorting to income or sales taxes or a diversion of the permanent fund dividend. Continue reading →

Co-Chair (and Chugach Electric Association, Inc. General Counsel) Mark Johnson and I closed the books yesterday on another exceptional two-day conference on “Energy in Alaska” (retitled this year, “Energy Markets and Regulation in Alaska”) put on annually by Law Seminars International.  We have been co-chairing the seminar since … well I am not quite sure I can recall.

As we shuffled the deck a bit in light of the election and other recent events, I ended up giving a set of remarks focused on Alaska’s current fiscal situation, which incorporated for the first time a look at the “work in progress” FY 2016 budget prepared by the Parnell Administration and transferred to Governor Walker’s Administration as part of the transition.  That proposed budget, and what the Walker Administration has to say about it, is available here.

My presentation is above.  My comments on the “work in progress” budget are at slide 10.

The conference always results in great discussions with serious people during the breaks and after each day’s set of presentations are completed.  This year’s was no exception.

At the reception following the first day’s events I appreciated the opportunity to explore in detail each of the five options for closing this year’s budget gap.  They are, in no particular order — cuts in spending, use of remaining savings, “raiding the PFD” (either directly or indirectly by spending from one of the accounts used in the calculation of the PFD), income taxes, sales taxes and transfer of increased responsibility (and cost) for government services to local government.

At the conclusion I came to realize that a realistic solution to “where we are headed” necessarily will involve all five.   I will be writing — and talking — about that more in the coming weeks.

Last Friday the Walker Administration released the proposed FY 2016 budget that former Governor Parnell had been working on prior to the election and transmitted to the new administration as part of the transition process.

While there will be more — likely much more — to say about the proposed budget in the days ahead, it is worth noting a few highlights at this point to help start a needed conversation on the state’s current fiscal situation and the choices going forward. Continue reading →

In August 2006, staring into a potential fiscal abyss created by an unplanned shutdown of the entire Prudhoe Bay field due to leak issues,  then Governor Frank Murkowski immediately announced two steps designed to curb state spending and reduce the potential drain on state savings, while additional analysis was being done.

The first step was an immediate freeze on new state hires.  The second was to direct the Office of Management and Budget to review the then-current capital budget to prepare a list of capital projects that could be “phased” (i.e., deferred) until the potential fiscal problems created by the shutdown were “better defined.” Continue reading →

Last evening, at the first session of the Walker Mallott Transition Team, what some have called the “elephant in the room” — the state’s fiscal situation — took center stage.  To Governor-elect Walker’s credit the session was designed specifically to do that.  As he had told KTUU’s Austin Baird earlier in the day, Continue reading →