April 19, 12 pm,Juneau Glacier Valley Rotary Pillars of Freedom speaker series with Brandon Stone,
at Centennial Hall Convention Center. Stone is a former Juneau resident, an 8-year Navy SEAL officer. Tickets at Hearthside Books.
Lt. (Ret.) Stone’s service with SEAL Team TEN was spent in Iraq, Afghanistan and Africa. While leading a team of U.S. and Afghani troops through a Taliban stronghold in the Helmand province, he was severely wounded, losing a foot from an improvised explosive device. He was awarded a Purple Heart along with a Bronze Star with Valor for his heroism.
He is modest about his service: “I know that my contribution pales in comparison to that of many I know who accomplished marvelous feats and have given their lives in service of our country.”
He is the son of the late Juneau Assembly member and Juneau mining historian David Stone. He earned his J.D. from Georgetown University Law School in 2015.
April 20, 6-8 pm, Anchorage Republican Women’s Club’s “Membership and Mimosas” at Pepperocini’s in the University Mall on Old Seward Highway (at 39th). A club membership building event open to men and women. $25 includes food and mimosas.
April 22, 12 pm, Pro-life memorial at the Anchorage Memorial Park Cemetery (corner of 9th Ave. and Cordova St.). Participants will walk to the St. John Paul II Memorial site on the Delaney Park Strip.
April 22, 7-11 pm,Treadwell Miners’ Ball, Baranof Hotel in Juneau. Admission $50. Enjoy mining-themed appetizers and dance to the sounds of SuSu and the Prophets. Silent Auction to benefit Treadwell Society historic preservation projects. Vintage attire optional. Commemorate the great Treadwell Mine on the 100-year centennial of the cave-in that signaled the demise of the four-mine complex on south Douglas Island April 22, 1917.
April 23, 2-5 pm,Treadwell Mine cave-in commemoration potluck picnic at Sandy Beach Log Shelter. Walking tours of Treadwell Mine Historic Park.
May 5, 6-9 pm, Join Republican Party Chairman Tuckerman Babcock at the home of Albert Fogle, 5910 W Tree Dr. Anchorage 99507, for the Alaska Republican Party’s Cinco de Mayo Party with Taco Bar, Decadent Desserts, Festive Beverages, even Pinatas to boot. $45 in advance, $50 at the door — tickets. Tuckerman is making his This Ain’t for the Faint of Heart Taco Meat and Paulette Simpson is bringing her famous Pecan Pie. There will be an auction because this is the Alaska Republican Party, after all.
The tax bill that a single mother or father of two with an income of $80,000 would pay to the State of Alaska.
HOUSE TAX PLAN GOES ‘FULL BERNIE’
The Alaska Senate Majority today rolled out a handy tax calculator so Alaskans can see how much they’d pay to the State of Alaska under the income tax proposed by the Alaska House of Representatives Democrat-controlled majority, a tax scheme designed by Gov. Bill Walker’s Revenue Department.
For a single person in Alaska making $80,000 a year in gross income, the tax bill would be $1,980.50 to the State of Alaska.
That’s because the State would tax you on $74,750.00 of net income.
But say you’re a single mother or father of two and you make $80,000 a year. You’ll only get $418 off for those two kids, and your bill to the state will be $1,562.50.
The Alaska House of Representatives, now controlled by hard-left Democrats, passed House Bill 115 over the objections of the Republican minority on Saturday.
HB 115 is endorsed by Governor Walker, who has said he has to have broad-based taxes before he’ll sign any budget.
Unlike a flat calculation used by most other states that have an income tax, HB-115 goes the California model and establishes an Alaska-specific tax code, with its own marginal tax rates and almost no deductibles.
Charitable contributions, mortgage interest, and many other usual deductions allowed under the Federal tax code are not recognized in HB-115 as legitimate deductions from Alaskans’ earnings.
The House majority’s tax treats capital gains, income from trusts, and interest from many bonds at varying rates. The tax estimator above does not have a function to compute the tax due from these other income streams. Therefore, the estimates from the calculator will tend to be low.
If the Senate passes HB 115, Alaskans will need to start itemizing their federal taxes. Most Alaskans do not itemize, but unless they do, under this tax plan they’d have to, or be taxed on the income tax they’ve paid to the State of Alaska.
Without that itemization, the single person referenced above who paid $1980.50 to the State of Alaska might owe an additional, say, $356 to the IRS. In other words, bad for taxpayers, good for paid tax accountants.
