The IBEW and the Alaska State Employees Association—both of which represent thousands of government workers–have endorsed “Yes” ballot measure 1, to repeal the oil tax. Meanwhile, four trade unions – Teamsters Local 959, Plumbers & Pipefitters United Association Local 375 in Fairbanks, Operating Engineers Local 302 and Laborers Local 942 –have urged voters to vote “No” on the repeal. Those unions get substantial amounts of work from the oil fields.
The debate is complex. Production curves. Rates of return. New versus old production. Legacy fields versus non unitized areas. Personalities and conflicting numbers. All of these things and more add to the stew that’s makes up the oil tax debate.
But the public union endorsements add to my suspicion that at its heart, the most recent incarnation of the fight over oil taxes—a fight that the state has been having since Prudhoe was discovered in 1968—is really more simple than all of this. When you get down to it, the biggest elephant in the room lives in the state coffers, where it involves, among other weighty things, public employee versus private sector jobs. And that’s an elephant that few, at least in government, want to talk about.
If my suspicion is correct, then the whole shebang is less about numbers and facts than it is about the basic struggle between aspects of human nature and economic systems, a struggle the world has been having since we emerged from feudalism and discovered capitalism. Namely, how is capital best deployed? If there’s about $1 billion or more at stake, as those who advocate for repeal say there is, in whose hands is that money better placed?
Do we give it to industry and trust it will use it to hire Alaskans, create jobs and grow the economy, which is the whole point and which it hasn’t always done? Or do we keep it and trust the politicians to spend it wisely to try to build a sustainable economy, which we all know they haven’t always done? With oil production decreasing so precipitously—75 percent since 1989–do we have any choice?
In any case, and no matter what happens in Tuesday’s primary vote, the state has a big government problem,that no matter who’s in charge, continues to grow and at some point is going to have to be addressed.
Since oil prices began to rise in 2002, there is no doubt that state government has been flush. But who has benefited most from bulging state coffers, the majority of which are paid for by the industry? In a state with no broad-based income or sales tax, who benefits most from private sector jobs?
Whose fair share are we really talking about when we talk about our fair share?
In 2013, there was an annual average of 335,800 non-self-employed jobs in the state. Of that, 82,700 were government jobs. That means that a little over 24.9 percent of total jobs in Alaska were government jobs, a percentage that dwarfs any other single category of workers in the state. That doesn’t account for all the hundreds of businesses in the state that are propped up by government contracts.
The national average percentage of government jobs to all employees was about 16 percent. Only Wyoming beats Alaska in percentage of government workers.
About 14,100—or about 4 percent of the population– worked in oil and gas in 2013.
Here’s a chart from the U.S. Bureau of Labor Statistics, which shows government employment in Alaska since 1990. It should be noted that the recent downtick represents a loss of federal government jobs, not state or local jobs:
If the oil tax is repealed, how are we going to pay for all those government workers if the oil companies make good on their indications that they’ll slow down production?
And if the oil tax isn’t repealed? What then? Are we all content to live in a conservative, anti-government state, where a full quarter of all workers are working for government and are getting the kinds of salaries and benefits that most of us can’t have?
The issue is so much bigger and potentially more painful than oil taxes. And none of our leaders, nor those who want to lead, are talking much about it.
Any thoughts?
Contact Amanda Coyne at amandamcoyne@yahoo.com
The room smells like it’s positively packed with pachyderms.
The elephant that is most influencing my vote is the low low low low bar we’ve set for ethics and accountability in the state legislature. I’ve served on grant review panels and student governing bodies with stronger conflict of interest rules.
I’m sending SB21 back to the kitchen, not because of the bill, I just don’t like how it was cooked.
Either way, the thing I hope to see this year is large voter turnout. I feel like this isn’t a question any one person can wrap their mind around, it’s as big as the moon and we need people on the other side to get the full perspective. When we make the decision together, we’ll know the answer.
