Your Dec. 15 edition included a piece by Reps. Les Gara and David Guttenberg entitled: “Oil wealth giveaway increases deficit now, undercuts savings later.”
The representatives are wrong in claiming “now that the new oil tax bill is in effect, revenue forecasts show revenue is nearly $2 billion less than previously expected.” Actually, the Department of Revenue’s 2013 Fall Resource Book states that a relatively modest $250-300 million of the $2 billion decline is attributable to Senate Bill 21.
The vast majority of the $2 billion revenue decline comes from lower than previously projected West Coast oil prices, continued oil production flow declines, and significant payments by the State for tax credits allowed by the old production tax statute before it was amended by Senate Bill 21 in the 2013 Legislative Session.
Senate Bill 21 was passed by the 2013 Legislature and signed into law in order to encourage petroleum investment and new production, with an emphasis on the long term Alaskan fiscal stability. SB 21 will cause revenues to decline in the short term while new projects are put into operation. Without SB 21 the decline in revenues will accelerate year after year as the producers invest in oil and gas provinces that have a more favorable tax climate than Alaska.
The representatives are congratulated for supporting the governor’s FY 2015 budget proposal to make a substantial contribution to the State Pension Fund and lower the unfunded pension liability.