DEMOCRATS GONE WILD
HB 115 will collect $700 million for the State of Alaska. Most of that money will keep afloat a government that Senate majority members say can still be trimmed by several hundred million dollars, and can be paid for with their legislation, Senate Bill 26, which restructures the way the Permanent Fund earnings are used.
Although the Senate majority posted the tax calculator for Alaskans to get a handle on what’s at stake concerning their own pocketbook, Sen. President Pete Kelly was quick to say the Senate majority does not endorse the plan.
“They are trying to force this for ideological reasons,” Kelly said. “It is just not the math, because you’d have to be willfully ignorant of the math to claim our plan [SB 26] is not a full plan.”
The House actually increased spending it the budget it sent to the Senate, killed the spending limit offered by the Senate, and instituted an income tax to grow government, Kelly said.
“These are three indisputables. They went ‘full Bernie,” Kelly said, referring to Socialist Bernie Sanders. “They’re trying to set up an Alaska IRS system with all the fining, audits, and investigating that goes along with it. If you look at their tax plan, it mirrors the IRS. They must think Alaskans want this.”
In the Alaska State House this past week, it’s All Aboard for California!
OUR MOST COLORFUL CONTRIBUTOR WADES INTO UNALLOCATED CUTS
By ART CHANCE
We’re entering the world of bureaucratese — the foreign language you didn’t take in school.
A decrement is bureaucratese for a cut in a budgeting unit’s requested budget.
I used the imprecise term “budgeting unit” because budget requests have become very imprecise and Legislative appropriations are even more illogical and imprecise.
It takes someone who really knows their way around the budget and the budgeting process, as well as a very good knowledge of the State’s organizational structure, to know where money comes from and where it goes.
The prime directive is that every State expenditure must have a supporting appropriation; the insider lingo is that an expenditure must “point to” an appropriation.
This has a constitutional basis, as the Constitution requires that all authorization for an expenditure must come from the Legislature; the executive branch has no independent authority to expend or retain State funds.
The constitutional mandate is articulated in statute in the Executive Budget Act (AS 37.07 et seq.), a law with origins in the Hammond/Sheffield era, but with amendments from time to time.
Back before we got really rich and really sloppy Alaska had a very positivist tradition in our laws governing the ministerial functions of the State; the money, the people, and the stuff. In my time there I saw a dramatic erosion in ministerial control and oversight.
The Executive Budget Act requires that each program be described in detail and the personnel and resources required must also be set out in detail. You must make a budget request for each part of your program.
That notion is mainly honored in the breach. I once asked for several hundred thousand dollars in a capital request for “negotiations expenses” with no detail at all because I didn’t want the unions to know what I planned to spend money on.
A legislator called me and asked what I was going to do with all that money.
I replied: “Buy beer for my horses and whiskey for my men.”
I got the money, or most of it anyway.
My point here is that there isn’t a lot of control and almost no auditing, so adherence to laws and policy really depends on the integrity and power of the fund manager, usually a division director. Some division directors have more power and influence than others, so the real authority may reside in a commissioner’s office or the Governor’s Office.
The imprecision of both the budget requests and the appropriating language makes it very difficult for the Legislature to make a cut in any particular place under the best of circumstances.
Everybody who has worked in the government knows stories of legislators targeting particular people or particular programs, but the reality is that it is almost impossible for the Legislature to get rid of Director Joe Blow because he pissed off some powerful constituent using the vaunted “power of the purse.”
If they cut the Division of Widget-making’s budget by an amount equal to Director Blow’s salary and benefits, he’ll just lay off the single-mommy clerks or close the Widget-making office in the district of the legislator who was behind the cut.
So, when you only tell the Department of Health and So-called Services to cut its budget by 5 percent and don’t tell it precisely where and how to cut the budget, you’ve enacted an unallocated decrement and the DHSS can take that cut anywhere it chooses to.
The State then has an almost untrammeled right to lay off an employee for lack of funds.
That said, we found it almost impossible to sustain these economic layoffs in arbitration or the courts because the imprecision of appropriations almost always caused the specific layoff to be an exercise of management discretion rather than a Legislative act denying funds.
When you have the Legislature or a body of the Legislature at odds with the Executive Branch you may rest assured that the Executive Branch will take any unallocated decrement in the place most likely to hurt the legislator(s) behind the cut or the place most likely to make a lead story.
