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Legislature: Budget bills moving but problems loom for oil tax reform

  • Author: Patti Epler
  • Updated: September 27, 2016
  • Published March 13, 2011

With the legislative session nearly two-thirds over, the state House last week moved an $8.9 billion operating budget to the Senate for its review.

Lawmakers whacked more than $16 million from Gov. Sean Parnell's original proposal but acknowledged that the spending plan will grow significantly once $129 million in additional health care costs that the federal government will no longer pay are added in.

Senate vows to restore House cuts

Senate leaders also are vowing to restore some of the funding cut by the House. Perhaps the biggest controversy was over cutting $2 million for the third year of a pre-school pilot program. The tourism industry also got less money than it would have liked.

"I don't think this is an outrageous budget by any means but I think we need to think about what we can sustain in the long term," Rep. Mike Doogan, a member of the House Finance Committee, said just before the full House voted 36-3 to move it over to the Senate.

Several members pointed out that the budget was far from finished because the governor's proposal to reduce oil taxes is still very much on the table. If approved, it would cost the state treasury about $2 billion a year, something Parnell says is a fair tradeoff for more jobs and economic benefits. But some lawmakers are resistant to the idea, especially if it means filling the shortfall with money from the state's savings accounts.

The oil tax proposal is getting a tougher ride in the Senate than it did in the House, where the measure -- House Bill 110 -- easily passed the House Resources Committee. It is now before the House Finance Committee which has hearings scheduled every day next week to dissect the fiscal aspects that include tax cuts and more credits.

Senate ignores House's oil tax work

But the Senate is starting from scratch with Senate Bill 49 and has scheduled hearings similar to those held for the last few weeks in the House where state officials, oil industry representatives and other experts bring senators up to speed on aspects of the legislation. The Senate Resources Committee is expected to begin that process this week. Oil tax junkies can watch debate on the proposals every morning at 8 a.m. in House Finance then catch it again in the afternoons on Monday, Wednesday and Friday in Senate Resources.

Parnell called reporters in for a routine press availability last week and defended the tax proposal in light of remarks made by some lawmakers who call it a giveaway since there has been no guarantee from the oil industry that there will be more investment and thus the jobs anticipated by the governor.

"This is nothing against the governor, he already knows I don't agree with him on his bill," Sen. Tom Wagoner, co-chair of the Senate Resources Committee told reporters on Tuesday. "If we're going to continue with a bill that gives away $2 billion to the companies with no guarantees at all of how that money will spent or what work will be done with money in the state of Alaska and how many Alaskans will be hired, I have a hard time supporting the bill. I guess that's an overall problem of mine."

Governor opposes 'decoupling'

Another influential senator, Senate Finance Committee co-chair Sen. Bert Stedman, also threw a bit of political wrench into the governor's works last week when he said he wants to revisit the issue of separating oil and gas taxes for accounting purposes. The "decoupling" measure was a hot topic last year, passing the Legislature only to be vetoed by Parnell, which put him crosswise with Stedman then, too. Stedman thinks the state gets shortchanged by having the taxes figured together but Parnell believes it hurts the industry -- and investment in Alaska -- to separate them.

On Thursday, Parnell called Stedman's idea "an oil tax increase."

"Trying to marry those two (ideas) up is not something I want to do," Parnell said about working his bill and Stedman's possible proposal together.

Parnell accused the Senate of letting the oil tax proposal languish and urged lawmakers to work to get the measure approved. He also called the notion that the state would lose $2 billion a year a "specious argument" and said his staff would present more information to the Senate to prove the naysayers wrong.

He several times referred to Alaska as an "outlier" when it comes to the rate of taxes imposed by the state under the current tax regime, called Alaska's Clear and Equitable Share, or ACES.

"This is a high priority of my administration," the governor said, adding that the state needs to create new opportunities. "We can't squeeze every last drop out of existing fields because that's a parachute that's going down."

ACES restructure doubtful this session, some say

Still, many lawmakers have said they doubt any substantive restructuring of ACES will make it through the Legislature this session. Stedman in particular has said he wants to wait until detailed studies of Alaska compared to other oil-producing regions are done, which won't be until June.

And on Friday, Stedman's Finance Committee introduced another new political wrinkle -- a bill that would allow more money to go toward education and community revenue-sharing when the price of oil climbs above $89 a barrel. Senate Bill 97 would allow the Legislature to steer an additional $2 million to educational programs for every dollar above $89 a barrel. Lawmakers could apply that same formula to revenue sharing, under the bill.

The governor did end the week with a milestone of sorts. Late Friday, he signed into law the first bill of the session, a Senate measure that allows members of the armed forces to designate which of their family members will act as next of kin in the event they are killed in the line of duty.

There are five weeks left in the session, which is scheduled to end at midnight on April 17, so this week promises to be another jam-packed round of committee hearings and floor action.

5 weeks and lots of work left, as usual

Besides the oil tax measures moving through the House and Senate, the Senate Finance Committee has scheduled daily hearings -- even twice a day -- on the governor's proposed $1.6 billion capital budget. The budget includes proposals for resource development and infrastructure projects throughout the state. Public testimony on the 47-page list of projects is slated for Thursday evening.

Parnell won't be here early in the week to shepherd it through himself, although his point man on the issue, Revenue Commissioner Bryan Butcher, is scheduled to appear many times at the committees. The governor told reporters he plans to head to Miami this week to attend a cruise ship industry meeting, where he plans to thank companies that added ships to Alaska routes last year and to try to encourage more to come north this year. He is expected back by Thursday.

Also on the minds of most lawmakers -- although not necessarily on the Legislature's formal agenda -- is a meeting of the Alaska Redistricting Board, set for Wednesday in Anchorage. The board is responsible for adjusting the boundaries of legislative districts every 10 years as the state's population grows and shifts. U.S. Census Bureau numbers on Alaska are expected to arrive in the state this week which means the board has 30 days to come up with a draft plan. That coincides with the last month of the legislative session. Redistricting is a contentious political issue because redrawing the district boundaries likely means some legislators --especially in rural and Southeast Alaska where population numbers have declined -- will likely lose their seats. Others worry they will be forced to run against other incumbents from their own parties.

Contact Patti Epler at patti(at)

Correction: This story has been updated to correct the time of the House Finance hearings (8 a.m., not 9 a.m.) and to clarify Sen. Stedman has not yet introduced a decoupling bill but is just raising the issue again.