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My Turn: Alaska's Constitution - for the maximum benefit of its people

Posted: January 16, 2013 - 1:00am

There are two major rules when it comes to analyzing Legislative proposals. “Follow the money, connect the dots” — and — the “other Golden Rule” — “He or she who has the gold, rules.”

The Alaska Constitution is unequivocal as to who is to get the maximum benefit of State natural resources; and to whom they belong — the People of Alaska. All of the people of Alaska are the stakeholder’s that count.

It’s through that prism that any new oil tax legislation will be reviewed by the Courts. I remember all too well first-hand the ill-fated first Alaska Permanent Fund Dividend battle all the way to the US Supreme Court. It can and will happen again if the Alaska Constitution is not followed on Oil taxes.

Governor Parnell, and Commissioners Butcher and Sullivan have recently written some eloquent, but generalized “motherhood and apple-pie” type appeals to set the stage for whatever legislation they have in mind. The administration has also somewhat cleared the way through legislative district Gerrymandering. Can’t blame them, they have their agenda; and there’s a lot of money at stake. However, one is reminded that those districts may not be the same in the future after the Court review, something legislators need to keep in mind.

I don’t have a problem with giving up more potential taxes to oil companies, but I want something in return. Just like any good capitalist would.

I want facts, not anecdotal references from politicians and self-interested oil company representatives, as to what revenue the state will give up, in return for what. The Commissioners of Revenue and Natural Resources are arguing for doubling the oil company profit take per barrel — so what will they legally commit to?

The state’s consultants must calculate how much tax we would have gotten under the old law at various average price-per-barrel levels versus what we will receive under the new law. In fact, they need to do this to craft the legislation to begin with — or how would they otherwise know if it gives them more money versus the current law.

Those numbers can then also be compared to the actual results. Numbers that were created by people who can be sued. Gov. Parnell’s administration in fact litigated and set that path for consultants.

I want provisions in the law that require CPAs to certify to the new increased spending by oil companies; and there be givebacks if they don’t. I want the oil companies to prove that they have in fact made new Alaska spending. Not some fancy, but quite common internal proprietary bookkeeping shuffle.

The state set that standard by using a hold-up lawsuit to extract money from actuaries. Yes, the lawyers were given a huge payout while the retirement systems and the state got a relative pittance.

But the precedent is effectively in place. Suing a consultant, on an estimate, is something a court can look at to see if the people’s interests have been protected in cases where a consultant recommends a tax scheme, but we actually give up a lot more.

I argued against the state’s approach and the suit at the time repeatedly because the same calculations that are used in financing oil and gas operations are very similar to those used in retirement systems. There would likely be a relatively low overall eventual recovery, with the fact that any settlement would be limited by the U.S. Supreme Court’s ruling in the Exxon Valdez case (which is what happened). However, eventually far more serious negative impacts would be felt on oil and gas exploration financing (which they will).

Gov. Parnell’s people wouldn’t hear of it. No, I wasn’t paid by anyone to argue against the state’s position, I just thought being penny wise and ton foolish was a poor approach.

This is not about being anti-oil. It’s about Alaskans acting as capitalist’s should; getting something for their money. Public resources belong to Alaskans, not private industry. Remember, the extra dollars for the oil company per barrel “take”, without committed reinvestment, will come at the expense of the Alaska Permanent Fund, the Permanent Fund Dividend, Capital Projects, a Susitna Dam, and statewide people services.

• Anselm Staack is a CPA and an attorney, who instructs accounting and private / public financial management subjects for the University of Alaska Southeast. The views are his own.

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