There have been exactly zero meaningful cuts in the Operating Budget during the Vince Beltrami…excuse me…Bill Walker Administration.
Yet, we’ve had Trooper posts closed, ferry schedules changed, and most recently the threat to throw veterans and senior citizens out into the street.
If you are going to cut the State budget through the Legislature’s power of the purse you must tell the Executive Branch exactly how and where to cut it or they will cut the budget in the place that does you the most harm or them the most good, often that’s the same place.
It is more difficult than it should be because of sloppy budgeting practices, but you have to tell them that you are abolishing the Widget-making Division and cutting the funds for all labor and materials associated with Widget-making.
If you don’t, they’ll cut the Transportation Department’s budget in such a way as you’ll never see a State snowplow in your district again.
Art Chance is a retired Director of Labor Relations for the State of Alaska, formerly of Juneau and now living in Anchorage. He is the author of the book, “Red on Blue, Establishing a Republican Governance,” available at Amazon. He only writes for Must Read Alaska when he’s thoroughly bored. Chance loves to ignite controversy by using the phrase “hermaphrodite Administration” to describe a governor who is both a Republican and a Democrat.
Sen. Peter Micciche explains that unallocated cuts are frequently put into budgets, but that the Senate never intended for the governor to close two of the Pioneer Homes.
Sen. Peter Micciche, who headed up the Senate’s subcommittee on Health and Social Services’ budget, took to the microphone on Thursday and explained to reporters that some unallocated budget cuts had unadvisedly been temporarily parked in the Division of Pioneer Homes budget by a legislative staffer, and were never intended to indicate that the Pioneers’ Homes would be closed.
He was tired of seniors being used as a political football. Micciche didn’t point the finger at the administration of Gov. Bill Walker, but the meaning was clear:
“We came down here to improve the lives of Alaskans and some things are so much more important than politics. And the way seniors have been kicked around as a political football this week…I’m going to stay on the high road…”
The Senate had given the Department of Health and Social Services approximately $30.7 million in flexibility to move around the department, a 5.7 percent cut in all, he said.
“This is a department with $2.6 billion in all funds, with 3,365 full-time mployees. We’re simply asking them to distribute this cut across all other categories of spend,” Micciche said
“We’re speaking specifically to seniors and veterans in our Pioneer Homes: That cut is not going to be directed at them,” Micciche said.
But that’s still the call of the governor, since those were, are, and will be unallocated cuts that can be moved around at his discretion. Alaska’s Executive Branch has wide latitude on unallocated funds, as has been seen with how Walker has used funds to open up gasline offices in Tokyo and Houston, and has hired a multitude of gasline consultants using departmental monies in his two and a half years at the helm.
Micciche’s insistence that seniors be held harmless was also a direct contradiction to the “shutdown memo” written by one of the governor’s staffers. The director of the division emailed residents and staff at the Palmer Veterans and Pioneers Home that closures would occur in August — the Palmer home and the Juneau home, specifically.
But on Thursday, the Senate as a whole made a rare statement with a “Sense of the Senate” message, clearing up the matter and reassuring Pioneer Home families that the veterans and other old-timers were safe from being kicked to the curb, from their perspective. “Sense of the Senate” is a rarely utilized legislative process, but that memo from the staff of Gov. Bill Walker necessitated something rare.
GOVERNOR BACKTRACKS, SAYS PIONEER HOMES ARE SAFE
The governor, for his part, sent a letter to Pioneer Homes staff and residents promising he will not close the homes.
His letter said he was caught by surprise and, without explaining that his department could have moved those cuts anywhere else, he said the reductions could have closed two Pioneer Homes on July 1 — a month earlier than the previous memo had warned home administrators. His budget, he reminded them, had included an increase for the Pioneer Homes.
Walker, unlike Micciche, was not contrite about the dust-up. He offered no apology and took no responsibility for his staff elevating the situation by issuing a shutdown memo before the budget had gone through conference committee. But a careful reader could see he was definitely “putting the toothpaste back in the tube.”
And yet, Walker chose not to explain why his administration had decided to close the only home that is eligible for federal funding, the Palmer Veterans’ and Pioneers’ Home.
The State receives up to $55 a day from the Veterans Administration for each veteran in the Palmer home. The home was remodeled a few years ago to be VA compliant, so that it could receive the support.
