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Paul Jenkins: Wielechowski's 52 reasons defy reason on oil taxes

Paul Jenkins

The insanity seemingly never ends. State Sen. Bill Wielechowski, apparently running for something or other, has taken to posting on the misnamed "It's Our Oil" website one reason a week -- there will be 52 of them, he promises -- to repeal Senate Bill 21.

Senate Bill 21, you will recall, fixed the punitive and failed Alaska's Clear and Equitable Share oil tax. The idea was to rejigger a terrible law that contributed at times to a 90 percent marginal tax rate and to spur lagging production and investment for new oil on the North Slope. It was a good idea and overdue, what with spending soaring into the stratosphere and oil production racing revenues into the tank.

The change, though, irked Democrats and oil industry haters. They managed to get on next August's primary election ballot a goofy referendum aimed at dragging ACES out of its grave to support bigger government and ever more spending.

Now comes the selling job. Wielechowski's very first "reason" to return to ACES? "SB21 is based on a failed philosphy (sic). It will NOT lead to increased production, yet will cost Alaskans billions."

He is dead wrong, of course, but more important is what he and repeal supporters are not saying: Over the long haul, schlepping back to ACES will cost Alaska much, much more. That was clear in the hearings leading up to passage of SB 21.

This is clear, too. Alaska already is losing hundreds of millions in revenues because of lagging production. If things remain unchanged, if spending continues unabated and North Slope production, which underwrites 90 percent of state spending, continues slipping, Alaska soon will find itself in a vast, painful hurt.

It is not me saying that, it is the University of Alaska Anchorage's Institute for Social and Economic Research. You can look it up. In its January 2013 report, "Maximum Sustainable Yield, FY 2014 Update," it concluded, with ACES then still very much in effect:

"Right now, the state is on a path it can't sustain. Growing spending and falling revenues are creating a widening fiscal gap. In its 10-year fiscal plan, the state Office of Management and Budget (OMB) projects that spending the cash reserves might fill this gap until 2023. ... But what happens after 2023?

"Reasonable assumptions about potential new revenue sources suggest we do not have enough cash in reserves to avoid a severe fiscal crunch soon after 2023, and with that fiscal crisis will come an economic crash."

In short, we need more oil, less spending and increased saving. If we repeal SB 21 and return to ACES, none of that will happen. None. In the ensuing fiscal meltdown, government would do what government does: save itself. Layoffs. Income taxes. Sales taxes. Taxes on taxes. It will bite us in unexpected places.

If revenues plunge and state spending nosedives, for instance, the $60 million annually handed local governments as revenue-sharing would be among the first pots of gold to dry up. Local governments like free state cash. They will want to make it up, and they will turn to you.

It could get worse. The state, while paying on its unfunded retirement system liabilities, has been helping local governments and school districts with theirs. In fiscal 2014, that amount was $634 million for state and local governments and school districts. In Anchorage alone, the tab was $23.6 million in 2012 and $72.5 million for the Anchorage School District. Those costs are not going away.

Then, there is education. Alaska is spending more than $1 billion for education statewide annually and nobody is demanding less, but where will it come from as revenues dry up? Guess.

The irresponsibility of returning to a failed tax system that retards oil production and investment and revenue is staggering. It is the kind of thing that would reach into every corner of the economy, with consequences touching every Alaskan. Yet, even with all of that, even with ISER warning of potential fiscal crisis, there are those, like repeal supporters, who blindly seek for their own ends a return to ACES despite its promise of fiscal cataclysm.

Instead of wasting valuable time conjuring up 52 different "reasons" over the next year to commit fiscal hara-kiri, we need only come up with one to avoid it: "Repealing SB21 and returning to ACES is a dumb idea."

If need be, we can say it 52 times.

Paul Jenkins is editor of the AnchorageDailyPlanet.com.


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