• Forecast
  • News Tip
  • Categories
Temperature Precipitation
Estimated read time
2m 54s

Dwindling state revenue projections spark oil tax debate

By Rhonda McBride 10:52 AM December 6, 2013

Oil tax reform opponents say sharp decline in Alaska oil revenues provides more ammunition to repeal SB 21

ANCHORAGE - Just one week before Alaska Gov. Sean Parnell is scheduled to roll out his budget for the next fiscal year, state finances took a huge hit.

Revenue from oil and gas taxes has decreased sharply. Earlier this year, the state was expecting about $4 billion in revenue for the current fiscal year. But new budget estimates cut that number in half.

The Parnell administration said the $2 billion dollar shortfall is because of lower-than-expected oil prices and a decline in production — not SB 21, the oil tax reform bill that was signed into law this year.

Vic Fisher, one of the backers of a referendum to repeal the bill, questioned the administration’s explanation.

“Well, that’s pure nonsense,” Fisher said. “The price of oil is down by $4. That would make it a minimal difference in the tax take. I think Alaskans should be very alarmed. They should look very closely at what is being projected, and they should vote to repeal SB 21 in the next election.”

Voters will get to weigh in on Proposition 1, the referendum to repeal SB 21, in August’s primary election.

The revenue projections for the current fiscal year are based on two different tax structures. The first half of the 2013-14 fiscal year is under Alaska’s Clear and Equitable Share (ACES), a tax reform bill designed to capture more revenue when oil prices are high.

Oil in the second half of the current fiscal year will be taxed under SB 21, which Parnell has rebranded as MAPA, the “More Alaska Production Act.” The legislation takes effect Jan. 1.

“The governor’s projections are bringing us to a precipice, where within a very few years you will see the economy of Alaska hurting very, very bad,” Fisher said. ”They will have no one to blame but themselves.”

The Alaska Oil and Gas Association, a trade industry organization representing oil and gas producers, paints a very different picture.

Kara Moriarty, AOGA’s executive director, points to recent signs of increased production.

“There are new rigs coming on line in Kuparak and Prudhoe,” Moriarty said. “The number of rigs in Prudhoe are going to go from five in 2012, up to nine. So we have more money in the private sector today in eight short months before the law even takes effect than we ever had under ACES.”

Moriarty contends that the state is already better off, even before the new tax regime takes effect.

She worries that the referendum backers will use the revenue shortfall to further distort the picture and scare away potential investors a natural gas line.

Parnell said he stands by MAPA, and believes the law will actually help capture more oil revenue than ACES because its structure is more favorable to today’s current low-oil-price environment.

Fisher doesn’t buy that argument and believes the trend in declining oil revenues could deplete the state’s $17 million in budget reserves.

“That can disappear in less than five years,” Fisher said, who fears this could lead to drastic cuts and perhaps an income tax.  “It’s going to be a real hit to the economy, and it will reduce jobs in Alaska. It will reduce the quality of life in Alaska.”

Moriarty doesn’t see it that way. She believes increased oil production will grow more jobs and revitalize the state’s economy.

Despite the differing visions of the future, the bottom line for now: $2 billion less in revenues, and very likely, some painful cuts ahead for state government.

Latest Stories

  • Lifestyle

    Still life meets real life, statue bearly makes it

    by Megan Edge on Jul 29, 21:29

    An Alaska Wildlife Conservation Center (AWCC) male brown bear, known as Joe Boxer, came across something kind of odd at his home along Turnagain Arm last weekend. It was another bear, but this one was covered with vibrant designs and painted berries. It wasn’t real. In late-June, 14 fiberglass bears, originally white, were brought to […]

  • News

    In the cockpit with the Blue Angels

    by KTVA CBS 11 News on Jul 29, 19:43

    Watching from the ground, have you ever wondered what it feels like to be in the cockpit of one of the Blue Angels? KTVA 11’s Bonney Bowman flew in the Number 7 plane with pilot Lt. Tyler Davies, for whom flying was a lifelong dream. “My dad took me to an air show when I […]

  • News

    Youth volunteers paint mural on Wasilla tunnel to cover graffiti

    by Shannon Ballard on Jul 29, 19:24

    For years the Newcomb Park tunnel, just south of the Parks Highway in Wasilla, has been the target of vandals. The city has tried to clean up the graffiti plagued walls numerous times, but nothing seems to keep people from leaving their mark. Wasilla Mayor Bert Cottle says he’s taking a new, more colorful approach. […]

  • Lifestyle

    How to reverse the health risks of sitting all day

    by CBS News on Jul 29, 17:35

    Sitting too much can take a serious toll on your health, even raise your risk of early death. But if you’re stuck in your chair at a desk job all day, don’t despair — a new study suggests there is something you can do to reverse the damage. It comes down to fitting in an hour of […]

  • News

    Driver killed in commercial truck rollover near Houston

    by KTVA CBS 11 News on Jul 29, 16:38

    The driver of a commercial truck was killed when it rolled over near Houston Friday morning, according to an Alaska State Troopers dispatch. Thirty-six-year-old Alexander Dmitryev, of Trapper Creek, was the only one in the truck when the incident happened on the Parks Highway near Cheri Lake Drive, according to the dispatch. Troopers said he was wearing […]

  • Lifestyle

    Video: Man uses drone to pull out granddaughter’s loose tooth

    by Jason Sear on Jul 29, 16:16

    Combine the ingenuity of a grandfather and the creativity of 6-year-old, and almost anything is possible. When Avery Radke heard her grandfather, Terry Siegrist, would be visiting Anchorage, a light bulb went went on. Avery asked her ‘papa’ to bring his drone to Alaska. She had a loose tooth and thought attaching it to a […]

  • News

    Troopers: Motorcyclist last seen in Glennallen reported missing

    by KTVA CBS 11 News on Jul 29, 16:04

    A Valdez man, who was last seen on Tuesday in Glennallen, has been reported missing by his family, according to an Alaska State Trooper dispatch. Christian Cumbie, 39, was driving his purple and yellow motorcycle, with Florida registration, when he left the Hub in Glennallen and headed south on the Richardson Highway, troopers said. An Alaska State Trooper […]

  • News

    Eroding Alaska village to vote on whether to move or stay

    by Rachel D'Oro / AP on Jul 29, 14:44

    A tiny island village on Alaska’s storm-battered western coast is entering a new chapter in its decades-long pursuit to move the entire community from its badly eroding shores to safer ground. The Inupiat Eskimo community of Shishmaref will hold a special election next month asking residents if they should develop a new community at a […]