Alaska: Adjustment Time, Let's Get It Right

Contributed by Rep. Shelley Hughes

Oil prices low? Fiscal challenge? Some see the glass half empty; I see it half full. Now is the time for Alaska’s transition to productivity. Now is the time to realize our potential. We can do this, Alaska!

Let’s first consider where we are and how we got here.

A few decades ago, that engineering marvel, the Trans-Alaska Pipeline, began pumping us to where we are today. We can all be thankful for that. The companies that toiled and produced (yes, and that profited) benefited Alaska. Neither greedy nor evil-they are businesses. Perfect they are not; guilty of business imperative to maximize value, they are. They have helped fuel America, and Alaska has been the beneficiary of thousands of jobs and billions in state revenues. 

To any who wants to bite the hand that feeds us, cut off our nose to spite our face (or whatever clever metaphor you prefer), I say: please reconsider. Let’s remember this industry’s many contributions, and how reliant we are on their success. Let’s not kill the golden goose, and heaven forbid, roast it and eat it too. Let’s allow the industry to weather low oil prices. Let’s not send their investment elsewhere by raising their taxes; they’ve already laid off 2500 Alaskans and counting.

But I’m no puppet of the industry. They don’t line up to give me campaign checks. Their lobbyists don’t frequent my office. I study, analyze, research bills, apply basic economic principles, ask questions, seek out experts and above all, look out for the best interest of Alaskans. I consider whether policy and tax changes will cause industry to stop investing, or in some cases, pack up and leave. I also factor in the principle that today’s exploration means tomorrow’s production-which also means tomorrow’s jobs and state revenue. 

With the companies riding out price challenges, the state must make adjustments and prepare to launch again, onward and upward. The billion dollar question at this historic juncture is: What adjustments?

What grieves me is that virtually all of the discussion about adjustments has focused on preserving and funding state government. That flies counter to Economics 101. Our primary focus should be on how Alaskans, how families and how the private sector can not only ride out the challenges, but grow stronger in spite of them. To grow, we can only afford the government that our economy, our private sector, can support.

Alaska state government is a very large component of our aggregate consumption; it’s not a measure of our productivity. Productivity is primarily the role of the private sector. It’s really quite simple: Alaska needs to produce goods and services the world wants to buy. 

So what must we guard against? We must not induce the job creators to scale back or leave. We must not discourage new investment. We have to build production back up to make up for low oil prices and replace lost production. And new production must be in new sectors, in addition to oil, gas, mining, fishing, and tourism. 

In the meantime, we must reduce government. If we tax Alaskans through PFD reductions, if we tax income and productivity, we can expect production from all sectors to decline; fewer goods and services to be purchased by people outside of Alaska. Less dollars coming into the state means a weaker economy. 

We’ve been barraged with media bites recently telling us that if we just tax every industry and every Alaskan, everything will be fine-that this is how to ride out the storm. That’s flat wrong. A healthy economy is not the result of a robust government. Only a robust economy can support a healthy government-one that isn’t overweight and bloated.

It’s really quite simple. We cannot replace lost oil dollars with state government spending paid for by Alaskan families and businesses, and expect productivity and economic growth.

I arrived in Southeast Alaska in the 1970s, when the timber and forest products industry was thriving. Fish canneries seemed to operate in every other cove. Alaskans were go-getters, hardworking and full of energy. Over the past 40 years, I’ve seen that same innovative spirit in pockets across the state. We must inspire Alaskan innovators and entrepreneurs to use our God given strengths, and multiply the gifts this state offers: the rich resources, the climate, the vastness, the knowledge. This is what will translate into productivity and growth.

A state leader’s role isn’t to make everything great in Alaska. It’s to ensure opportunities so Alaskans can do great things-individuals, families, women and men, young and old. Barriers erected by government stifle potential. 

An important part of my job is to remove those barriers, to release the grip of government. Let's allow people not just to dream about their potential but step into it, to become what they were destined to be-productive and successful.  Add to accomplishment and success, integrity and service, and a heart for inspiring and reaching out to help others rise up and do their best, and we'll reach new and unparalleled levels as communities and as a state. Strong, unfettered individuals, will keep Alaska the very best. Yes, the very best place to live on the planet. 

Credit and many thanks to Tom Boutin, former Dep. Commissioner, Dept. of Revenue.