Original article posted March 19, 2010
JUNEAU, Alaska — Alaska's maturation since statehood has failed to carry with it true economic diversification, a longtime analyst told representatives last week. As a result, the state should bank on decades more of dependence on petroleum and should prepare to use more Permanent Fund income and return to personal income taxes, he said.
Scott Goldsmith, formerly of the Institute of Social and Economic Research, told a House fiscal planning task force that the state depended heavily on federal spending 50 years ago, when Alaska joined the United States. It still depends almost as heavily on a few sources, led by oil, making it smart to save money now and get used to the thought of personal taxes and spending earnings from investment accounts.
“If we're honest, it looks to me like at some time they're going to have to be some part of the long-term fiscal solution,” Goldsmith said March 11.
The Legislature eliminated personal income taxes a few years after construction of the trans-Alaska oil pipeline. Since then, it generally has relied on oil taxes and at the community level on property or sales taxes. Oil development has declined, by volume, since the late 1980s, and Goldsmith said changing market prices could leave state government facing big deficits in the coming decades.
Fairbanks legislators back energy bill
Representatives from Fairbanks said the energy “vision” approved by the House on Wednesday is a good start — but only a start — to focusing future policymaking.
The bill, if it gains final approval, would form a shell for energy plans, funding and policies across the state.
“It's aspirational,” said Rep. Jay Ramras, R-Fairbanks and member of the House energy committee. “You have to frame the puzzle before you fill in the pieces.”
The proposed policy complements broader energy bills under debate in the House and Senate. The Senate's version — the Alaska Sustainable Energy Act — awaits hearings in the Finance Committee and addresses a broad slate of demand- and supply-side energy production and efficiency issues.
Rep. Scott Kawasaki, D-Fairbanks, said those more detailed plans need support as well.
“We have to implement the policy now to go with the direction,” he said.
Rep. Charisse Millett,
R-Anchorage, thanked many people from Fairbanks for help with the policy bill. Among the names were geophysicist and former lawmaker John Davies and Alaska Center for Energy and Power director Gwen Holdmann.
Rep. Tammie Wilson, R-North Pole, said the bill likely would make the state more efficient while it spends money on energy policies. She said she liked its inclusion of biomass, a major potential renewable resource for much of the state.
The House Finance Committee opened meetings Thursday on Rep. Mike Kelly's proposal to build an annual balancing act into state spending.
The resolution from Kelly, R-Fairbanks, would peg spending from oil revenue to a five-year average of income from natural resource development. The measure, a proposed constitutional amendment, also would build a storage shed for extra revenue.
Kelly said the move would guard against spending sprees during high oil prices and provide a long-term buffer against the need for big cuts when prices falls. Unneeded oil revenue each year would be stored automatically in the new balanced budget account, which the Legislature could tap using a majority vote when needed.
Kelly has said his resolution would avoid impacting “sacred cows” — politically untouchable accounts such as the 20-year-old Constitutional Budget Reserve and the larger Permanent Fund. The resolution calls for putting Kelly's plan to a public vote this fall.
Committee members Thursday applauded Kelly's effort to push the proposed spending plan.
“It fits right into the discussions we're going to continue to have over what the future holds and how we're going to fund it all,” said Rep. Alan Austerman, R-Kodiak, who is leading the fiscal task force.