Alaska Dispatch News, Charles Wohlforth, January 13, 2016

Any Alaska budget solution will hurt or protect people in four main groups. In any fair solution, all four have to sacrifice.

The state’s budget math doesn’t work without capping dividends and using Permanent Fund earnings. But we also need an income tax, budget cuts and repeal of oil tax credits. There is no fair solution without a hit to people with each of these interests.

Where you fit in the four-way tug-of-war depends on how much money you make, how old you are, how many kids you have and what industry you work in.

The guy who explained this situation most clearly to me is the only one I’ve met who seems able to rise completely above it. Cliff Groh, a lawyer who attended Harvard, has been studying Alaska’s fiscal and economic situation for decades as a hobby. He gives lectures and has helped put on more than a dozen public forums on the subject. Since May, he has done nothing else, without pay.

He calls the four-way fight the “Groh Square.” That name is his nerdy attempt to wring humor out of this dry stuff. He also sometimes lectures in an Abraham Lincoln costume.

But he refuses to give his own opinion. As the chairman of Alaska Common Ground, a small nonprofit dedicated to educating Alaskans about policy choices, Groh speaks only in favor of knowledge.

“What I often call for is for people to actually understand what the choices and trade-offs are, rather than having them assumed,” he said.

In Alaska, this is revolutionary talk. We’re in the habit of making decisions based on slogans. Groh is asking us to think.

Read the rest of the article here.

Most Americans know the climate is changing, but they say they are just not that worried about it, according to a new poll by The Associated Press-NORC Center for Public Affairs Research. And that is keeping the American public from demanding and getting the changes that are necessary to prevent global warming from reaching a crisis, according to climate and social scientists.

As top-level international negotiations to try to limit greenhouse gas emissions start later this month in Paris, the AP-NORC poll taken in mid-October shows about two out of three Americans accept global warming and the vast majority of those say human activities are at least part of the cause.

However, fewer than one in four Americans are extremely or very worried about it, according the poll of 1,058 people. About one out of three Americans are moderately worried and the highest percentage of those polled — 38 percent — were not too worried or not at all worried.

Despite high profile preaching by Pope Francis, only 36 percent of Americans see global warming as a moral issue and only a quarter of those asked see it as a fairness issue, according to the poll which has a margin of error of plus or minus 3.7 percentage points.

“The big deal is that climate has not been a voting issue of the American population,” said Dana Fisher, director of the Program for Society and the Environment at the University of Maryland. “If the American population were left to lead on the issue of climate, it’s just not going to happen.”

Linda Gebel, a 64-year-old retired bookkeeper who lives north of Minneapolis, has read up on global warming.

“Everybody’s life would be totally disrupted,” Gebel said. “It will cause famines and wars, huge problems. I don’t know why people wouldn’t be worried about it.”

And yet because she lives in the middle of the country — joking that she’ll be “the last one who will be submerged” — Gebel added she doesn’t “feel worried personally. I’m not sure this is going to happen in my lifetime, but I worry about my children. I worry about my grandchildren.”

The “lukewarm” feeling and lack of worry has been consistent in polling over the years, even as temperatures have risen, said Anthony Leiserowitz, director of the Yale Program on Climate Change Communication.

“The issue hasn’t quite boiled up enough so that people have put it on the top of things they want to focus on,” Princeton University climate scientist Michael Oppenheimer said.

One issue is how big, yet distant the problem seems and how abstract it can be, Fisher said. It can cause people to put off worrying about it.

Renata Schram, a 43-year-old customer service representative in Sturgis, Michigan, says she believes global warming is real and is mostly caused by people, but she is only moderately worried.

“On my list of things that worry me today, global warming is kind of low,” she said. The world’s violence is a far more pressing issue, she says.

“Usually when we hear about global warming everything seems so distant,” she said. “The sea levels are going to rise but I find it difficult to find a prediction that tells you how many years exactly.”

White House science adviser John Holdren said climate contrarians emphasize how large the problem is, essentially telling people “the result (of warming) is too scary, so let’s not believe it.” He said these groups have been “incredibly effective in sowing doubt” about global warming.

For his part, Myron Ebell, a policy expert at the conservative American Enterprise Institute, said the elites on the coast may be concerned about global warming but people in the heartland who dig stuff up, grow stuff or make stuff are used to the vagaries of extreme weather. “They don’t see it as much of a problem” because it isn’t, he said.

