Is the Yukon government’s new $150 per household Inflation Relief Rebate not doing much to keep inflation from taking a bite out of your wallet?
Instead, how about a cheque for $7,000 for each member of your family?
For a family of four, that would be a crisp $28,000.
This was the prospect the state senate dangled in front of our Alaskan friends last week. The senate passed a budget bill with a US$5,500 payment (about $7,000 in our money) combining the annual Alaska Permanent Fund dividend and a one-time energy relief payment.
By the time the political dust settled in negotiations with the House of Representatives and the Governor, the amount had been whittled down to around US$2,600 from the Permanent Fund and a US$600 energy relief payment. That US$3,200 figure works out to $4,100 on this side of the Chilkoot Pass.
This windfall is the second biggest in Alaska’s history, corrected for inflation. The largesse is thanks to soaring oil prices. First, the global economy and oil demand recovered more quickly than oil producers expected. Then the Ukraine crisis sent oil prices spiking even higher.
It’s welcome relief for the Alaska government after years of slumping revenues and painful budget cuts. As well as the big payout to citizens, The budget that passed last week included new funding for education, infrastructure and other priorities.
The debate in Juneau centered on whether all the oil windfall should be given to citizens, or whether more should be kept to help fund government programs. The oil, after all, belongs to the people. Despite the whopping cheques, the final deal sees less of the fresh cash going to citizens than would have under the formula used prior to the oil price slump in 2014.
We take a very different view of natural resources in the Yukon. While in theory they are owned by the public, there is no mechanism to share the benefits directly with the public. The money goes into Yukon government coffers to be spent in the usual budgetary way.
And even if we did have an Alaska style citizen payout, it wouldn’t amount to much. The Alaskans have developed their oil fields, and oil is a highly lucrative business. We, on the other hand, decided not to develop our oil and gas.
We do get royalties from mining, but they are relatively small. The total in the latest Yukon budget for land and mineral leases and royalties was $322,000.
If you got a cheque for your share, it would be for $7.39.
The Yukon government publishes the royalties paid by each major mine. In 2020, all of them paid $0. The 2021 royalties are yet to be published and, given rising mineral prices and the $322,000 in revenue expected this year, are likely to be higher.
Things are a bit different for Yukoners who are also citizens of the Selkirk First Nation. The Minto mine is on Category A settlement land and all Minto royalties are paid to the Selkirk First Nation. Since 2007, that totals $33 million.
However, while the Alaskans struck oil, we struck transfer payment. Ottawa gives significantly more per person to the Yukon government than Washington sends to Alaska. We also have a territorial income tax while Alaskans do not pay a similar levy. Combine all this with not passing on much cash directly to Yukoners, the Yukon government has more to spend on government programs such as health and education.
Nonetheless, the Alaska dividend does give Alaskans a real sense of ownership of their natural resources. It also has the effect of building greater support for natural resource development. In the Yukon, it can be hard for citizens to see direct benefits from new resource development since the royalties are so small and go into the general Yukon government revenue pool.
Some of the Alaskans arguing for a smaller payout this year are worried about future years when oil prices may be low again. They wanted to save more of the windfall.
In the long run, there are big question marks about Alaska’s fiscal position. Climate change means Alaska’s oil business will not last forever. However, most energy forecasters expect it will take decades for the world to wean itself off oil. Alaska may have more time to adjust than many think.
The state is also trying to develop its natural gas resources. The Ukraine crisis has shown countries the value of having a diversified set of suppliers. Alaska may be able to export Liquefied Natural Gas at some point, or to use carbon capture to convert its gas into low-carbon hydrogen or ammonia for export.
But that’s all for the future, after this November’s election, and in the meantime Alaskan politicians will be reminding voters how big this year’s payout was.
Keith Halliday is a Yukon economist, author of the Aurore of the Yukon youth adventure novels and co-host of the Klondike Gold Rush History podcast. He is a Ma Murray award-winner for best columnist.