We have to end unaffordable oil company cash subsidies that are estimated to cost the state $1.5 billion over the next 10 years. Some legislative leaders say they will only end those unaffordable subsidies during this special session if we “replace” them with new subsidies that cost Alaskans almost as much.
Through press statements, they’ve offered to replace $1.5 billion in cash payments by the state with a $1.45 billion reduction the state receives in oil company tax payments. They also want a separate $10 million per year reduction in already meager oil company production tax payments to Alaskans.
There’s a path to meaningful compromise and closing our deficit. This isn’t it.
Progress in politics requires legislators to put down their ideological swords. And it means special interests, including our partners in the oil industry, need to truly chip in so a deficit solution is fair to all, and not just the loudest, wealthiest interests.
Politics, when it works, requires ideological purists to put on their adult clothes. Most, but often not all, legislators recognize that.
Last week our Republican-led Senate told the press they will only end unaffordable oil company subsidies if we adopt almost equally unaffordable new oil company subsidies in their place.
That might be great for our oil industry partners, but it’s not great for you. It doesn’t materially reduce a crippling deficit that’s harming our economy, nearly drained our savings, and that’s making Alaskans feel insecure in their jobs.
Our House Majority Coalition of Independents, Democrats and Republicans came together this year out of a deep concern that prior legislatures have let annual $2.5-$3 billion deficits fester while draining our once healthy savings.
The reality our House Coalition recognizes, and has to keep recognizing, is that the public also elected a Republican-led Senate.
Our House Coalition passed a modest 25 percent tax on oil company profits, so we can receive fair revenue. We ended unaffordable subsidies. The House bill would reduce Alaska’s deficit by roughly $1.5-$2 billion over the next 10 years. It intentionally recognizes that a fair deficit fix can’t just rest on the backs of those with little privilege, little wealth and no lobbyists.
This House Coalition plan didn’t meet with Senate approval, and we all have to keep working to find common ground. But common ground isn’t leaving the deficit unsolved and our economy in peril.
Solving our budget deficit is now a math problem. A solution doesn’t leave lots of room for people to stand on ideological purity. Fair oil reform has to be part of a needed deficit reduction plan, in part because there is no source of revenue, on its own, that can solve a $2.5-$3 billion deficit in a state that has largely run out of savings. We cannot afford a current oil tax system that taxes most oil fields in Alaska at either a zero percent or meager 4 percent oil production tax.
Currently, the oil tax rate in North Dakota is 250 percent higher than Alaska’s, and Conoco calls North Dakota a good place to do business. Additionally, North Dakota oil royalty payments are about double Alaska’s oil royalties. So let’s drop the soundbite that Alaska, with its vast oil resources, is somehow a bad place to do business.
Statesmen and stateswomen can bridge differences.
Both sides agree $1.5 billion in oil company cash subsidies over the next 10 years are unaffordable. Let’s focus on that area of agreement. The House has offered a compromise to eliminate the $1.5 billion in poorly crafted, unaffordable oil company cash subsidies. Legislators can join and do what we can agree upon now.
Let’s agree to work this summer and fall, with oil consultants we’ve recently hired, to fix the rest of our oil tax system so that a full solution can be passed when session starts in January. And let’s fully fix our deficit.
I want an Alaska people believe in, where people want to raise their families. Haggling over ways to not solve our deficit is going to drive away the Alaskans we need to teach our children, care for our seniors and build a better state.
• Rep. Les Gara is an Anchorage Democrat and Vice Chair of the House Finance Committee.