The Morning Headlamp—Budget talks ahead

The New York Times covered Alaska’s ongoing fiscal woes as oil prices continue to fall. The piece highlights the fact that although other resource-based economies are also seeing the long-term impact of declining oil prices, Alaska’s situation is unique as Governor Bill Walker must address new taxes and Permanent Fund issues as well. While the piece does cover our state’s ongoing fiscal woes, it fails to mention that Governor Walker’s fiscal plans will call for increased taxation on oil production.  A federal coordinating office handling Alaska’s gas pipeline projects has been defunded by Congress and will no longer serve as a liaison between the public and organizers of the behemoth AKLNG project.  The long-anticipated move was made official when Congress enacted recent spending and funding bills. Federal coordinator Larry Persily plans to close the office, which operates the site and contains information about the project and each phase that it has moved through thus far. Persily is hoping to find a repository for all of the information that the office has gathered during its 10 years of operation. Persily noted that the public will notice less coordinated flow of information to the public. While any cuts made to the AKLNG megaproject are bad news, the removal of a bridge between the public and private sectors on a project of this nature is a critical loss and will severely affect the project’s progress.

A long five months. According to coverage in the Homer News, one main issue will dominate discussions in the second regular session of the 29th Alaska Legislature: the budget. That’s the Legislature’s only real job, Sen. Gary Stevens said at his Rotary talk. What budget it passes and how the Legislature deals with Alaska’s fiscal crisis is an open question. “It’s going to be a bad year,” Stevens said. Stevens said he thought the Legislature would go into double-overtime, with at least two special sessions extending its stay in Juneau beyond the 90-day limit for two more months. Despite the seriousness of the issues at hand, ideas like an income tax aren’t likely to pass in the next Legislature, not with newer legislators running for re-election, Stevens said. Asked for his remarks on the challenge ahead, Stevens said, “Bring it on.”

A recent study conducted by University of Alaska Anchorage’s Institute of Social and Economic Research (ISER),  claims that cutting $100 million by laying off state workers will cost the economy significantly more jobs and income than would an income tax to raise the same amoun. It is interesting that an agency funded by the state of Alaska focuses on potential damage of a hypothetical lay off of state workers while ignoring the reality of more than 900 oil field workers having already been laid off.  Should employees who could be impacted by state layoffs be performing the economic analysis on the impact? 


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First Reads

Election year may derail fiscal plan, says Stevens
Homer News, Michael Armstrong, December 24, 2015

How balancing the budget could harm Alaska’s economy in the short term
Alaska Dispatch News, Jeannette Lee Falsey, December 24, 2015

As Oil Money Melts, Alaska Mulls First Income Tax in 35 Years
New York Times, Kirk Johnson, December 25, 2015

Public pension fight heating up: State, municipalities spar over liabilities; storm inbound to Delta
Fairbanks Daily News Miner, December 28, 2015

The King’s First Budget – Spending Cuts, Less Oil Revenue, Economic Reform
Oil Pro, Jeff Reed, December 28, 2015