In the governor’s “Sustainable Future” conference that was held in Fairbanks in June of 2016, very few of his hand-picked participants defended the Pioneer Homes as important, as seen in the photo below from the event.
Green dots means it’s critical a critical service, red means it’s of low importance. Few of his brain trust in 2015 voted for Pioneer Homes, although they might vote differently today, considering the trouble such proposed cuts have caused the governor:
A rather glum gaggle of tax advocates: The House majority voted to place an income tax on working Alaskans to pay for government services. They chose April 15, which is normally thought of as Tax Day, to pass their legislation.
Gov. Bill Walker applauded the Democrat-led House majority on Saturday for passing an income tax, HB-115, which he and the House Democrats renamed last week. It’s now just an “education tax.” Except that, in spite of the name, the tax would pay for all state services.
The road to an income tax started shortly after Gov. Walker took office in 2014.
Gov. Walker convened a group of his trusted allies in Fairbanks that June. They all stayed in the dormitories, and they had break-out sessions and heard presentations about what was important in our state. Participants were specifically told: “Don’t think about how to pay for it. Think about what kind of Alaska you want.”
Tax advocate Robin Brena, who spent tens of thousands of dollars getting Gov. Bill Walker elected, speaks on behalf of higher taxes during the “Sustainable Future” conference in Fairbanks in 2015.
THE WAYBACK MACHINE — AT THE GOVERNOR’S 2015 TAX CAMP
Must Read Alaska was a brand-new newsletter in June of 2015, with only six editions under its belt. Editor Suzanne Downing drove to Fairbanks and attended the governor’s “Building a Sustainable Future” conference, and wrote this set of observations:
A high percentage of the 165 people invited to Gov. Walker’s Building a Sustainable Future conference in Fairbanks were government workers, retired state or municipal/borough government workers, education activists, academics, environmental activists, union representatives, and general left-leaning political activists.
Very few Republican activists were invited or present, but several Interior GOP activists attended as observers. No Republican legislators took an active part in the conference programs, but several Democrats did, including Reps. Adam Wool, Sam Kito, Geran Tarr, Daniel Ortiz (I-Dem), Harriet Drummond, and David Guttenberg.
The three-day conference was informative. From the outset, participants were led through an exercise to build a case for taxes. Breaking into groups of subject experts and interests, they were first asked to determine which government services were critical.
The HSS group, as shown below, determined that all HSS services were critical, although Pioneer Homes were determined not critical, but expensive. [Side note: Several people in the conference suggested closing the Pioneers’ Homes.]
Participants were repeatedly told not to worry about cost, but simply to identify whether various programs had value to Alaska. The breakout group voting sheets were posted in the dining hall at UAF’s Wood Hall, and an observer could easily see that every group reflected the same experience: Every government service is critical and we’re not spending enough on any of them.
An example of the voting from the HSS breakout session follows. On the left sheet of paper, green means it’s a critical program, on the right sheet, green means there’s not enough funding for it. Note there is one lone red dot against Medicaid expansion:
During one of the breakout sessions, participants put green, yellow or red dots on services they felt were critical. They were asked to ignore how to pay for those services, but only decide which were of highest importance.
The next exercise was to determine how to pay for these services. Many tax ideas were brought forward in this process.
The flawed design of the weekend agenda was that it led participants from their Christmas list of all that government should do straight into the wallets of Alaskans and companies doing business in Alaska: Miners, energy companies, fishermen, property owners, sales tax, out-of-state workers, and more. The old adage was brought to mind: “If it moves, tax it.”
There was no meaningful discussion on how to privatize, consolidate, or make efficient current services, or whether local governments should be picking up the costs so voters can have more say in the matter. There was no discussion of best practices from other states for making government more lean and responsive. Taxes were the solution, rather than for example, reducing the number of optional Medicaid services provided by the state.
The conference closing remarks reflected that many of the hand-chosen participants were satisfied with the results of the weekend, that it met their expectations, and that they would be honored to serve as (tax) ambassadors to continue the conversations in their communities, (which were mainly Anchorage, Fairbanks and Juneau).
FLASH FORWARD TO 2017
On Feb. 10, 2017, the House Democrat majority introduced HB 115, which they titled the “State Revenue Restructuring Act.” The bill summary described it:
“An Act relating to the permanent fund dividend; relating to the appropriation of certain amounts of the earnings reserve account; relating to the taxation of income of individuals; relating to a payment against the individual income tax from the permanent fund dividend disbursement; repealing tax credits applied against the tax on individuals under the Alaska Net Income Tax Act; and providing for an effective date.”
