Alaska editorials

Here is a sampling of editorial opinions from Alaska newspapers:

Oct. 9, 2016

Juneau Empire: Dunleavy’s bill will sink PFDs

If you haven’t spent your Permanent Fund Dividend yet, hold it close and tight. It may be one of the last, and largest, you will ever get.

Wasilla Republican Sen. Mike Dunleavy held a news conference in front of a Fred Meyer store on Wednesday, touting his plans for legislation to restore the $700 million in PFD funds vetoed by Gov. Bill Walker.

We hope his bill sees the quick death it deserves.

Dunleavy’s stunt is nothing more than a gimmick to raise interest ahead of a possible run for governor in 2018. It’s a wise move in that regard, pandering to a population of Alaskans who prefer we remain a welfare state.

Our state is suffering from something far greater than billion-dollar budget deficits. It seems political ineptitude and constituent greed are our true enemies, not low oil prices.

We’ve defended Walker’s veto before, but we’ll put it in simpler terms:

1. Alaska has a $4 billion budget deficit.

2. Alaska has $3.2 billion in the Constitutional Budget Reserve.

3. Alaska’s unrestricted general fund revenue is $1.2 billion (it was $7.5 billion in 2014).

4. When the Constitutional Budget Reserve runs out in summer 2018, we’ll have to spend from the Permanent Fund Earnings Reserve.

5. The Earnings Reserve is the same account used to pay PFDs.

No matter how you do the math, all of us are in big trouble.

There’s no evidence to suggest a sudden and drastic spike in oil prices will save us. Sure, it’s possible, but not probable. When Fiscal Year 2019 rolls around, we’ll have three options:

1. Tax ourselves at Connecticut levels.

2. Cut state services and jobs into oblivion.

3. Borrow from the fund that pays dividends.

Gov. Walker is anticipating the third option, which is why he halved our PFD checks this year. It’s only a matter of time until the fund that pays PFDs begins paying for state operations. When that happens, checks will be whittled year by year until nothing is left. When the Fund’s earnings reserve is gone, the only piggy bank left is the constitutionally protected Permanent Fund itself. Walker’s veto bought us more time to get state finances in order.

“Let’s agree that we’re going to have to reduce government and come up with a number first,” Dunleavy said Wednesday. “We can’t even right now agree on a number, a size of reduction.”

A year ago, Alaskans and lawmakers had a say in the size of government. Not so much anymore. The options now are to cut a lot, or a whole lot. Or the state can tax a lot, or a whole lot. In truth, it will probably be a lot of both.

We’d have preferred the real options on the table last January, but legislators turned down those options. Now we must decide how quickly the ship will sink, and stealing an extra $1,000 today will only speed an unpleasant end.

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Oct. 9, 2016

Fairbanks Daily News-Miner: New oil find field will benefit state, but doesn’t fix revenue problem

There’s no question that Caelus Energy Alaska’s major oil find on the North Slope will be good news for state revenue. At an estimated 6 billion barrels in total size, the field is one of the biggest ever found in Alaska - not of a similar size as Prudhoe Bay, but roughly on par with Kuparuk. When developed, it could contribute hundreds of thousands of barrels per day to the throughput of the trans-Alaska oil pipeline, easing concerns about declining North Slope production forcing an early shutdown. But there’s one thing the field isn’t - the answer to the state’s revenue crisis. Alaska needs solutions before the Smith Bay field is developed, and it will need them even more when most of the field’s recoverable oil has been extracted and it joins the North Slope’s other declining fields.

The discovery of the field could fairly be described as a game changer for the medium-term outlook for the North Slope. With Prudhoe Bay production on a long decline since peaking in the late 1980s and other fields too small to make up for the Prudhoe downturn, conventional wisdom held that North Slope oil was on its way to the fate of Cook Inlet, where large-volume production ended decades ago. But the Smith Bay find could help the North Slope maintain a presence more like what the state has been accustomed to for the past several decades - a landmark source of oil and gas that helps prop up one leg of the state’s proverbial “three-legged stool” of revenues.

But Smith Bay won’t fix the state’s current revenue problems. Even if permitted, leased and developed with all haste, oil from the field wouldn’t be flowing through the pipeline until the early 2020s, well after available state savings (including the Alaska Permanent Fund’s earnings reserve, out of which dividend checks are paid) would be exhausted without new revenue measures. What’s more, even at the top-end estimate of 200,000 barrels of new oil from Smith Bay flowing through the pipeline, the new field’s production tax revenue and royalty oil wouldn’t close the budget gap on its own; the state would still be operating at a significant deficit.

The state’s revenue crisis is just as severe today as it was a week ago. But the Caelus discovery is a significant bright spot for the state’s future, and there’s one way it could have a substantial direct positive effect on Alaska residents: Under Gov. Bill Walker’s permanent fund restructuring plan, dividend checks would shift from being generated by returns from the permanent fund corpus to a disbursement based directly on oil revenue. The Smith Bay oil, when developed, would provide a bump to that amount.

Alaska must address its revenue problem by restructuring permanent fund earnings and other means. The Smith Bay field doesn’t change that reality - what it does is give the state a bit of a boost that will make life easier once the budget has been balanced. Neither legislators nor citizens should labor under the idea that the find gives us more time or takes pressure off the need to resolve the revenue shortfall. At the ballot box in November, in the governor’s budget in December and when the legislative session starts in January, that will still be the first, most important order of business.