Monday Musings: Solving the State Budget Deficit

In Uncategorized by Owen Phillips

The state of Alaska made several decisions 40 years ago that made sense then but not now:

  • They decided oil could pay 90% of the budget despite what happens to production and price. 
  • They decided we needed no broad-based tax. 
  • They decided they could pay dividends out of Permanent Fund earnings.  
  • They decided those earnings would not be needed for state services. 

They also made other decisions that directly weigh on the present:

  • They decided they could have oil taxation in excess of the competition, both in 1989 and 2007, without affecting taxpayer behavior. 
  • They decided they could change oil taxes with alarming frequency, without affecting the investment climate. 
  • They had ballot measures to increase taxes. 

As a result of those decisions, 

  • We do not have a natural gas pipeline. 
  • We have less oil production. 
  • We have billions of barrels of undiscovered oil and only two major companies seriously looking for it.  
  • We have created an unstable business climate in which investors are scared to death of spending billions of dollars under one tax regime, and then having the state take it away with another ballot measure or legislative tax change.  

It is policies like this that got the state into the situation it is today.
It is policies like this that created the deficit. 
It is wildly inaccurate to say that ballot measure 1 is a way to solve the budget deficit.
We’ve tried it before – it didn’t work.
Don’t Let History Repeat Itself.