The public pushback was profound — polling data shows that Alaskans are still generally opposed to an income tax, unless the pollster frames it as an option between an income tax and a catastrophic alternative. The majority of Alaskans want additional cuts, according to credible polls. They might tolerate a sales tax, but they are likely to revolt politically against an income tax. The House Democrat majority, with HB-115, was going against the will of the people.
Last week, the version that passed had a new name: No longer a Revenue Restructuring Act, it’s now the “Education Funding Act.”
The new description is:
“An Act bearing the short title of the ‘Education Funding Act’; relating to the taxation of income of individuals, partners, shareholders in S corporations, trusts, and estates; relating to a payment against the individual income tax from the permanent fund dividend disbursement; and repealing tax credits applied against the tax on individuals under the Alaska Net Income Tax Act.”
On Saturday, the governor played along with the ruse, sending out a press release praising the House for passage of the sweeping income tax that will be placed on working Alaskans. Here’s his press release:
Governor Walker Praises House for Passage of Education Funding Act
New revenue would provide funding for essential state services
April 15, 2017 JUNEAU – Governor Bill Walker praised the Alaska House of Representatives today for passing the Education Funding Act, which would provide funding for essential state services like education, public safety, and road maintenance. Combined with continued budget cuts and the Permanent Fund Protection Act, SB 26, this bill would fill Alaska’s $3 billion budget deficit and put the state on a path to economic security.
“I commend lawmakers in the House for taking the bold move to pass the Education Funding Act and establish a new source of revenue for our state,” said Governor Walker. “We have seen far too many businesses close in recent years due to the uncertainty in Alaska’s economy. We must pass a complete fiscal plan this year and stop the draw on our precious savings. This includes continued cuts to the budget, a restructure of our Permanent Fund Earnings Reserve, and new revenue. My administration will continue to work with the legislature to pass a complete plan this session so we can move on to building Alaska’s future.”
Governor Walker introduced his FY 2018 budget in December, and stressed the need to establish a complete fiscal plan through continued cuts, restructure of the Permanent Fund Earnings Reserve, and the establishment of a broad-based tax. This bill would fulfill the need for a broad-based tax, and provide a steady source of funding for essential services like public education and state troopers.
NEW TITLE, BUT SWEEPING PROVISIONS
In a move right out of George Orwell’s 1984, the proposed income tax has been rebranded as an “education funding” mechanism.
But the truth is, there is no direct tie to education in the bill. It is simply a general fund tax with a name that proponents hope will make it palatable to the public. After all, it’s for the children.
But it faces tough sledding in the Senate, where the Republican majority has already signaled it is dead.
Senate President Pete Kelly of Fairbanks made this statement:
As I’ve said many times, the only thing standing between Alaskans and an income tax is the Senate. – Sen. Pete Kelly
“The House is a co-equal chamber of the legislative branch, therefore, we plan to give the income tax proposal a fair hearing,” Kelly said. “That being said, reaching into the pockets of working Alaskans – when the state is in the grips of a recession – is absurd on its face. The state lost 9,000 jobs last year, and is expected to lose thousands more this year. This is the worst possible time to penalize people for having a job.
“The Senate Majority’s solution solves the state’s fiscal problem without taxes, which begs the question: why would we impose an income tax on working Alaskans when we don’t need to?” Kelly said.
Alaskans might find it fitting that HB-115 was passed out of the House on April 15, normally thought of as Tax Day for the Internal Revenue Service. (This year that day falls on April 18 because of the Easter holiday weekend.)
Next week, on April 24, will be Tax Freedom Day, or 114 days into the year, when Americans will have paid $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes — nearly $5 trillion, or 31 percent of the nation’s income.
Commissioner of Revenue Randy Hoffbeck explains why the Revenue Source Book was being presented so late to the Legislature, while Tax Division Director Ken Alper takes notes. (360north.org screen shot)
With somewhat stronger oil prices and increased production, the State of Alaska will have $191 million more dollars to patch the difference between its spending and its revenue, which even now comes mainly from oil.
The gap between those two is now $2.6 billion, down from the $2.8 billion hole the Legislature and the governor are attempting to bridge. That is what the Department of Revenue’s Revenue Source Book says.
