The path forward

EAGLE RIVER —As oil prices get ready to rise or plunge on an OPEC deal and Alaskans pay year-end bills and go Christmas shopping with fewer permanent fund dividend dollars to work with, legislators for the Chugiak-Eagle River talked goals for the next legislative session.

Top on the list? The budget.

“Before we can take money from the public pocket in any manner, we need to be able to have a comfortable size of government in spending,” Representative Cathy Tilton said. “There is no bigger goal than the budget. Everything else ties back to that.”

Local legislators predicted a house, under the new Democrat-led coalition, that would propose fewer budget cuts than the Republican-majority senate, and offered a range of ideas on how to best manage the state’s fiscal woes.

Incoming senator Shelley Hughes, who will fill retiring senator Bill Stoltze’s shoes after being elected to represent Chugiak and Palmer, said she continues to be a backer of the Scott Goldsmith plan, developed by the economist at the Institute of Social and Economic Research.

The plan, published by ISER in May of 2015, seeks to capitalize on state assets, including state-owned in-the-ground petroleum values, cap spending to drop the deficit to a more-manageable $1 billion, and preserve the permanent fund distribution in its entirety.

“If we could all agree to do the ISER Goldsmith model, shoot toward that, it doesn’t close the possibility to having to go to another step if you’re unable to provide for basic essential services,” Hughes said. “You still could consider sales tax after that. “

Hughes said Alaskans are shareholders under the PFD, which stands in lieu of state subsurface rights.

Representative Lora Reinbold also expressed concern about empowering the governor to veto the PFD, and said cuts to government spending should come first.

“We have to down-size, or right-size, government,” Reinbold said, adding veto power over PFDs is a lot for a single person to wield.

“Maybe this year he’ll just decide we get a $1 dividend,” she said.

Reinbold said it’s time to take a look at statutes that grow government, and critically examine them. At the same time, she said, the state’s pursuit of a natural gas pipeline that appears to have poor economic prospects and bad world-market timing, is a shaky bet that she’s hoping the state “doesn’t get too deeply involved in.”

Representative Dan Saddler said he has reservations about the Goldsmith plan, as well as one forwarded by Brad Keithley, owner of an Alaska-based consultancy that focuses on oil, gas and fiscal policy.

“Goldsmith says we should look at the oil that’s been monetized and put in the oil fund, and that’s not monetized, and based on population and level of government, oil above and below the ground, set a sustainable budget level,” Saddler said.

“It’s a theoretical way of looking at government, and it’s a difficult basis upon which to budget, because there’s so much that can interfere with realizing the value of oil yet to be discovered and produced. Likewise I’ve got some concerns about what Brad Keithley is proposing. There’s similar elements. Everyone wants a long-range fiscal plan, but you can’t plan everything out.”

Saddler said one element that’s important for Alaska to keep is the oil tax credit structure that incentivizes oil production in Alaska.

He pointed to the Caelus Energy discovery, announced in early October, of between 1.8 and 2.4 billions of previously unknown oil. It’s an offshore find that lies within state waters, meaning taxes would go toward the state. Unlike other oil-producing states in the lower-48, Alaska is not a revenue-sharing state for federal offshore oil production, meaning the federal government does not divert a portion of the tax revenue it raises from its oil leases to Alaska.

“The company said it would have not found this deposit if it had not been for the oil tax credits,” Saddler said. “It’s a clear case that these credits have a beneficial impact on Alaska, and could help to support the next three or four generations of Alaska services.”

He said he thinks there’s a rubber-meeting-the-ground spot, though, where Alaskans’ elected officials are going to have to choose between spending some of the PFD on government services, versus instituting some form of new state tax.

Hughes said she’s hopeful that some of the budget gridlock could be resolved with what she called “some out-of-the-box thinking.”

Rising health insurance costs continue to burden state government coffers, she said, with Alaska health care costs across the board exceeding those in other states for no good reason – the difference isn’t attributable to higher costs for operating in Alaska, she said.

She’s planning to advocate for something that’s out-of-the-box, giving free market competition an opportunity to work better with a little above-board information about how much things cost at the doctor’s office, or what she calls “medical cost transparency.”

Hughes said, “With healthcare, you don’t know what anything costs. What I see with healthcare, is the free market system is not working, and part of it is because we don’t know what things cost. I think that if we were to require that information being available to the public, you’d see people shopping around a bit. We all have to pay some out of pocket, so people have an interest.”

She also floated examining government operations for bloat, and serving multiple rural Alaska schools by investing in “one really great teacher” who could reach students via long-distance education systems, instead of using a traditional classroom in rural areas where high teacher turnover is a continuing challenge.

Reinbold also said budget concerns buried some of the finer details in Senate Bill 91 last year, allowing a restructuring of the Alaska criminal code to pass without adequate examination.

“They have the bail schedule changed, some drugs were practically decriminalized, misdemeanor A’s were reduced, misdemeanor B’s, felony C’s were reduced,” she said. “There’s some 1,600 car thefts this year in Alaska, and one thing that Senate Bill 91 did is, it’s hard to get someone in jail if they don’t have prior convictions.”

Reinbold said she’s been working with crime victims in Eagle River, and will be cosponsoring or sponsoring a bill to improve public safety in the next session.

The next Alaska state legislative session begins on Jan. 17, 2017. Senator Anna MacKinnon, Eagle River, was not able to comment for this story.

The Eagle reporter Mary Lockman can be reached at (907) 352-2268, or at mary.lockman@frontiersman.com.