Alaska House Democrats have posted their rewrite of oil tax reform, numbered House Bill 111. The new legislation would hit smaller oil exploration companies that came to Alaska on the promise of incentives, which Gov. Bill Walker has since refused to pay.
It also rams the large companies that have been driving economic growth in Alaska for decades.
The bill would not close the State of Alaska’s fiscal gap, but would add instability to the economy, which is reeling because of low oil prices. Jobs losses are mounting and a deep recession in Alaska is under way.
The House Democrats answer? Tax the job-creators even more. Exacerbate the problems further.
If passed, HB 111 would be the seventh oil tax change in 12 years.
“Combine that reality with the governor’s repeated vetoes of the earned tax credits, and Alaska looks like an unreliable, unstable, and unpredictable business partner,” said Kara Moriarty, CEO of the Alaska Oil and Gas Association.
Alaska’s Labor commissioner Heidi Drygas says we lost 6,800 jobs last year. The Alaska Dispatch News says it’s 9,000 of losses in the third quarter alone, year over year. What’s an Alaskan to believe? Both are correct, it just depends on your timeframe for comparison.
“In fact, our economy is shrinking faster than at any time since the 1980s,” wrote Drygas. “We lost 6,800 jobs last year. Our 2017 economic forecast projects that job losses will continue in all sectors except health care, and layoffs will accelerate in sectors such as retail as the ripple effect of job losses impact aggregate demand and consumer spending.”
The picture is particularly alarming, as it shows job losses accelerating.
Statewide employment compared to year-ago levels was down about 3,800 early in 2016, or 1 percent. By September the loss had deepened to roughly 10,000 jobs, or 3 percent.
Across two years that is a 4.2 percent contraction in jobs, which is already what is being felt as a deep recession.
For comparison, the national recession of the early 1980s saw job losses of about 3 percent.
Unlike 2015, when job declines were heavily concentrated in the oil and gas industry, 2016 saw the spiral pull in trade, services, and government sectors.
Commissioner Drygas’ Labor economists predict additional job losses of of 2.8 percent for 2017. At this point, given recent data and Labor’s pattern of underestimating downturns, that could prove to be the optimistic view.
Even if losses in the crucial oil and gas sector are more tempered this year, the losses in the indirect support sector could accelerate, much like they did in the mid 1980s. While there are important differences in our situation now versus then, a key economic truth remains: As goes oil, so goes much of Alaska’s economy.
The oil tax increases advocated by the Gov. Walker’s political ally, Robin Brena, and House Democrats would only exacerbate and extend the downturn.
Alaskans cannot influence oil prices. We can only influence the amount of oil that flows down the pipeline. Democrats seem determined to influence oil production in a negative way. That seems to us like an excellent way to ensure the loss of another 10,000 jobs. Or more.