Not so, said scientists.

“We are all vulnerable to the impacts,” climate scientist Chris Field of the Carnegie Institution said. “If you are a farmer in Illinois or if you work on a railroad in Alabama or are a miner in West Virginia, there are impacts that are going to affect your life, your health and what you’re going to pay for things in the grocery store.”

Scientists, however, aren’t communicating their worries well, figuring that issuing more reports and data will convince people, said climate scientist Katherine Hayhoe of Texas Tech, who reaches out to the evangelical Christian community. Success lies in finding common ground in humanity, she said.

“More facts are not going to fix the problem,” Hayhoe told a meeting of top climate scientists last week in Washington. “Nearly every human on the planet has the values they need to care about climate change. We just need to connect the dots.”

Read the article here.

Devin Kelly, Alaska Dispatch News, September 19th, 2015

Alex DeMarban, September 17, 2015, Alaska Dispatch News

Kenneth Rogoff, September 4, 2015, Alaska Dispatch News

Dermot Cole, Alaska Dispatch News, August 23, 2015

Alex DeMarban: Alaska Dispatch News: August 13, 2015

Alaskans favor a combination of new revenue and spending cuts to help the state survive a fiscal crisis brought on by low oil prices and waning production, according to a poll released Thursday by the Rasmuson Foundation.

The results seem to be at odds with key Republican lawmakers who say their constituents prefer deep, aggressive cuts before new revenue is generated to help Alaska survive a $3.5 billion budget gap.

The statewide poll, conducted by Strategies 360 of 1,206 registered voters in Alaska, found respondents prefer generating new revenue over deep spending cuts to essential public services such as education, roads, police and health care.

The poll found Alaskans prefer, in the following order:

• Tapping a portion of the earnings of the $52 billion Alaska Permanent Fund.

• Introducing a statewide sales tax.

• Capping the annual dividend check sent to most Alaskans.

• Reducing tax credits to the oil industry.

Last on the list, by a strong margin, was a personal income tax. But even an income tax was preferred over deep cuts to essential services — by more than 2 to 1.

In a response showing support for a balanced approach to addressing the budget crisis, 42 percent wanted equal measures of new revenues and cuts. Twenty-five percent wanted mostly spending cuts or only cuts. Another 25 percent wanted mostly new revenues or only new revenues.

The poll, called the “Alaska Attitude Survey on the State Fiscal Climate,” was commissioned by the Anchorage-based Rasmuson Foundation as part of a statewide campaign on creating a fiscal plan.

In June, the foundation took a stand on some of the issues in the poll in a white paper, which said spending cuts alone would not close the fiscal gap.

The $60,000 poll was conducted in July. Its unusually large sample size — Alaska polls usually reach no more than 1,000 respondents, while many number only in the hundreds — gives it a margin of error of 2.8 percent, meaning it was likely to be representative of the opinions of Alaskans at the time it was conducted.

The poll found most Alaskans are aware and anxious about the fiscal crisis, a problem brought into high profile after oil prices cratered from about $100 a barrel last summer to around $50 today.

The foundation over the last two weeks has shared the poll results with elected officials.

The state is currently drawing on savings built up when oil prices were higher. Ed Rasmuson, the foundation’s chairman, said if the state continues to draw 85 percent of its revenue only from the oil industry, it will be broke by 2019 even if oil prices jump back to $100 a barrel — something many analysts don’t expect.

“These results show that Alaskans are ready to have the difficult deliberations about the sustainability of our state,” Rasmuson said in a prepared statement. “And now our elected leaders need to lead. The Governor and Legislature have the unenviable responsibility to make decisions that are going to be unpleasant, but necessary.”

Rep. David Guttenberg, D-Fairbanks, a member of the House Finance Committee, said the poll overlooked an important revenue-generating option: Reforming the oil-production tax. He said he’d prefer a broad solution that could include changing the oil-production tax, additional cuts and other money-raising measures.

He said he supports an income tax over a sales tax as part of a broad plan, because it would capture income from the state’s large nonresident workforce [5] that arrives in Alaska seasonally or for recurring, multiweek stints.

“There is so much income leaving the state on all those jobs, it is amazing,” he said. “I don’t like an income tax, but it’s one of the answers and we can put in clauses that cancel it out when we don’t need it.”

