The Morning Headlamp — Walker’s Tax Credit and Permanent Fund Plan Get Questioned

Walker’s bill raises concerns. Gov. Bill Walker’s bill to reduce tax credits to the oil and gas industry, worth $500 million to the state primarily through reduced spending, underwent tough questioning during its first hearing in the House yesterday. House Bill 247 would reform a program that is expected to pay out $625 million next year, which the administration says is no longer sustainable now that the state’s petroleum-based income has collapsed with the price of oil. The bill also calls for raising the veil of secrecy that has surrounded the credits by disclosing companies that receive them. Rep. Mike Hawker, asked why Walker wants the Legislature to completely reverse its tax credit policy. A Senate working group convened last year by Sen. Cathy Giessel, recommended careful adjustments to protect advancing projects. Headlamp agrees with Sen. Giessel—protecting ongoing projects should be a principal goal of any tax plan the Governor puts forward this session. Pulling the rug out from current projects not only defeats the purpose of the tax credits, but also threatens to inflict considerable economic harm and disruption in how the financial industry views Alaska’s trustworthiness. Incentivizing sustained investment will keep Alaska’s head above water as lawmakers attempt to remedy the fiscal crisis. It is also interesting that the Governor is calling for “raising the veil of secrecy” just two days after finally posting the state’s online checkbook, despite it being offline for roughly seven months.

Arizona lawmakers propose new U.S. 12th Circuit Court; Alaska to be Included. A Sen Jeff Flake and Rep Matt Salmon of Arizona have introduced legislation to break up the 9th U.S. Circuit Court of Appeals. Flake and Salmon, both Republicans, want to move Arizona, Nevada, Montana, Idaho and Alaska into a newly established 12th Circuit. Arizona Gov. Doug Ducey supports the effort. Currently, the U.S. 9th District Circuit Court has jurisdiction over the State of Alaska. The bill introduced by Arizona Sen. Jeff Flake and Rep. Matt Salmon, would place Alaska, and four other western states, under the jurisdiction of a new U.S. court of appeals. Given the uniqueness of Alaska, the vast territory the 9th Circuit Court covers, and the excessive workload consistently faced by the Court, Headlamp thinks this is a bill to watch.

Rep. Hawker weighs in on PFD plans Gov. Bill Walker has proposed using the Permanent Fund earnings to pay for much of the state’s annual budget, but Rep. Mike Hawker has proposed another Permanent Fund bill that’s drawn attention, House Bill 224. It would appropriate an annual percentage of the Permanent Fund for the budget. He cited a provision of the Alaska Statehood Act that says the state’s natural resources should benefit communities, not individuals. “Direct, indiscriminate redistribution of that money, from the resource to people … that is pure socialism,” he said. “It’s confiscating wealth and redistributing it without any public purpose, and that’s just simply wrong.” “My bill respects the Permanent Fund for what it was intended for when it was established,” Hawker said. Hawker’s measure allows for much lower dividends, $250 or less in years where there’s a budget shortfall. “My bill respects the constitution, it respects the Statehood Act, and it utilizes our existing budget reserve funds for the purposes they were established. I don’t believe we need to re-engineer everything just to give it a different name, just to get the same outcomes.” Another key difference between the governor’s and the legislators’ proposals is revenue. Legislators want to see at least $500 million in budget cuts, while Walker has proposed $100 million in cuts over a two-year period.

Headlamp commends Rep. Hawker for putting together his own plan to address the state’s fiscal deficit. Rep. Hawker and other legislators are right to question the merits of Gov. Walker’s Permanent Fund Protection Act (his bill to ‘re-plumb’ state finances). Headlamp also has many questions and concerns with the Governor’s fiscal package. Is the Governor right to raise taxes on Alaskans by $400 million, while only cutting the budget by $100 million over two years? Do Alaskans know that the Permanent Fund dividends would be roughly $300-400 per year given current oil prices under Gov. Walker’s plan? Do Alaskans know that the Governor’s fiscal plan leaves the state with a roughly $400 million deficit this year? Many questions remain unanswered regarding the Governor’s plan. Headlamp hopes Alaskans provide their input today on SB 128 (Gov. Walker’s Permanent Fund Protection Act), by going to their local LIO and testifying.

Murkowski hit the nail on the head. As Sen. Lisa Murkowski continues to promote her bipartisan energy bill, she used a case study close to her heart—Alaska. “Alaska is an energy producer for the rest of our country and for the rest of the world. That’s our legacy and our future because we are blessed with an abundance of resources that most states and countries can barely dream of,” Murkowski explained, “As we produce more of our natural resources, Alaskans will benefit significantly. New jobs will be created. New revenues will be generated for our state treasury. And local energy costs will decline sharply allowing Alaskans to keep more of their hard-earned money.” Headlamp couldn’t have said it better ourselves. We’re thrilled to hear Sen. Murkowski continually promote Alaska’s energy opportunities.


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First Reads

Walker’s oil tax credit bill seeks more transparency, fewer loopholes
Alaska Dispatch News, Alex DeMarban, February 3, 2016

Flake, Salmon introduce bill to split 9th Circuit court
Associated Press, February 3, 2016

Three pitches for closing state budget deficit with the Permanent Fund
Alaska Public Radio Network, Andrew Kitchenman, February 3, 2016

Walker administration submits supplemental request
Associated Press, February 4, 2016

Murkowski touts Alaska benefits in bipartisan legislation
Homer Tribune, February 2, 2016