This is the “I’ll cut my nose off (by voting no) to spite my face”, argument. Alaska can spend money we earn from the sale of our oil under ACES for important projects that make our state a better place. Hydroelectric power, a gasline, etc. But if we are poor (MAPA- Make Alaska Poor Act) we will not even have the basic funds to pay for these important, pro development projects.
One observer to all this asked how Alaskans could be so foolish as to give away billions, no strings attached. by voting “no”. He said, “Those capital budgets are about to dry up. Thousands of construction jobs will be lost. Capital budget spending will be the FIRST to go as Parnell whacks $1.5 billion from next year’s budget. He also remarked at how remarkably stupid Alaskans are to be fooled by the Vote “No” campaign. “We’re laughing our asses off listening to you Alaskans who we’ve manipulated into thinking a “no” vote is somehow good for your state.”
Amanda hit a homer or three on this one. I am still voting Yes, not really because of the twisted economics of it either, but for the exact same reason I jumped head first into the Repeal idea to begin with…Corporatism and a reckless Alaska Gov’t that acts like it owes the resource extraction and facilities maintenance gang (CBC) something, something We don’t have.
Personally I think the entire resource severance tax code should be adjusted to a flat rate… and that Alaskans get first crack at enough resources for Our Use. Quit changing the darned thing and stabalize the State’s income while also reigning in spending. Here comes the tricky part… Where do We get the money to keep up with federal mandates and such? Big Oil or Federal Program takeovers and subsidies, thus further assaulting the sovereignty of Alaska?
Jon,
When Fukushima failed and Japan turned away from nuclear power that was the golden opportunity for Cook Inlet if indeed all these “possible” and “probable” reserves of natural gas in Cook Inlet were worth pursuing. And what did the Cook Inlet lease holders do? They showed no interest in exploration. Facing an immediate gas supply crisis in South Central, the State “blinked” and, to avoid importation, agreed to provide incentives for others
. Besides additional state tax revenue an affordable long term domestic supply of gas was supposed to be realized from the “Cook Inlet Renaissance”. Now we have dumped how many millions of State finances into Cook Inlet and after that expense what now is our tax revenue from the Basin?
As to domestic supply, we have firm gas supply contracts now until 2018. The year 2018 will arrive before either of the pipeline schemes can come to fruition and then what? Jon, you apparently see firm supply contracts through 2018 as very comforting. I see that as nothing but a borrowing of time for a few more years to another crisis. Also, think about poor Fairbanks.
As to affordable gas, what is the fate of the Alaska consumer now? Are we to compete amongst ourselves for this additional gas as appears to be the case between Enstar and MEA? Are we to bid for export gas to Japan with Tokyo Electric? Three times as expensive gas is in our future if we continue on course and I would just as soon not see us freeze in the dark in the interim.
Parnell and his ilk can only promise and spend. I will vote “NO” on SB 21 for reasons that have nothing to do with any trust or admiration of the ability of the current Governor or his legislative cohorts.
I expect if SB 21 remains, yet Alaska increased production threatens to marginalize profits by creating an over supply of oil; the Alaska production increases will be minimal. Then the Parnell cultural apologists will be out within one year explaining away reality and the gullible will lap it up like warm milk. If SB 21 is repealed and all this effort to increase production lapses, then perhaps we will finally understand that Alaska is no longer important and our gas and oil, currently locked up in leases, will either never be produced or will not be produced until the time is optimal for the lease holders many years from now.
Don’t let your optimism go “into the toilet” if SB 21 is repealed. Look for the passage into history of a generation of Alaskan politicians whose main (and perhaps only) talent was spending. Anyway, there is going to be an SB22, SB23, SB24, etc. etc, in future years. . Perhaps you could reflect on what Erwin Rommel is supposed to have told his staff when told how easy it would be to defeat the Americans. He supposedly said; “You can afford to be optimists, I cannot”.
