Who is to blame for Alaska's fiscal crisis?
In the wake of the SB21 repeal, there has been a lot of talk about the multibillion-dollar deficit the state is currently facing. Many people are blaming the oil companies for the crisis and insisting it is their fault because of the reduction in taxes under SB21. That is easy to do, they make billions of dollars and are some of the largest companies in the world. However, as convenient as it is, it is not correct to blame them for our fiscal crisis.
Oil companies do not determine our budget, the legislature and governor do. Since ACES was passed in 2006, two things happened. Revenues increased and spending went way the hell up. Since 2006, general fund contributions to the operating and capital budget have almost tripled. Why did spending go up so much? The answer is pretty simple, there was a lot more money and people like it when legislators give them things. The new $150 million UAA sports arena, the crime lab, millions to the Alaska Moose Federation and millions to the Dome in Anchorage to pave their parking lot are only a few examples.
Some people, like myself, have been talking and warning of this fiscal crisis for some time. I ran for the state Senate in the 2012 Republican District K primary against Sen. Lesil McGuire on a platform of reducing spending to sustainable levels to protect future Alaskans. She has consistently voted for these ridiculous budgets. She, and most of the other Republicans in this Legislature and past ones, who have crafted and passed the irresponsible and unsustainable budgets are the ones to blame, not the oil companies. As a side note, Sen. McGuire is currently advocating to establish a multibillion-dollar state Arctic infrastructure bank, I have not the slightest idea how she plans to pay for that. This shows just how out of touch many of our legislators are.
If we use the administration's current revenue forecast and assume a budget with ZERO percent growth, the state is out of reserves (Constitutional and Statutory budget reserves) in 10 years. What many people fail to realize is that even under ACES the state would face the same crisis because of continuing decline in oil production. Unfortunately, we cannot go back in time. At this point, the only hope the state has is to reduce funding to sustainable levels and increase oil production. I believe SB21 will lead to increased oil production if left alone. Stability is a big part, maybe the biggest part, of how and why companies make investment decisions, and Alaska has proven to have a very unstable place to do business. We have had 5 different oil tax structures in Alaska since 1977:
This is an incredibly unstable way to create a business climate. How can a company expect to invest billions of dollars on a project that will last twenty years or more in a place that is constantly changing the tax system it has to operate under? Further, the oil companies, who pay for more than 90 percent of our unrestricted spending, have the right to and should be concerned with our spending problem because they are the ones who will be forced to pay for it.
As a Republican who believes in small and efficient government, I am very disappointed in how Republicans in the legislature and governor's office have failed us when it comes to the budget. The only people to blame for this fiscal crisis are the ones who have built and voted for these irresponsible budgets. Fiscal year 2013 and 2014 budgets saw general fund contributions of $7.6 billion and $6.8 billion respectively, the largest I state history. For a comparison, general fund contributions for the fiscal year 2006 budget was $3.0 billion. The following is a list of legislators, by party, who voted for last year's budget:
Alaska House of Representatives:
Republican yeas (25): Austerman, Chenault, Costello, Feige, Gattis, Hawker, Higgins, Holmes, Hughes, Isaacson, Johnson, Keller, LeDoux, Lynn, Munoz, Neuman, Olson, Pruitt, Reinbold, Saddler, Seaton, Stoltze, Thompson, P.Wilson, T.Wilson Democrat yeas (4): Edgmon, Herron, Kreiss-Tomkins, Nagaek
Republican nays: None Democrat nays (8): Drummond, Gara, Greunberg, Josephson, Kawasaki, Kerttula, Tarr, Tuck
Alaska Senate:
Republican yeas (13): Bishop, Coghill, Dunleavy, Dyson, Fairclough, Giessel, Huggins, Kelly, McGuire, Meyer, Micciche, Stedman, Stevens Democrat yeas (3): Egan, Hoffman, Olson
Republican nays: None Democrat nays (3): Ellis, French, Wielechowski
Excused: Gardner
Then Gov. Parnell signed it.
Both bodies had enough Republican votes to pass the budget even if everyone else voted "no." But there was not a single Republican that voted against last year's budget in either body. To be fair, the Republicans who were newly elected in 2012 are less to blame than the ones who have been there longer, especially since 2006. It is time we start electing Republicans who are actually serious about fixing our fiscal crisis, not just ones who talk about it.
Jeff Landfield moved to Anchorage in 2004. He graduated from UAA in 2009 with a BA in history and minor in economics. He spends time advocating for limited government and market-based reforms. He is the current president of the Taku/Campbell Community Council.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch, which welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com.