Gattis: Connecting The Dots Of Alaska's Budget Crisis

Contributed by Rep. Lynn Gattis

Alaska is facing an unprecedented budget crisis. This is largely due to a continuing decline of oil production, a precipitous drop in oil prices, and an unwillingness by some to make the necessary changes in state government to save money. How we respond to this crisis will define what Alaska and our economy will look like over the next decade and beyond.

Governor Bill Walker's vision for dealing with this crisis is extremely different from mine. The governor wants to impose an income tax and a sales tax on hard working Alaskans. He also wants to raise taxes on the fishing, oil, and mining industries, as well as products like motor fuels, tobacco, and alcohol. On top of all that, he wants to restructure the permanent fund dividend program, taking the majority of Alaskan’s dividend to spend on government.

Likewise, because of his antagonistic behavior towards the oil industry, these extra costs to Alaskans will likely continue to increase well past his time as governor. His recent attacks could decimate resource development in Alaska and jeopardize the only economic development he seems interested in - the gas pipeline - which has very questionable economics in the world market already.

All of these actions are contrary to my point of view. I don't believe that we can tax ourselves into prosperity, or that the Alaska should pursue projects when private industry is skeptical of whether or not they will even pencil out. 

I am simply not willing to vote for any new taxes or reductions to your permanent fund dividend until Alaska makes significant structural changes to Alaska government and further reduces spending. More government has never been the solution in Alaska, and it certainly won’t be this time.

Additionally, I’m extremely troubled by Governor Walker's recent attacks on our oil industry. Alaska’s North Slope is still a world class resource-rich basin. The best way to solve the Alaska's financial problems is to stop the decline of our oil production. With the right tax and regulatory policies, the North Slope can and will be the answer to Alaska’s financial woes. However Governor Walker's recent maneuvers, first on newer independent companies and now the major producers, are putting that in jeopardy.

Senate Bill 21, which was passed just a few years ago, provided incentives for companies willing to invest and explore for oil and gas. New companies came to Alaska, drilled, made discoveries and are putting new fields into production. Several very promising discoveries have been made.  

Even in the face of cratering oil prices and shrinking exploration budgets, Alaska has continued to attract new players who are investing in exploration and development that will lead to more production, more jobs, and more revenue for the Alaska.  

These companies invested on the North Slope based in part on the Alaska’s promise to partner with them through the credit program, which was broadly supported. 

Unfortunately, all of this momentum is now in jeopardy because of Governor Walker’s reckless decision to veto money to pay for previously earned tax credits for the second year in a row. After this devastating action against the independents, Governor Walker is now threatening the majors by claiming they are in default on their plan of development for Prudhoe Bay.

A lot of companies are now wondering if Alaska is a place that can be trusted. I fear the Governor’s actions will ensure that oil production in Alaska declines. Some of the smaller independent companies doing business here will likely be driven into bankruptcy. Alaskan vendors will be unpaid and Alaskans will lose jobs. Many promising drilling projects will be postponed or cancelled. And Alaska will be known around the world as an unstable sovereign that does not keep its word.

Meanwhile, Governor Walker only seems to care about one thing: building the AK LNG project as fast as humanly possible. But the Governor cannot connect the dots. The AK LNG project has little chance of success because nobody will partner with a state that can’t be trusted and refuses to honor its commitments. 

Further, his ranting desires for the Alaska to “go it alone” simply are too costly, complex, and mostly importantly - too risky for Alaska. 

My perspective is very different than Governor Walker’s. Talking with more and more Alaskans, it is appearing that the governor insistence on stubbornly pulling against the will of Alaskans, will get us nowhere. Alaska’s economic future is not a piece of rope we can play tug of war with.