Cassandra Stalzer, communications director for the Rasmuson Foundation, said a production-tax overhaul was not part of the poll because the diverse group that discussed what to include –such as economists, business representatives and lawmakers – sought solutions that would make a large dent in the deficit and be accomplished within a year’s time.

Given that Alaska voters approved the current oil-production tax last summer — after a long and contentious debate — organizers of the poll felt an overhaul of the system would not happen within a year.

“We are not trying to protect the oil industry,” Stalzer said.

The foundation, criticized by one side of the political spectrum for not including a production-tax overhaul, was also taken to task by the other side for not advocating for deeper cuts.

Sen. Anna MacKinnon, a Republican and co-chair of the state Senate Finance Committee, said constituents in her Eagle River district continue to prefer cuts over revenue discussions.

With the state in a $4 billion dollar hole, the revenue solutions alone won’t close the gap, so more cuts are “mandatory,” she said.

She said she’ll continue to focus on reducing the state budget by corralling the three biggest expenses, K-12 education, health and social services, including Medicaid, and debt service that includes pension obligations.

“We’re in the middle of a process to right-size government and bring up the confidence level of the people of Alaska that we are investing the money (properly),” she said.

But she said she’s looking forward to hearing new revenue options once Gov. Bill Walker submits an economic plan [3], something expected in this fall.

“I’m waiting for that to come out, not to fire at it, but to fully explore it,” she said.

Rep. Dan Saddler, an Eagle River Republican and vice-chair of the House Finance Committee, said he’ll continue looking to cut unnecessary services created when oil prices were high, before looking for new revenue.

He said he was doing just that on Thursday. As chair of the finance subcommittee on health and social services, he and other members of the subcommittee were touring the agency in hope of finding programs that could operate more efficiently.

He wouldn’t say what state programs are not needed.

“I’m not going to say ‘X’ program or ‘X’ division is not critical,” he said. “I don’t make that decision as an individual. That’s a decision we will make as a Legislature.”

The poll also weighed in on Alaskans’ views of the “overall job performance” of their elected officials.

Fifty-three percent of Alaskans said they totally approve of the governor’s job. Fifteen percent totally disapproved.

Thirty-two percent said they totally approve the Legislature’s job performance. Forty-one percent said they totally disapproved.

Jeannette Lee Falsey: Alaska Dispatch News: August 18, 2015

Another one of the three major credit rating agencies lowered its outlook for Alaska to “negative,” citing the high likelihood of sustained low oil prices and lawmakers’ aversion to opening up the state’s most promising sources of revenue.

In a report released Tuesday, Standard & Poor’s Ratings Services warned that if left unchecked, Alaska’s fiscal problems could lead to a future credit downgrade. A credit downgrade often serves as a red flag that an investment opportunity carries higher risk and therefore could raise the state’s cost of borrowing.

Standard & Poor’s believes budget cuts alone cannot fix Alaska’s fiscal problems and suggested that Alaska’s politicians could avoid a downgrade by raising revenue.

“Relying solely on spending cuts to close the fiscal deficit would necessitate that lawmakers oversee a dramatic downsizing of the scope of state government in Alaska,” the report said. “It’s more likely, in our view, that policymakers will need to pursue of mix of sustained spending restraint and some form of revenue enhancement.”

Aside from introducing state sales and personal income taxes and tapping the portion of the Permanent Fund not protected by the state constitution, Standard & Poor’s floated the ideas of capping annual dividend payouts from the Permanent Fund or eliminating tax credits intended to spur oil exploration or development.

The agency recognized that its proposals, which have been fixtures of public dialogue since oil prices began falling last year, are contentious.

“It would be a significant political achievement for the state’s lawmakers to reach agreement on any one of the fiscal reforms mentioned above,” the report said.

Standard & Poor’s pointed out that the state’s “extraordinarily large budget reserves,” which have thus far covered the state’s spending deficits, won’t last forever. If lawmakers do not start correcting the state’s fiscal imbalance within the next year, a lower rating would be likely, it said.

Moody’s, another credit ratings agency, revised its outlook [2] for Alaska to negative in December 2014.

John Havelock, Alaska Dispatch News, Opinion, July 25th, 2015

In a time when all Alaskans must suck it up and face a reinstatement of an income tax, it is also a time to do a thorough review of the appropriate tax structure for oil and gas.