This is pretty simplistic. Taxes don’t spend themselves. It is our crony capitalist and socialist legislature that spends more money than they have, Here in the Mat-Su, we have an assembly full of crooks who keep on coming up with more ways to spend our money..like their ferry, Port Arvin euphemistically called Port MacKenzie the customer-less rail spur and now the planned community that reads like an old Soviet collective and we don’t even get oil taxes directly. Oh and these guys, are our “conservatives” just like in the legislature. ACES stinks..SB21 is worse…vote yes and get a proper tax bill, send it back! AND while we are at it lets vote out the crooks!
Our candidates are addressing the issue of state government bloat. We also support NO ON ONE this coming Tuesday.
http://t.co/tabIWkowpX
This is the discussion Alaska needs to have but the 2014 election is keeping Alaska from having it. North Slope petroleum is not infinite. The Prudhoe Curve was supposed to end at 11 billion barrels in about 2000. 17 billion have been produced. Municipal governments are even more bloated than is state government but state government is in far, far too many businesses; the mortgage business, the housing business, the railroad business, marine transportation, park and camping business, salmon ranching (or at least financing of the business), etc. etc.
Lynn, your electric bill would be three times higher if we had to import LNG, which would have happened without he resurgence in the cook inlet that began around 2011.
Anyway, although we often disagree about the state’s future, if the Yes vote wins, my optimism goes into the toilet. Bradner’s piece should be required reading before anyone votes on Tuesday:
http://www.alaskajournal.com/Alaska-Journal-of-Commerce/August-Issue-3-2014/Repeal-will-hit-gasline-treasury/
Thank you…..
@Lynn. Thanks. You were my muse!
This is an excellent analysis Amanda. Just like Brad Keithley calls for a serious inquiry into future budget control methods, perhaps equally important is a serious review of the mission statement of the State Government regarding what to do with those budget dollars.
We are now in deficit spending to the tune of an estimated 7 million dollars a day. If you are spending 7 million dollars a day you will spend 1,000 million (or one billion) dollars every 143 days. That is an actual “2 billion dollar giveaway per year” we are foisting on future Alaskans. Just to replenish our cash savings on the promise of SB21 look at the additional revenue we now need to generate.
Our founders were not awash in oil cash. They wisely created a check and balance to over generous legislatures by affording the Governor of Alaska line item veto power over appropriations. Governor Parnell has approved the largest budgets in State history. This year Governor Parnell did not veto one penny from this latest deficit spending budget. And now he brags about creating 16,000 jobs. Amanda, your analysis shows that either directly hiring more government employees or approving spending on projects like the LIO expansion to boost “private sector” hiring does indeed create jobs (and votes). Isn’t it a bit hypocritical of our current Governor to then claim he stands against any government redistribution of wealth schemes like power cost equalization or medicade expansion? As you state Amanda things are perhaps not so great for some not benefiting from the state jobs program. For instance, today I heard that my MEA electric bill will rise 23% partly to purchase gas for the new MEA power plant. This is right on top of my annualized
48% Enstar increase. So please spare me the “Cook Inlet Renaissance is good for everybody” baloney.
The legislature is like kids with their parent’s VISA Card. Don’t expect anything from them. Remember a legislator will be kicked out of the majority caucus if they fail to support the budget regardless of the budget amount. Senator Kevin Meyer (Co-Chair of Senate Finance) called a talk show today to invite the public to attend the opening of a new high school football field funded at public expense. I dare him to invite the public to the opening of the new LIO.
America has a sad history of having to be seriously hurt before we demand action (e.g. Pearl Harbor, 9/11, and the 2008 Crash) and I fear that will unfortunately be the case with state spending. How many were here when the bottom fell out in the 80’s due to low oil prices? Back then we had the production levels so that when prices rose we recovered (grounding a super tanker was also a helpful economic stimulus). Now, the highest prices in history won’t do us any good without substantial additional production. And I wouldn’t bet the farm on any gas lines any time soon.
