Rep. Les Gara

June 14, 2017

Juneau – Recent analysis from the Alaska Department of Revenue shows a stark contrast between the competing versions of legislation to reform Alaska’s unsustainable system of subsidizing the oil industry on the North Slope with unaffordable tax credits. The version of House Bill 111 supported by the Alaska Senate Majority follows the lead of the Alaska House Majority Coalition in ending the practice of paying oil companies cash for tax credits, but on paper only. This is expected to save the State of Alaska an estimated $1.5 billion over the next ten years. However, the Senate version of the bill would result in the loss of $1.45 billion in revenue over that same timeframe by replacing the cash for credit system with a higher percentage of “carry forward” deductions that oil companies could subtract from production and other taxes they pay to the State of Alaska.

“The Senate Majority bill is unaffordable and unfair to Alaskans,” said House Finance Committee Vice-chair Representative Les Gara (D-Anchorage). “We must reform this flawed subsidy system because it’s not working and continues a massive liability to the state that is threating our budget and essential services like public education.”

The Department of Revenue analysis of the different versions of HB 111 shows that by Fiscal Year 2027 the tax value of the carried forward losses by oil companies on the North Slope is estimated at just over $600 million under the House version of the bill but jumps up to over $1.45 billion under the Senate version.

“A good version of House Bill 111 that properly reforms this incredibly flawed and costly oil industry subsidy system should be a cornerstone of any comprehensive fiscal plan to respond to the fiscal crisis and recession in Alaska,” said House Finance Committee Co-chair Rep. Paul Seaton (R-Homer). “Our version of the bill is just that. However, the version the Senate Majority is insisting on is more like an anchor that will weigh down the State of Alaska for decades and cost us money every year. That money could better be used to pay for essential government services like educating our children, plowing our roads, and properly managing our fish and wildlife resources.”

Analysis from the Alaska Department of Revenue shows that the version of HB 111 passed by the Alaska House of Representatives will bring in additional revenue in the next few years, while the Senate version will reduce production tax revenue. For instance, in Fiscal Year 2019 the House version brings in $95 million, but the Senate version of the bill will cost the state an additional $10 million in lost revenue. The contrast is even more pronounced in later years. By 2025, the House version of the bill will bring in an estimated $320 million, while the Senate version will still cost Alaska an estimated $5 million in lost revenue.

“I appreciate that the Senate Majority has come to the realization that paying cash for tax credits is bad business, but their version of the bill just shifts that liability so that Alaska will subsidize the oil industry through lost production tax revenue. That is not sustainable, and it’s not acceptable,” said House Resources Committee Co-chair Rep. Geran Tarr (D-Anchorage), who was chosen to serve on the Conference Committee for HB 111 that will work out the differences between the two versions of the bill.

Governor Bill Walker included House Bill 111 on the agenda for the First Special Session of the 30th Alaska State Legislature. The Special Session is scheduled to end on Friday. 

For more information, please contact Alaska House Majority Coalition Press Secretary Mike Mason at (907) 444-0889.