The extra cash represents a 20 percent increase in oil revenues — from about $967 million to $1.16 billion — that goes into the part of the State’s budget available as undesignated general funds (UGF).
For Fiscal Year 2017, which ends June 30, the price of oil is projected to be seven percent higher than prior projections, and will remain in the same $50-a-barrel price territory for Fiscal Year 2018, the Walker Administration is predicting.
Production for this fiscal year is exceeding the prior forecast by 7 percent, but the Walker Administration surprised lawmakers on Friday by predicting a whopping 12 percent drop in production for 2018. That is a prediction that seemed to mystify any other credible observers of state oil output, including the Commissioner of Revenue.
ADMINISTRATION SAYS ITS NUMBERS ARE ‘STALE’
Commissioner of Revenue Randy Hoffbeck was quick to dismiss the state’s own numbers, saying that the production number for 2018 was a “stale number,” and should not be counted on.
Committee member Sen. Peter Micciche explained that stale (read: inaccurate) numbers were not helpful to a legislative body trying to find the best way to balance a budget for 2018.
“We are looking at a fiscal plan that is outlined in SB 26. Our assumptions are based on a set of factors that demonstrates that our plan is a [complete] fiscal plan, yet when you plug in numbers that are stale…” He looked exasperated.
In the past several years, the State has hired Dudley Platt, an oil analyst who provided the revenue forecast at a cost of between $50,000 and $100,000. But last year, the Walker Administration decided that the Department of Revenue can do its own forecast.
Now, that forecast is something neither Hoffbeck nor the Department of Natural Resource’s leaders seem willing to stand behind, even as they presented it to Senate Finance.
In addition to the unprecedented 12 percent drop it predicted for 2018, the Administration predicts a swift decline in oil, projecting the Trans Alaska Pipeline will carry less than 350,000 barrels a day in less than a decade. Experts say the pipeline will be unlikely to remain functional with that level of production. But few other experts believe that oil will decline that quickly, unless the State wants it to.
REVENUE REPORT COMES AT LAST MINUTE
The Senate Finance Committee received the Administration’s Revenue Source Book just minutes before the committee met on Friday, giving committee members inadequate time to review it.
Committee Chairwoman Anna MacKinnon made note of the tardiness of the report: “That’s not a lot of time to go through the information,” she understated to Commissioner Hoffbeck.
Notwithstanding the stale numbers it contained, Hoffbeck tried to explain that they were eager to get it right, rather than get it earlier. He denied that the report’s delay was a political ploy by the Administration.
“There was some speculation in the other body that we had withheld the information,” he said. “And that’s simply not true.”
The commissioner said the numbers in the forecast had needed refining. “We weren’t trying to hold them back,” he said.
More than “refining,” the forecast numbers need major rework, especially the short-term and longer term production assumptions. In the meantime, suspicions are growing that the days of an objective, rigorous and nonpartisan revenue forecast are a thing of the past, at least under the Walker Administration.
That the Governor has been looking for any sort of political leverage he can muster to pressure lawmakers into a wide array of tax increases and new taxes, only feeds those suspicions.
The Revenue Source Book was released one day before the Democrat-controlled House passed a massive income tax, which it has dubbed an “education tax” on working Alaskans.
Commissioners of Revenue Randy Hoffbeck and Resources Andy Mack.
Friday, the 88th day of the legislative session, will be historic, but not in a good way:
Income taxes: Rep. Paul Seaton of Homer will introduce income tax legislation onto the House floor for a vote. Democrats will insist HB 115 is needed to patch the fiscal gap. It will likely pass the House on a caucus vote after Republicans state their lengthy objections.
Oil taxes: Senate Resources is hearing HB 111, the House Democrats’ plan to scrape more taxes out of oil companies in Alaska.
Catastrophic oil prediction: But neither the income tax nor the oil tax hold a candle to what’s happening in Senate Finance.
The 2018 oil production forecast (Revenue Sources Book) will be presented by the Walker Administration, and legislators are now hearing that the Revenue Department predicts an unheard-of 12 percent drop in throughput in the Trans Alaska Pipeline System (TAPS) in 2018.
No one that Must Read Alaska spoke to tonight could ever recall such a year-over-year reduction in production.
“It’s a catastrophic prediction,” said one industry insider. “I don’t know how they could arrive at that number.”
The Walker Administration is predicting that Alaska oil production will drop to its lowest point in history.
