Contributed by Larry Wood
Without a sustainable fiscal plan, Alaska faces fiscal calamity. To continue to spend at this rate is irresponsible. We are literally stealing our children's future.
A sustainable budget fiscal plan is the only option that will prevent the state government from spending us into the poor house and provide a modicum of optimism for the future.
I support the Institute of Social and Economic Research's (ISER) sustainable budget fiscal plan to provide for fiscal stability, continuance of the Permanent Fund Dividend, and a healthy permanent fund that will provide for Alaska's government costs into the future.
Alaska's economy is cooling and the price of oil is still under $50/bbl and is unlikely to rise much higher, unless there is a serious interruption or threat to the supply of oil. The decline in the price of natural gas and the need to use North Slope gas to keep the oil fields pressurized for eventual recovery of the 20 billion barrels of heavy crude remaining in the legacy fields will continue to bar North Slope natural gas from going to market. Oil will need to rise to at least $110/bbl before the heavy oil will be extracted.
Oil has to be at least $36/bbl to keep current crude production rates on the North Slope. If oil drops below $30/bbl for any length of time, activity on the North Slope will grind to a halt.
There is optimism that the next Republican President will open ANWR and offshore leasing in Alaska. However, it will be years before there is any production from ANWR.
Offshore production does not benefit the state.
Layoffs in the oil service sector are now common place in Alaska. 250 employees were laid off last year. BP will lay off another 270 this year. Other industries are cutting workforces. The Department of Corrections is going to close a prison, eleven Alaska State Trooper positions will not be filled, and one hears of continuing cutbacks all across state government.
The solution of our governor is to a slowing economy is to raise taxes on all sectors of resource development, raid the permanent fund, and reduce our PFDs. All to keep the government sector from suffering the privations that an economic downturn inflicts on the private sector.
The fact that decreased energy prices did not produce any upswing in the economies of the developed countries should be an indication to all that the world economy is in the throes of a depression with no end in sight. The last depression of this magnitude resulted in WWII.
I have not been able to find an economist who sees a quick turn-around to the current U.S. or worldwide fiscal crisis. The economic prognosis is not good; in fact, uncertainty is the only commonality in any opinions regarding what may or may not happen when the "bubbles" burst and the piper has to be paid.
The Legislature and our governors have failed to ensure a balanced economy through judicious enabling of mineral, timber, and fisheries industries to provide jobs and a strong private sector along with tourism and the energy sector.
Instead, over the years, these industries have languished without proper incentives. The state government took the easy route and instead of investing into infrastructure to promote and to support sustained resource development and to provide a viable surface transportation infrastructure to provide for commerce and economic development across Alaska, oil became the "drug" of choice to fuel growth of Alaska's government into a gross welfare state now doing its best to ignore a worsening financial crisis.
The state government has doubled in size since 2006, and most if not all municipal; local governments and borough governments have increased well beyond need or necessity. All government must be cut. Otherwise, property taxes and a worsening job climate will result in people leaving this state.
ISER's plan will restrain government growth and spending. However, this must be coupled with a decrease in taxes and deregulation to promote private sector growth.
The governor's idea to increase taxes, cut the PFD, and raid the PF is simply wrong-headed and will result in worsening our economic crisis.