In an apparent bid to run our government more like the federal government — or, for that matter, Venezuela — the Alaska State House this week passed Gov. Bill Walker's bill to issue a billion dollars of bonds to pay for oil tax credits. Let's be clear about these oil tax credits — the payment of these tax credits is purely at the discretion of the Legislature and the Walker administration. That said, we should pay our debts, and contrary to what some may have said, we have been paying these oil tax credits, every single year, according to a statutory formula. In fact, when we were overflowing with oil revenue, we actually paid above and beyond our statutory duty.
Then the price of oil crashed.
When we could no longer afford to make carte blanche payments of these credits, Gov. Walker did the politically popular (at the time) thing and vetoed oil tax credits down to their statutory levels. So what's the problem, you ask? Well, even though the statute is crystal clear about the state's obligation to make these payments, the oil company bankers don't like the fact that they aren't getting paid as fast as they would like.
The incredible irony is that the statutory formula to pay back these credits is tied to how much oil production revenue the state makes. Remember when the oil companies successfully persuaded us to massively cut their taxes? Well, the hangover there is that it also cut the amount of tax credit reimbursement the state owes per year.
So what are fat-cat bankers to do when they don't get everything they want? They naturally use their clout to get the governor and Legislature to change the laws. And Walker, being in a tough election and desperate to please the oil company gods, agreed. He has concocted a scheme to have the state issue a billion dollars in bonds, and that billion dollars will promptly be turned over to these Outside bankers. Saddling future generations with massive debt is generally not a good idea. In this case, according to the Legislature's own attorneys, it is likely also unconstitutional. You don't have to be a constitutional scholar to figure this one out. Article 9, Section 8 of the Alaska Constitution prohibits issuing state debt except for veterans housing loans or capital improvements, and both must be approved by the voters. It says nothing about issuing bonds to pay pure debt.
Gov. Walker thus sought to circumvent the constitutional prohibition on issuing debt by using a constitutional exception that allows for public corporations to issue revenue bonds, which are secured by revenue. Walker has created a sham corporation with no assets whose sole purpose is to issue these bonds. The problem is, his own administration testified these are not revenue bonds, and there is no revenue being generated by the corporation or by the issuance of these bonds.
The administration then concocted a unique theory — that this billion dollars worth of bonds is not actually "debt" and therefore is constitutional. Huh? They actually testified that yes, these bonds will be issued, but there is no obligation to actually pay these bonds back.
So presumably the bond gods on Wall Street will simply gift us a billion dollars and we can go our merry way. The problem with this is that his own administration said the failure to pay these bonds would damage our credit rating. That would impede our ability to issue future (constitutional) bonds.
There is a reason the state's Founding Fathers didn't want the state to straddle future generations with debt. They were the children of the Great Depression. They saw the damage of becoming over-leveraged, of heaping massive debt on our grandkids. This governor and legislative bunch in Juneau, not so much. Why worry about the future when you can back the oil banker truck up to the state treasury and allow them to shovel in as much as they can?
Speaking of leverage, sources in Juneau tell me the House Republicans made their support to access the Constitutional Budget Reserve to pay our current budget contingent on passage of this bonding bill. I suppose they could have held out for a full permanent fund dividend, which the current statutes say shall be paid, but they know who gets them elected.
The bill goes to the Senate now, where it is undoubtedly greased for passage.
Shannyn Moore is a radio broadcaster.
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