10-8-12 Crouching Grouches Remembered!
Is the "Crouching Grouches" Spending Message of 2002 Still Timely?
In 2002 oil was less than $17/barrel, about the same as it was priced in 1987 and Alaska Senator Fred Dyson (NGP Photo) was chairman of a legislative caucus calling itself the 'Crouching
Tigers Grouches Caucus".
The low price of oil was combining with the diminishing throughput trend we still have today to create more of an atmosphere of 'crisis' than of the more muted 'concern' we have now. So today, while we are even closer to a shut-down of the 3/4 empty Trans Alaska Pipeline System (TAPS) than in 2002, and while our oil tax burden is more predatory and unfriendly to investors, we are only 'concerned' because the price of oil happens to be so much higher. Wise minds know, however, that high prices today -- as in the 1980s -- can quickly fall and cause all financial projections to be worthless.
The point is that Dyson in those days was responsibly recommending government spending restraint (See his Op Ed piece, here). We've written about the importance of spending restraint ourselves over the last decade. We know that unrestrained spending naturally leads to a sense of program entitlement with a parallel pressure for an addicted majority to increase taxes on a productive minority. (Our Anchorage Readers will note that the Alaska Association for Energy Economics will be conducting a class on precisely this subject today.)
|Our friend, Richard Wien of Fairbanks addressed the revenue side of Alaska's current fiscal crisis, last week, this way: In 1976, Alaskans said yes to the following constitutional amendment: “At least 25 percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the state shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.”
The permanent fund now totals more than $42 billion, fueled by $13.7 billion in dedicated oil deposits, including $914 million from last year alone.
Alaskans have the opportunity to cast another monumental vote Nov. 6 when they decide if the state Senate continues its path towards economic Armageddon or if we reform our oil taxes so our children and grandchildren inherit an Alaska fueled by a vibrant oil economy.
This is one of the most important elections Alaska has faced. That’s why I’m voting for more oil, more jobs, a stronger economy. I’m voting for oil tax reform and I hope you do, too.
Richard Wien, a lifetime resident of Fairbanks, owns a local business and has been active in community affairs for many years. The son of aviation pioneer Noel Wien, he has had an extensive career in that field as well. (See the Alaska Dispatch's Richard Wien biography.)
Today, thankfully, others are adding voices to the concern for the unsustainable level of Alaska state government spending. We first draw attention to Brad Keithley (NGP Photo) and to Retired Public Employees President Bob Doll. We agree with Doll when he takes Legislators to task as they, "...for most of the past decade paid only the minimum amounts into both retirement systems." We do not agree with Doll that fully funding the PERS/TERS (i.e. public employee pension) liabilities requires keeping oil taxes high, repelling investment. We also disagree that the way to fiscal responsibility means reinstating a defined benefit plan for new public employees. Nevertheless, he's on the right track to suggest the state act like adults, pay off debt and prepare for a more austere future. Keithley, in a more scientific way, carefully extrapolates impact on the future of Alaska's current spending pattern. The picture is ugly and the result is disastrous. In a Fairbanks Daily News Miner Op Ed this weekend, he concludes that: "Significant spending cuts must be part of the equation. In order to avoid leaving future Alaskans with a substantially lower standard of living, those spending cuts need to start in the next legislative session." Read all about it here.
In 2002 the Crouching Grouches had the principle of restrained spending down pat; they just didn't know that a reprieve would come in the form of significantly higher oil prices. Unfortunately, Legislators soon forgot the warnings of the Grouches, using the last decade to continue spending exorbitantly instead of using the time to wisely wind down spending. Had the politicians used the time wisely, we might have ended up with a sustainable spending pattern and also attracted more investment here with a more attractive climate for investment: a more competitive tax policy.
Instead, elected leaders misused the grace period and we who elected them are experiencing the result. -dh
Petroleum News by Kristen Nelson. The North Slope producers and TransCanada are wrapping up work on concept selection for a Southcentral Alaska liquefied natural gas project, but appear to be telling the state that the ball is back in its court over fiscal issues. ... The concept selection technical work is reaching closure, the companies said in their letter, and “additional commercial agreements as well as support from the State of Alaska will be required in order to progress this world-class opportunity.”