Lastly, If we have arrived at the point of killing the golden goose of oil, I am simply amazed that a government union would be the first to show up with the hatchet when the golden goose’s neck is on the chopping block.
Two points worth considering : production declines are not inevitable. Look at most basins throughout North America and even Cook Inle where oil production has doubled in the last several years. The north slope has staggering untapped potential. The key is creating an environment to attract investment, new companies, and capital to unlock the potential. Otherwise we are screwed
Second, ACES wasn’t sustainable – we couldn’t keep subsidizing massive projects with oil throughput so low. I don’t think that people realize that Bp Exxon and Cp were getting up to 2/3 of the costs of their project covered by the state. This is a lot of money that we don’t have. Moreover, given that ACES’s progressivety factor was determined by costs and price and with costs rising while prices are stagnating we were getting creamed under ACES – we lost $2.5 billion between FY 2009 and FY 2013 even though prices were $12 higher – progressivety didn’t work. It will be very interesting to hear Bill W or Les explain to Alaskans why we aren’t seeing more revenue if ACES is resurrected.
This post is provactive. I haven’t looked at this issue from such a perspective and think it helps provide some clarity. As you note, it is a complex issue and has mutiple facets on which to make an argument. Your point about spending and government employment is an issue that transcends the outcome of Ballot Measure #1. I wish our policy makers were more thoughtful, consistent and willing to lead by example. The governor, nor the legislature has seldom offered up any proposals or sacrifice where they could lead by example. On a related note, I hope that this discussion takes hold and resonates into a real debate and other members of the public pitch in dollars to something like Keithley’s independent expenditure fund to promote fiscal conservatism and sustainability. Amanda, I like your thinking, regardless if I agree or not, as it often causes me pause, reflection and reconsideration of my own views, often times from a perspective of greater depth. Thx.
@Kathleen: Uptick was 9/11 and homeland security for airports and various terrorism drills across the state.
@Arctic: One thing about Noway: they taxes their citizens very high. They decided early on that they would rather have high taxes than having the country’s basic services be dependent an oil taxes. It also gives them MUCH more leverage when negotiating taxes. Also as a result, that country’s equivalent of a permanent fund is about $730 billion, where ours is about $50 billion.
Why does the graph show a huge uptick in 2001? I assume 9/11 is the cause, but what kind of government hiring led to this spike? Also, the graph rises again at the time ACES was enacted, or so it seems. Am I to see a correlation between the implementation of ACES and an increase in government hiring?
The only way to reduce Alaska’s (fiscal) government problem is to reduce the number of government employees (and the bureaucracies that hired them). If ACES in any way led to a bump in government hiring, shouldn’t voting No on 1 be the first step in getting our government problem under control?
#askingforafriend
Regardless of whatever side you fall on, ballot initiatives are a terrible way to conduct public policy on any issue ranging from economic development to personal freedoms, such as reproductive rights. There is no way I want people who have only heard sound bites of information voting on policy that will affect the state for the long term. If policy maker make bad policy, vote them out. Constant threats of contradictory citizens initiatives complicate the law and create a huge amount of uncertainty. The constant changing of taxation laws has more effect on production than whether the taxes are low or high. Why would any business invest in an area if taxes so variable and can change on a whim? A stable taxation policy is key, what are we Venezuela? Look at Norway, they have relatively high taxes but their taxation structure hasn’t changed since the 1960s and production is booming. Oklahoma has a relatively low tax structure, which has been stable over the long term, and production is also booming. The common denominator here is not percentage bracket, but stability. Furthermore, the standard of living that we enjoyed growing up in the 80s and 90s would have been completely unattainable without big oil–strong public schools, high government wages, the bike trail to the spit, facilities at Kachemak Bay State Park, the boat harbor, the Islands and Oceans center, a relatively good community college, well maintained roads, ect. In Alaska, we have had the benefit of not having to pay for the vast majority of public goods we use daily solely due to the wealth of resource extraction.