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By PETE KELLY
About a week ago, Alaskans received outstanding news. North Slope oil production rose for a third consecutive year. Since 1988 was the last time this happened, it’s worth stepping back to view the larger picture.
Because Alaska gets most of its revenue from oil, increased production means the state has a lot more money in its future than Gov. Walker has been telling us. It also means Alaskans chose wisely when they voted to keep in place the oil tax reform known as SB 21.
Remember, it was just last March when Gov. Walker and the House Democrat Majority were desperate to justify an income tax. The Walker administration told us to expect a 12-percent decline in oil production this year that would result in a catastrophic loss of revenue.
As it turns out, we have a 2-percent increase. So, what unforeseen economic event accounts for this 14-percent turnaround? The answer is, nothing. It appears the sky-is-falling projection was never justified. Doomsday scenarios were useful, however, to the Walker administration as it worked to rationalize a tax and spend agenda.
Last year, when the Republican-led Senate majority were confronted with Walker’s projections, they just didn’t make sense and our Finance Committee pushed back. We’d just experienced two years of increases after decades of declines. In addition, there was a barrage of good news about huge discoveries on the North Slope. Even though we didn’t have exact numbers, the anecdotal evidence was mounting, and it suggested the administration’s production estimates were nonsense.
Ultimately, Walker’s officials admitted their numbers were “stale,” and the Senate told them to provide us with more realistic information. About a week later, their new projections showed only a 4-percent decline. It was still off by about $600 million gross, but in the realm of reality.
This all happened in an environment where Gov. Walker and the House Democrat majority envisioned an Alaska IRS system under which working Alaskans would write a second check on April 15. The Senate said, “No.” As a result, we were dragged into multiple special sessions as the governor and political left sought to wear down the Senate’s resistance.
We were told repeatedly to “do our job,” but apparently what that really meant was “capitulate!” And do it quickly before anyone calculates the math.
When the governor began talking about another special session on taxes in October, the Senate said he needed to provide accurate oil production numbers before we would engage in any discussions about revenue. To the governor’s credit, the new numbers didn’t help his position, but he delivered them anyway. It is these new oil production estimates that show a 2-percent increase instead of a 12-percent decline. That 14-percent change represents nearly an additional $1.5 billion circulating in our economy.
The Senate doesn’t believe our fiscal problems are over. However, these new production estimates suggest we might be dealing with a difficult but manageable problem, not a dire crisis.
The Senate has repeatedly found that our reserves, if prudently managed, will earn enough investment income to fund government and ultimately close the fiscal gap without taxing Alaska’s wage earners. Our plan doesn’t rely on draconian cuts, nor wipe out our budget reserves. It does, however, envision a state spending limit and continued downward budget pressure to reduce the size, scope and intrusiveness of government.
Gov. Walker and the House Democrat majority labor under the false impression that the Senate will act counter to the best interests of Alaskans after we’ve been sufficiently leveraged, worn down or cajoled. The governor can drag us back to Juneau, ad nauseam, and the leftists can pin every government ill on us, but it simply won’t work.
Here’s the deal, in the past two years, senators have spent more than a year living in Juneau hotels and sleeping in rented beds, but we won’t be more easily leveraged because we’re tired. We won’t be leveraged because we’re unpopular with the bureaucracy, either.
The Senate will support new revenues only when proven to be in the best interest of all Alaskans, not just their government.
Sen. Pete Kelly, R-Fairbanks, is president of the Alaska Senate.