Senate Finance convenes at 9 am, and at the microphone will be Department of Natural Resources Commissioner Andy Mack, and Revenue Commissioner Randall Hoffbeck.
The two will be presenting a forecast that predicts an actual swing of 14 percent in production from fiscal year 2017, which ends in July.
This is the second forecast produced in-house by the Department of Natural Resources. Prior to last July, it had been done by a third party contractor.
In 2016, the department predicted a 7 percent drop for fiscal year 17. The actual production is up by 2 percent, which means the department missed by 9 percent.
“What’s remarkable is that they were already several months into the fiscal year when they were forecasting that, and they still missed by 9 percent,” said one long-time analyst.
Now, the spring forecast for next fiscal year has a reduction never before seen in the history of the pipeline.
Kara Moriarty of the Alaska Oil and Gas Association was doubtful.
“We don’t expect to see that kind of drop and we will be keen to see what they are basing their prediction on,” she said.
OIL PRODUCTION HAS BEEN GOING UP
The first quarter for 2017 has been promising, with a four percent increase in production over the first quarter of 2016.
This month, throughput actually hit 570,000 barrels per day at one point. Yesterday, the throughput was 557,708 barrels.
In fact, the lowest throughput in the history of TAPS was in 2014, when oil production dropped to 513,441 barrels. That’s when Senate Bill 21 was passed and companies began investing again.
Now, the Walker Administration is predicting production at 459,000 barrels a day, nearly 100,000 barrels fewer than today’s production.
There are a couple of ways this radical forecast can be explained: Either the Department of Natural Resources doesn’t have good modeling capabilities, or it is cooking the books to show less revenue in order to push through HB 115 and HB 111, income taxes and higher oil taxes.
“This is part of a Walker pattern to manipulate the public consent and outrage, with numbers that literally defy reality,” one analyst said. “I remember when under ACES decline was 4-6 percent, and people were freaking out. Now it’s 12 percent? This is a political forecast, not an oil forecast.”
In just nine years, according to Walker’s forecast, the pipeline will need to be shut down because the flow of oil will be too low to move it safely.
Any amount below 350,000 barrels a day is thought to be untenable, and could lead to breakages in the portions of the line that are underground, due to pressure from frost heaves.
Must Read Alaska will be posting new information as it becomes available, so check back.
Silliness: It’s the middle of congressional recess, which means lawmakers are back in their districts meeting with folks.
Alaska Democrats took the opportunity to go on social media and criticize U.S. Sen. Dan Sullivan, Congressman Don Young, and Sen. Lisa Murkowski for not holding town hall meetings at their Democrat-foot-stomping demands.
Uh, Sullivan is in uniform this week, training with the Marines, and next week he’ll be meeting with Inupiats up at the Fort Wainwright area. Rep. Young has been throughout Southeast Alaska meeting with constituents. He was spotted in Ketchikan, Wrangell, Petersburg and Juneau, last we heard. And Sen. Murkowski has been in Ketchikan, greeting the arrival of a Coast Guard vessel. It’s not that hard to keep up with our delegation, if that’s what Democrats really want to do.
In Juneau, the Glacier Valley Rotary Club will be hosting its annual Pillars of Freedom speaking series, and among the inspirational speakers this year is a hometown hero, bronze medal recipient Brandon Stone.
Stone is the son of the late David Stone of Juneau. Watch for a profile of Brandon on these pages soon. And get your tickets at Hearthside Books.
Join Americans for Prosperity Alaska and other supporters of bringing ride-share companies like Uber and Lyft to Alaska at a rally on Friday, April 14. The event is from 6-7:30 pm, location is 49th State Brewing Co., 717 West 3rd Avenue, Anchorage. They’ll have drink tickets and ways for people to send letters of support to our representatives, to encourage them to pass SB-14 as it stands, on the House floor. Contact Ryan McKee at 907-841-3274 or by email: rmckee at afphq.org.
Sen. Mike Dunleavy lost most of his staff when he cut himself out of the Senate Majority Caucus, and now he has fun ending every sentence with “because I’m running for governor,” which is all he is hearing these days at the Capitol.
Daniel George and Christa McDonald, two highly qualified staffers, are on the job market — but with their skills, they won’t last long, we hear.
Friday is Day 88 of the Alaska Legislature, and the House and Senate still haven’t appointed the conference committee for the budget. This is going to take a while.