The oil industry can’t be blamed for avoiding taxes. It’s the American way. But if the Alaskan public is not to be spun around a cylinder on a spiral ridge by artful corporate tax dodgers, the technically educated in the state government and their community colleagues had better pencil down hard.

The moment is in the realization that the current model for state financial survival won’t work, as we have lately been reminded by the powerful credit-rating agency Moody’s. The governor’s conference on the fiscal situation earlier this summer in Fairbanks left the same impression, though it went easy on the variable role of oil taxes.  Perhaps the conferees were more accepting of the notion, beloved by the Big Three (ConocoPhillips, BP and Exxon Mobil), that the voters’ narrow rejection of the referendum proposing to repeal SB 21, the bill which established the current tax regime, ended all discussion of the oil revenue contribution.

Even if you accepted the notion that a bill passed only by the votes of legislators who were also oil company employees didn’t need a new look; even if you were not bothered by the enormous sums that were spent by the Big Three, directly and indirectly on advertising, much of it misleading, to assure the defeat of the referendum, new evidence should change your mind. Recent information reveals that the production and discovery rebates of the bill have already taken hundreds of millions from state revenue with no showing of a state benefit. Surely this requires a new look at the whole oil tax situation.

Of course the industry giants are filing state tax returns. Is the state working a prompt, thorough audit? Unlikely. Human resource talent for these jobs is scarce. State audit budgeting is tight — hmmm. On the other side, fiddling with returns to minimize taxes, also very American, employs many accountants.

The record of the industry for avoiding Alaska’s taxes actually due is phenomenal. Many billions of dollars have had to be recovered by the state in annual audit demands and litigation, mostly settled, but when did an oil company settle without thinking it was getting a better deal than the judge would give it?

In a time when the rest of us are being asked to scrape up new revenues out of service cuts and to spend savings, surely many factors suggest a fresh look at oil taxation. Prudhoe Bay and neighboring fields are still surprisingly profitable to the Big Three as indicated in reports required to be filed with the federal Securities Exchange Commission. Those that can spread their profit sources add a chunk from enhanced pipeline profits, another from shipping and another from refining. We want them to profit, but as the Alaska Constitution states, the development should be “for the maximum benefit of the people.” That means that the profit must be reasonable under the circumstances.

“Reasonable” is a pretty flexible word. Higher profits make sense if there is a high-risk investment. If the state assumes a big chunk of that risk, then a high profit margin makes less sense. Established fields, with known or easily predictable levels of production (with all costs deductible) do not require a high-profit, low-tax regime. If a buck’s to be made, the oil will be produced. If it takes more investment to maximize production, those costs are largely deductible. The oil will still be produced though there is an argument that new costs deserve an extra profit reflecting the time value of the extra money required to be invested.

Yes, the calculation of a fair profit is more complicated than that, and the calculation is variable depending on specific ground conditions. But the state’s problem is that it has not recently made an attempt to make the calculation. In a time when all Alaskans must suck it up and face a reinstatement of an income tax, (deductible, as are oil taxes, from the federal tax of course), it is also a time to do a thorough review of the appropriate tax structure for oil and gas.

John Havelock, as the state’s attorney general, negotiated a new tax regime with the major oil companies in a 1973 special session. 

Go to original piece.

Jeannette Lee Falsey, June 24, 2015, Alaska Dispatch News

Is Alaska’s economy in a recession?

With oil prices low for more than a year and resulting state budget cuts [2], it’s a question on the minds of many Alaskans.

One economic consultant, Gregg Erickson, declared in a recent report commissioned by the Alaska Mental Health Trust Authority titled “The Great Alaska Recession” that the state is in the midst of a “major” recession.

But in a phone interview with the Alaska Dispatch News, Erickson appeared to change his mind.

“The numbers don’t say we’re in a great recession,” Erickson said. “Maybe we should have couched these conclusions in less dramatic language.”

Other Alaska economists agree there’s no recession. Not yet, anyway.

That Erickson could simply declare the existence of a recession, with little data to back up his claim, underscores the fact that the definition of a recession is somewhat subjective. There is no set standard — as there is for measuring earthquakes — for decisively assessing shakiness in an economy.

Read the article here.