Alaskans vote on their financial future

On Aug. 19, Alaskan citizens will do something that Yukoners are never permitted to do: vote on a big local issue. Our Alaskan friends will be voting on whether to repeal the new oil and gas tax regime that Governor Sean Parnell brought in last year.

On Aug. 19, Alaskan citizens will do something that Yukoners are never permitted to do: vote on a big local issue.

Our Alaskan friends will be voting on whether to repeal the new oil and gas tax regime that Governor Sean Parnell brought in last year.

They are not being “consulted” via carefully staged focus groups, charettes, online surveys or choreographed townhall meetings. Alaskans are actually voting yes or no.

And on an important issue. Oil and gas taxes are to Alaska what the Peel debate is for us.

Oil and gas-related production, corporate income and property taxes generate around 90 per cent of Alaska’s own-source revenues, according to the Office of Management and Budget in Juneau. This funds the bulk of Alaskan government services, since federal transfers are only about one-third of the state budget (not over 80 per cent like here).

Oil revenues fund not just government services, but also the Alaska dividend which citizens get instead of paying state income tax. Everyone knows Alaska’s North Slope cash cow is producing less milk. In 2013 the dividend was just $900, down from over $2,000 as recently as 2008.

The Wall Street Journal recently pointed out that Alaska has fallen to fourth place in U.S. oil production, behind Texas, California and frack-friendly North Dakota. Alaska’s oil production is down from over 700 million barrels in the late 1980s to under 200 million last year. Gross domestic product fell 2.5 per cent in 2013, putting Alaska in 50th place among the states. Alaska’s unemployment rate was above the national average and its population went down.

Alaskans face some serious questions about how they should respond.

On one side is Governor Parnell, the oil industry and majorities in the State Senate and State House. They passed the new oil and gas tax regime last year. This cut taxes to encourage more drilling. They argue that lower taxes, in conjunction with a push to build a pipeline to Kenai to export gas to Asia (not, you’ll note, down the Alaska Highway), will drive more oil and gas activity and therefore revenue.

Basically, the idea is that Alaska will make back on bigger volumes what it loses on lower tax rates.

On the other side are those in favour of the previous regime, which had generally higher taxes. It also was more progressive, in that the tax take increased faster as oil prices rose.

Alaska is now awash in pro and con advertising. The ballot is confusingly worded, so that those in favour of Governor Parnell’s new scheme are the “No” side. This is because the question is basically whether you want to go back to the old scheme. “Yes” voters tend to be on the left side of the political spectrum, although some Republican legislators are supportive of the higher taxes.

To make the campaigning even weirder, Sarah Palin agrees with the lefties who want to go back to the old system. After all, she introduced it when she was governor. Palin has launched a new online subscription channel called SarahPalinChannel.com, where for just $9.95 per month you can get privileged access to the latest Palin thinking plus quotes of the day from Ronald Reagan and a handy counter letting you know how many minutes are left in the Obama administration. You can watch an 18-minute video in which she says things like “We have every right – and a responsibility – to value (our oil) appropriately, to demand a clear and equitable share of our oil’s value.”

Governor Parnell’s spokesflunkies are unamused.

The No side’s Jim Clark, former chief of staff to pre-Palin Governor Frank Murkowski, claimed at a public debate that Alaska’s take under the old regime was 72 per cent; much higher than oil states in the Gulf of Mexico where the take is closer to 50 per cent. He also said that the long trend in declining production was stopped in fiscal 2014, proving the new scheme was already working.

The Yes side doesn’t buy this math. Les Gara, a Democrate from Anchorage, called the new scheme a “pathway to poverty” for Alaska and that the new system will progressively cripple the state’s revenue as new oil production ramps up under the lower tax rates.

What is the average voter supposed to think about all this? Tax policy is complex, especially when combined with long-term oil price forecasts and various investment scenarios. To make matters worse, both sides have their own experts and economists.

“Vote No on 1 for Alaska’s Future,” the campaign for the new system, was delighted when former Democratic governor Tony Knowles came out in support of Dr. Scott Goldsmith, professor emeritus of economics at U of A Anchorage, whose report was favorable to the No side.

Meanwhile, opponents at “Vote Yes! Repeal the Giveaway” quickly attacked Knowles for being a “paid shill” for the oil companies (they later apologized). They also rolled out their own expert, Dr. Mark Meyers, former director of the U.S. Geological Survey. He rubbished Goldsmith’s report, saying that it was not submitted for peer review, didn’t publish its models and relied on unaudited data that could cause a “garbage-in garbage-out” problem.

This is the academic equivalent of saying “nice truck … did you lose a bet?” to a guy at the Red Dog Saloon in Juneau.

The facts – several sets of them in fact – are now on the table and Alaskans will vote on Aug. 19. Meanwhile, on our big issues here in the Yukon, we just have to wait to see what our 19 MLAs decide when they get back from summer vacation some time around Hallowe’en.

Keith Halliday is a Yukon economist and author of the MacBride

Museum’s Aurore of the Yukon

series of historical children’s

adventure novels. You can follow

him on Channel 9’s Yukonomist

show or Twitter @hallidaykeith

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