The University of Alaska Board of Regents passed a resolution opposing the Senate’s proposed use of the Alaska Performance Scholarship, the Alaska Higher Education Fund. The vote was unanimous.
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The Senate majority cancelled meeting in joint session with the House today. The meeting was to confirm some of the governor’s appointments, such as Attorney General Jahna Lindemuth and Human Rights Commission nominee Drew Phoenix. If they are not confirmed by ajournment, the governor will have to start over. This is all about the budget, although these two nominees have unrelated problems with their confirmation.
A Fairbanks group called Gender Pioneers is having a rally for Mr. Phoenix tomorrow in Fairbanks at noon. Gender Pioneers describes itself as “a peer2peer support group for all transgender, genderqueer, genderquestioning or otherwise gender-bending folks in Alaska’s interior.”
Juneau Indian Village, with the white gable of the Governor’s Mansion peeking from behind the bluff above. The Central Council Tlingit Haida has applied for Indian reservation status for a parking area next to the council’s building.
A parking lot just a stone’s throw from the Governor’s Mansion is the most recent site of land that will likely be designated a reservation under the new “Indian Country” rules that apply to Alaska.
Three parcels that are subject to the change are owned by Central Council Tlingit and Haida Indian Tribes of Alaska, and are said to total one-fifth of an acre. The area is used for parking and as vacant land.
The council applied to the Department of Interior to accept the land “into trust”, which establishes it as Indian reservation land, subject largely to tribal authority over municipal authority.
According to a notice received by the State of Alaska and the City and Borough of Juneau, the three parcels are surrounded by other property either owned by the tribe or owned by members of the tribe. Two of the parcels are joined and the third is a vacant lot.
The council has announced no plans regarding the uses of the property, which is located in a part of town known as the Juneau Indian Village, directly across from the Driftwood Lodge, where many legislators live during the legislative session. Other parcels nearby are believed to be in application process, according to sources who spoke on the condition of anonymity.
The State of Alaska has 30 days to provide comment to the Bureau of Indian Affairs, which has set a May 5 deadline. The City and Borough of Juneau was notified just a week ago and have been in contact with the tribe to see if they can reach an agreement to get an extension on the comment period. Tlingit Haida Central Council has made no notice on its web site of the pending request for its land.
The City and Borough of Juneau may need more time to talk with the council about who will provide police, fire, and emergency protection, as well as other services.
The BIA is requesting comments on “the impact of the removal of the subject property from the tax rolls, and…. jurisdictional problems and potential conflicts of land use which may arise.”
Craig, Alaska was the first location of land being placed in federal trust status after the Walker Administration dropped its challenge of the Akiachak case last year. That relinquishing of State authority ushered in the ability of tribes to apply to the federal government for reservation status.
Citizens with opinions on the Juneau land-into-trust question may send them to [email protected]. The State’s deadline for public comment is April 21. Comments can also be sent to the BIA, Alaska Region at 3601 C Street, Suite 1100, Anchorage, Alaska 99503.
One opinion comes from Mary Bishop of Fairbanks, who is a subject expert on Alaska land access and Indian Country. She holds the view that Indian Country was extinguished in Alaska, and that the entire state is better off for it.
“The issue of importance is the future — think seven generations ahead. If these lands are placed into trust, adjacent lands can more easily be placed into trust. Assuming the land is accepted for trust, the tribe is a sovereign nation with trust land under tribal governance as Indian country.The BIA and the courts will provide them as much “self-determination” as Indian law can possibly allow. The tribe can ignore state and municipal zoning and regulations, put in a marijuana business or other business that unfairly competes with non-tribal, taxable and regulated businesses,” she said.
Agencies of the federal government have determined that Indian Country was extinguished by the Alaska Native Claims Settlement Act:
According to the EPA, “Generally speaking, land located in Alaska would not qualify as Indian country based solely on its association with, or ownership by, an Alaska Native Village. Much of the current Native landholding in Alaska has been established through the Alaska Native Claims Settlement Act, which extinguished the prior reservation status of most Native lands. Because Alaska Native Village lands also do not qualify as dependent Indian communities, they are generally not Indian country.”
But the Bureau of Indian Affairs, under former Secretary of Interior Sally Jewell, moved to change the terms of ANCSA. With applications rolling in now for Indian Country, Alaska has entered a new chapter of multi-jurisdictional challenges.
