Legislators from Southeast Alaska cleaved along caucus lines in their reactions to Republican Gov. Sean Parnell’s State of the State address Wednesday night.
Members of the Republican-led majority largely praised Parnell’s remarks, while both of Southeast Alaska’s Democratic minority lawmakers criticized the governor’s proposal for oil tax reform.
In his speech, Parnell referred to proposals included in bills submitted to the Alaska House of Representatives Wednesday, including his third proposal since taking office for an overhaul of the state’s oil production tax system.
The current base production tax rate is 25 percent, with an additional progressive component of the tax that requires oil companies to pay more when production tax value reaches $30 or more per barrel.
Parnell seeks to do away with the progressive tax, which oil companies have argued acts as a disincentive to increased production.
“Our state’s prosperity has already rested on natural resources, and tonight, that foundation is at risk, not because we are running out of oil, but because we are running behind the competition,” Parnell said. “Alaska’s North Slope has billions of proven barrels, and billions more waiting to be discovered. What we do not have is a tax system that attracts new investment for greater Alaska oil production. Our problem is not below the ground; our problem is above the ground.”
Parnell said he wants to have a “simpler 25 percent tax.”
“Gone will be the need to calculate progressivity each month,” said Parnell. “What will remain will be a more balanced, more competitive and more predictable tax system, one with greater protections for Alaskans at lower prices in exchange for lower taxes at higher oil prices.”
Rep. Cathy Muñoz, R-Juneau, praised Parnell for giving specifics on his latest oil tax proposal.
“He proposes to do away with the progressivity, which is what is crippling economic investment on the North Slope,” said Muñoz. “So that’s the area that most people agree needs to be dealt with.”
But while Sen. Bert Stedman, R-Sitka, said he believes Alaska’s oil tax system now is “too progressive,” he expressed concern about returning to a “regressive” tax structure. He called striking progressivity altogether a “red flag.”
“You can’t go, in my opinion, to a regressive tax,” Stedman said. “But with that being said, there might be mechanisms within this tax proposal that neutralizes that, and that’ll be one of the flags, of course, to take a look at.”
Stedman’s fellow Sitka legislator, Democratic Rep. Jonathan Kreiss-Tomkins, was critical of the proposal.
“There’s a difference between a give-and-take and a giveaway, and I’m concerned this is more the latter,” Kreiss-Tomkins said.
House Minority Leader Beth Kerttula, D-Juneau, agreed.
“The governor’s new bill would mean that when the oil industry rakes in record profits, Alaskans will be firing teachers and troopers and not building roads and not building ferries,” said Kerttula, speaking alongside Senate Minority Leader Johnny Ellis, D-Anchorage, immediately after Parnell’s speech.
Rep. Peggy Wilson, R-Wrangell, said Thursday morning she has not yet read the bill, but she was aware of the Democrats’ response.
“I felt bad about the comments that were made later, because they weren’t comments on his bill, they were comments on last year’s bill,” said Wilson, referring to a proposal last year that was ultimately withdrawn from consideration after lawmakers expressed opposition to it. “And they were very negative.”
Wilson, Stedman and Muñoz complimented Parnell’s speech.
“I thought it was an upbeat speech,” Stedman said. “I thought it was positive.”
Stedman said he appreciated Parnell’s remarks emphasizing Alaska as financially sound and business-friendly.
“This is 180 degrees out from what a lot of the marketing’s been in the press about Alaska being ‘closed for business’ and on and on and on, because there’s just no validity to that,” said Stedman. “It’s 180 degrees different, his message. … And I think he’s on point.”
Sen. Dennis Egan, D-Juneau, one of two Senate Democrats caucusing with the Republican-led Senate majority, praised Parnell for being open to working with the Legislature. Parnell told lawmakers in his speech that they “have a partner in the executive branch.”
“I thought it was the best speech he’s given,” Egan said. “I think there are places for compromise in that, and his intention to work with both houses, the upper body and the other body. So I think it’s a good starting point. I think it’s a great starting point.”
Kerttula, Juneau’s other Democratic lawmaker, was not as impressed.
“The governor wants to require more of our students, but less of the oil industry,” said Kerttula. “If he wants a 90 percent graduation rate, he needs to listen to the teachers and give them the resources that they need. They need the ability to build on successful programs, they need the same resources next year — at least the same resources next year — that they have this year, and they need to know their jobs are secure.”
In his speech, Parnell set a target of increasing Alaska’s graduation rate to 90 percent by 2020, saying, “Alaska’s graduation rate remains under 70 percent, and as far as I am concerned, that is not a passing grade.”
Muñoz said she would have liked to hear more specifics from Parnell on his ideas for education.
“He spoke about education, but he didn’t really give any specifics on where he was going other than removing some of the outdated assessments — the Terra Nova assessment, he mentioned — and he mentioned a goal of increasing graduation to 90 percent by 2020, but … it was really hard to know what the specifics of that initiative (are),” Muñoz said. “I wanted to hear more about K-12 education and what the governor’s ideas were on getting more resources into the classrooms.”
Parnell devoted part of his 25-minute address to criticizing the federal government and urging the Legislature to resist federal efforts to impose certain regulations and restrictions in the state.
“Washington, D.C., doesn’t get Alaska. Never has, never will. Federal law, though, says that states have the right to regulate activities regarding their own lands and waters, and it’s about time that Alaskans … exercise these rights over our resources,” Parnell said to applause. “So tonight, I urge you to pass legislation giving our state authority to seek and assume primacy over dredge and fill operations within our borders.”
Such a law could ease restrictions on mining and other economic operations in Southeast Alaska, suggested Muñoz, who sounded intrigued by the notion.
“I think the biggest economic development issue that I heard in this speech for this region had to do with primacy over federal permitting issues that affect mines and other developments in our region, primarily mines,” said Muñoz. “I mean, dredge and fill issues, those are pretty basic community-building issues that affect all of the towns and villages in our region.”
Parnell also spoke about his “Choose Respect” campaign and efforts to curb domestic violence, sexual assault and human trafficking in the state. He submitted a bill to the House Wednesday that would increase penalties for certain crimes, including distribution and possession of child pornography, and expand the definition of “sexual felony” to include sex trafficking and “online enticement of a minor.”
“By passing this legislation, we will send a stern message to criminals who prey on the weak: you won’t get away, and you will pay,” Parnell told the joint session of House and Senate lawmakers.
While he criticized other portions of Parnell’s speech and proposals, Kreiss-Tomkins brought up that campaign as an area of common ground between himself and the governor.
“Domestic violence throughout Southeast and rural Alaska is a huge issue, and I’m really supportive of … the governor’s effort and attention on domestic violence, sexual abuse,” said Kreiss-Tomkins. “That’s a Southeast issue — of course, statewide also.”
Wilson said that she had been considering introducing a bill together with Sen. Anna Fairclough, R-Anchorage, to crack down on human trafficking, which Parnell addressed in his speech.
“I’m very anxious to see what his bill covers, and if it covers what we were talking about, I might not do it,” Wilson said. “That’s a very serious problem in Alaska, and I’m very glad to hear that he’s really pushing on that.”
The speech did not contain much about transportation. Wilson, as chairwoman of the House Transportation Committee, said she wished it had.
“I really did hope that we would hear more about how we are going to be able to grow our state economically,” Wilson said. “And without roads to the resources, that’s going to be hard to do.”
• Contact reporter Mark D. Miller at email@example.com.