House Republicans indicated in a House majority caucus press conference Friday morning that they may make changes to the oil tax reform proposal and fiscal year 2014 budget submitted by Republican Gov. Sean Parnell for the Alaska State Legislature’s consideration.
Speaking about the oil production tax bill at the start of the press availability, House Majority Leader Lance Pruitt, R-Anchorage, said he thinks the majority will “make sure that we do our part and spend the time on it that is necessary.”
“We’ll be hearing a lot of conversation, of course, about the governor’s tax bill,” Pruitt said. “I just want to make sure that the public understands we’re going to do our due diligence on it.”
Pruitt added, “He’s given us something that I think is a little more simple, which I think is good.”
Parnell’s proposal to cut oil production taxes last year met with widespread opposition from both Democrats and Republicans. Among the complaints were that the proposal was too convoluted and that administration officials could not explain how it would lead to increased production.
Without specifically addressing the criticism that Democrats in the minority have leveled against this year’s proposal, many of whom have called the bill a “giveaway” to big oil companies like ExxonMobil, ConocoPhillips and BP — often known collectively as the “Big Three” — and argued that it does not guarantee renewed investment in Alaska, Pruitt rejected the idea that Republicans are simply trying to enrich oil producers.
“Our goal is not just to give money back,” Pruitt said. “Our goal is to make sure there is more oil in the pipeline.”
Pruitt called Parnell’s oil production tax bill “a great starting point,” but said he has heard some concerns and alternative ideas from the Democratic minority, members of his caucus and the oil lobby.
“There have been concerns about the tax credits, especially from some of the independents and some of the smaller players,” said Pruitt, referring to changes proposed in Parnell’s House Bill 72 that would take away certain existing tax credits for capital expenditures on the North Slope. “They made some of their decision-making into the future based on some of those credits that exist right now, so they’re concerned about some of those potentially going away. And while I’m not saying that we’ll keep them, that’s something that I think we’ll have to have further discussion on.”
Pruitt cited the “gross revenue exclusion” element of Parnell’s plan, under which 20 percent of the profits from new oil development would be exempt from the flat 25 percent production tax the governor is proposing — H.B. 72 would eliminate the progressive component of the tax — as another area at which the House majority caucus is likely to look.
The Alaska Oil and Gas Association also fired a shot across the bow of Parnell's proposal Friday.
In an email, Executive Director Kara Moriarty provided AOGA's initial comments, which read in part: "While we support some provisions of his new tax policy, such as the elimination of progressivity and the concept of a gross revenue exclusion, we do have concerns, such as the restructuring of some of the credit provisions, and it is a tax increase at lower prices. We do not believe the bill in its current form achieves the Governor's goals of growing the state's economy."
Pruitt said he sees the fact that people have expressed concerns about the bill as a good thing.
“I think we’re off to a good start when no side thinks that it’s good,” said Pruitt. “You know, you have the (oil company) executives that have struggles, you have the minority that has struggles, and so that’s a good sign, because I think in the end, we’re going to have to come up with something where not everybody’s going to be happy, but, in the end, will be a benefit for Alaska.”
When asked for comment, Parnell’s spokeswoman, Sharon Leighow, referred back to the governor’s remarks on the oil tax reform issue at his press conference the previous day.
Asked Thursday whether he would be willing to talk with Democrats in the minority who have criticized his proposal, Parnell replied, “Always have been.”
Parnell added several minutes later, after being questioned on whether he feels his plan is the only proposal that will avert a catastrophic decline in oil revenues, “I haven’t seen another plan that actually addresses and balances these guiding principles.”
The FY14 budget proposal Parnell unveiled last month will also receive legislative scrutiny, according to Rep. Alan Austerman, R-Kodiak, who co-chairs the House Finance Committee.
“The governor’s proposed budget was a lot smaller than it’s been in the past,” Austerman said Friday morning. “It’s going to be up to the Legislature to take a look at that, trying to figure out whether we’re going to be as conservative as he is, or whether we can control ourselves to the degree that we need to control ourselves on a conservative budget.”
Austerman said it is too early for the caucus to discuss the capital budget. But he briefly addressed the lack of significant growth in the operating budget, which is up only 0.8 percent from FY13 in terms of unrestricted general fund spending. Previous years’ operating budgets have seen larger year-to-year growth to keep up with costs.
“Whether we’ll be able to hold the same percentage of growth in the operational budget that the governor has proposed is all too early for us to tell until we actually have our subcommittees get started looking at those budgets,” said Austerman.
Leighow pointed out that legislative analysis of the proposal is not unusual.
“That’s kind of all part of the budget process,” Leighow said. “It gets analyzed.”
Karen Rehfeld, director of the Office of Management and Budget, agreed.
“The amount of the budget is based on a department/program’s mission and core services and the people and resources needed to effectively deliver the services,” Rehfeld wrote in an email Friday afternoon. “The legislature may, or may not, agree with what has been proposed and will make changes.”
Austerman also responded to Parnell’s calls for the Legislature to work with him on setting a spending limit, which he mentioned both in his budget announcement last month in Anchorage and his State of the State address Wednesday night in Juneau.
Parnell declined Thursday to state a dollar amount at which he believes spending should be capped, and Austerman responded in kind, saying, “We will not set a number to start with.”
Austerman left the door open to discussions on a specific spending limit later in the spring. He suggested the issue could be revisited in mid-March.
• Contact reporter Mark D. Miller at email@example.com.