Morning Headlamp — Tax credits and special session: AK lawmakers’ long night

The Alaska Senate passed legislation that would phase out credits and impose a tax on Cook Inlet oil production. The measure does not go as far as the House version in addressing North Slope credits.

Hours later, the Alaska House rejected the Senate rewrite of the oil and gas tax credit bill. Minority Democrats sought resolution on oil and gas tax credit legislation and said they’d prefer to go to a special session, focused on a select number of issues. Somehow, Headlamp isn’t surprised by the legislative hypocrisy that has become commonplace this session—we’d rather focus on the thousands of Alaskan families that are now directly at risk as the state’s primary industry will be belabored for the foreseeable future.

The Alaska Journal of Commerce ran a brilliant editorial about the Governor and Alaskan legislators following the approval of tax credit reductions for oil and gas producers. According to managing editor Andrew Jensen, “Alaska has a new House majority full of Garas and Guttenbergs that are apparently capable of coming up with an endless series of convoluted matrices of tax levers creeping ever upward but who can’t or won’t read the daily production report from the Department of RevenueIt is patently dishonest for Democrats and Walker (but I repeat myself) to continually assert that the state is losing money from oil tax credits when the state is taking in more than a billion dollars this fiscal year.” Headlamp commends Jensen, again, for his apt analysis and wonders if Alaskans are aware that the Governor is providing incorrect information about the impact of oil and gas tax credits.

Nothing special of note. Yesterday marked the 121st day of the regular legislative session prompting Governor Walker to immediately call a special session to being Monday in Juneau. “Feel a little defeated and unfortunate, because Alaskans are the ones that are really going to suffer if we don’t get a budget passed,” said House Majority Leader Charisse Millett. The Legislature’s failure to produce a budget means that state workers are still set to receive layoff warnings in early June, just like they did last year, with the Governor claiming that 10,000 employees could be laid off…it didn’t happen then, it won’t happen now. Unfortunately, the difference between last year and this year is the layoff of thousands of people in the oil and gas industry. Bills on the special session agenda include the budget, oil and gas tax credits, a proposal to allow for structured annual draws from Alaska Permanent Fund earnings and many taxes.

Treasury Secretary Lew spent Wednesday morning in Anchorage in meetings with Mayor Ethan Berkowitz, Lt. Gov. Byron Mallott, and representatives from Alaska banks, oil companies, Alaska Native corporations, nonprofits and other organizations. They talked about issues surrounding economic diversification and financial inclusion — that is, making sure Alaskans have access to financial services such as checking or retirement savings accounts, and that people know about opportunities for starting businesses. “There’s a lot of people out there who have a lot of good ideas, who are willing to work hard, grow businesses, take risks,” he said. “Those are the people we need to get more engaged in the economy. Connecting budding capitalists with capital is a critical piece of making sure that an economy prospers.” Headlamp is sorry to inform Secretary Lew that the aforementioned capital is going to be hard to come by in Alaska due to recent legislation.

Everyone has to live within their means. State lawmakers cut education funding in the proposed budgets by nearly $13 million Tuesday night. They moved the money into the oil and gas tax credit fund. Legislative Finance Division Director David Teal said in the House budget, the government was going to use $145 million leftover money from fiscal year 2016 to pay for education. But during the conference committee meeting, they decided not to. “They put it into the oil and gas tax credit fund instead,” Teal said during a phone interview. Senate Majority spokesperson Michaela Goertzen wrote in an email that the conference committee chose not to fund the increase (to the Base Student Allocation) because it “was approved under vastly different budget conditions. … Given the current state budget deficit, we are not in a position to continue the increase for FY17.” Anchorage School Board member Tam Agosti-Gissler said the district estimates they will have to trim $4.6 million from the Anchorage School District budget if the legislature keeps these cuts. She said she doesn’t know how they would make up for the loss. For FY16/17 the Anchorage School District has a total budget of $816,513,000. Headlamp questions the ‘sky is falling’ rhetoric used by Mrs. Gissler to describe a paltry $4.3 million reduction in state funding for the ASD. We’d suggest Mrs. Gissler and the ASD follow the lead of the Fairbanks North Star Borough (FNSB) school district. FNSB Superintendent Karen Gaborik said she plans to provide the board with a list of potential cuts, organized into priority levels, by Friday. She said the cuts at the top of her list of recommendations include things like leaving certain administrative positions unfilled, scaling back phone system upgrades and reducing curriculum materials funding.


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First Reads

Alaska Legislature adjourns with work still to do, called back by Gov. Walker
Alaska Dispatch News, Nathaniel Herz, May 18, 2016

Alaska House leaders losing grip over rank-and-file, complicating finale in Juneau
Alaska Dispatch News, Nathaniel Herz, May 18, 2016

The Latest: Alaska governor calls special session
Associated Press, Becky Bohrer, May 18, 2016

U.S. Treasury Secretary talks finance and economic diversity in Alaska
Alaska Dispatch News, Annie Zak, May 18, 2016

Showdown set over oil tax credit bills
Alaska Journal of Commerce, Elwood Brehmer, May 18, 2016