I want your voice heard
Please share your opinions, concerns, or suggestions with me. Together we can make government work for you.
Click here to write me an email
Toll-Free (800) 865-2487
Please visit me:
305 Center Avenue Ste. 1
Kodiak, AK 99615
State Capitol Room 406
Juneau, AK 99801
AUGUST 6th, 2017
Dear Friends and Neighbors,
It has been a while since my last letter and I would like to update you on the legislature’s progress over the past two special sessions. This was a contentious year in Juneau and a difficult time for all Alaskans as uncertainty loomed in the form of a potential government shutdown, job losses, an economic recession, State credit-rating downgrades, and a reduction to PFDs. A potential income tax, the oil and gas tax restructuring, and other controversial solutions on the table added to the fervor of the debate.
Although we still have work to do to reach the complete fiscal plan that is needed, I am pleased to report that the House and Senate were able to reach compromises on some important issues. As with any good compromise, both bodies left the negotiation table unhappy about certain aspects.
• Oil and Gas Taxes: On July 15th at the end of the second special session, the conference committee reached a very key compromise with the passage of HB 111, the oil and gas tax credit bill. The bill immediately ends Alaska’s cashable credit system and contains some caveats to protect the State from an unaffordable high future liability.Instead of receiving cash payments from the State, companies will now carry forward unused lease expenditures to reduce future taxes. I am very pleased that the House was able to add a time limit of 7-10 years for those deductions. With the passage of the legislation, all of a company’s carry-forward losses need to be used within that timeframe or they lose 10% of their value each year. This is very good for two reasons: it is expected to lower the State’s liability by approximately $300 million over the next 10 years and it will incentivize companies to produce sooner rather than later. Another win for Alaskans was the addition of “ring-fencing,” which means that an expenditure will be tied to the project where it was incurred until said project reaches production. As a result, Alaska will no longer be paying for expenditures that do not result in production and revenue for the State.
Although our coalition in the House did not get everything we wanted out of this bill, it is a good start towards getting Alaskans more of their fair share of the state’s oil wealth, as well as holding oil companies accountable to participating in a fiscal solution. I and my colleagues in the House are committed to further revisions to and simplifications of our oil and gas taxes.
In recognition of the need for further reforms, both the House and Senate passed a resolution affirming a commitment to a legislative working group that will be tasked with simplifying our oil and gas tax system and further reducing the impacts that deductions may have on the State.
• Capital Budget: On July 27th, the legislature convened the third special session and passed SB 23, the capital budget, in one day. This year’s capital budget is the smallest in the last 17 years, but it still manages to leverage $1.2 billion in federal funds. The finished product was a compromise between the two versions that both bodies passed during the first special session. Another win for Alaskans, the capital budget included only $20 million for oil and gas tax credit payments, bringing the total payment this year to the statutory requirement of $77 million. This is a far cry from the $288 million payment to oil companies that the Senate had proposed.
Specifically related to our district, I was very relieved that the finished budget included $244 million for the replacement of the State Ferry Tustumena. As with most federally-funded projects, the state only has to bear 10% of the cost.
Other items of note in the capital budget are: nearly $40 million for deferred maintenance, repair and upgrades, $1.2 million for equipment on the Alaska Class Ferries, $1.5 million for the AHFC Weatherization program, $64.8 million for village safewater and wastewater projects, $580 million of federal funds for surface transportation, and $1.2 million for marine fisheries patrol improvements.
Although, there was a reduction to the PFD, the House was able to negotiate a 10% increase above what the Senate had proposed. The Permanent Fund restructuring was a difficult choice for everyone, but unfortunately, a responsible use of the Earnings Reserve is the only lever big enough to make a complete fiscal solution even possible; even with the use of Permanent Fund earnings, the State still has a very significant budget shortfall left to address. Lawmakers were faced with a difficult choice of providing for education, public safety, marine highways, fisheries, and transportation maintenance or fully fund the dividend. One thing that both the House and Senate have agreed on all year is that in order to provide for essential services and maintain an Alaska that people want to live, work, and play in, a responsible use of the Permanent Fund earnings must be part of the solution. Additionally, a less volatile dividend calculation will ensure that the Earnings Reserve will remain solvent over time and provide for dividends for our children and grandchildren well into the future.
• New Revenue: The House Majority passed over a complete fiscal plan during the regular session, but the Senate doggedly refused to consider new revenue beyond a Permanent Fund restructuring. New revenue is a key pillar of our 4-pillar plan and without it the state has a very significant budget shortfall remaining. The legislature may be called back into another special session in the fall to address a new revenue component, but only if there is an agreement between both bodies to work on something together. Calling a fourth special session would be a tremendous waste of State dollars if the Senate flat out refuses to work on a new revenue stream of any significance. Alaska has recently received two credit-rating downgrades from S&P and Moody’s because of a continued lack of a complete plan and we are burning through valuable savings every day. My sincerest hope is that the Senate will be willing to work with us this fall and we can put a complete fiscal plan in place this year; if not, it will be our number-one priority next session.
The House Majority did what it had to for the good of our constituents: we compromised to avert disaster. We settled for some of what we wanted now, so that hard working Alaskans weren’t left with nothing later.
Make no mistake, however, we formed over the concept of a complete fiscal plan and remain steadfast in our resolve to find a solution that is fair across the board to all Alaskans. Without such a plan, the future of the state remains in jeopardy during a time when our number-one revenue stream is declining. Oil jumpstarted Alaska and has provided us with tremendous wealth and opportunity. It will always be a vital part of our economy, but it is time to look toward the future and preserve that wealth, save it, and grow it. We need to increase other revenue streams and find less volatile ones so we have a diversified portfolio as a State. As Chair of the Fisheries Committee, I will do everything I can to increase economic opportunities in our one truly renewable resource industry: Alaskan Seafood.
I would love to hear your thoughts on the new revenue ideas, suggestions for bills you would like to see introduced, or anything else that is important to you and your family. I work for you, so please do not hesitate to reach out to me with any issue you may be having, large or small.
State House Representative for District 32
Proudly Serving Kodiak, Cordova, and Yakutat