Governor signs oil tax, budget bills, vetoes $2.5M

JUNEAU — Gov. Sean Parnell on Tuesday signed into law an overhaul of Alaska’s oil tax structure, hailing it as part of an historic legislative package aimed at moving the state forward.


Parnell, who championed the overhaul as a way to increase oil production and industry investment, repeatedly referred to the bill as the “More Alaska Production Act.”

“It’s been an historic year for our state, it’s been a phenomenal year, a comeback year,” Parnell told a crowd at the Anchorage Chamber of Commerce. He said Alaska’s “energy comeback begins today.”

Critics, however, say the oil tax plan will give away too much to oil companies with no guarantee about what Alaska might see in return.

The plan could cost the state up to $4.6 billion through fiscal year 2019, assuming a continued net decline in oil production and prices between $109 and $118 a barrel. Protesters, including state Sen. Hollis French, D-Anchorage, gathered outside the venue in Anchorage where Parnell signed the oil tax bill and legislation related to permitting and a gas line project.

“I think people sense the horrific result this is going to have on the state budget,” French said.

Alaska relies heavily on oil revenues to run. Production has been trending downward since the late 1980s but higher prices in recent years have helped mask the impact on the state budget. Supporters of the tax cut said something had to be done to address declining production. The tax cut was intended to help ease the decline, if not ultimately begin to reverse it.

Critics agree with the goal of seeing more production but say the overhaul is the wrong strategy. An effort is under way to give voters a chance to decide if the bill should stand or be repealed.

The group behind that effort, Vote Yes — Repeal The Giveaway, organized Tuesday’s protest. The group’s Pat Lavin called the signing of the bill “historical all right. It’s a mistake of historic proportions.”

Parnell pushed for changes of some sort to Alaska’s tax structure since 2010, his first legislative session as governor. The most recent session, which ended in April, was the first for him in which Republicans controlled the state House, Senate and governor’s office.

At the chamber event, Parnell signed several other bills. HB4 is intended to get an in-state gas line project to the point of knowing whether there is sufficient interest to move forward. HB129 is aimed at streamlining the permitting process, while SB27 would allow the state to move toward taking responsibility for dredge-and-fill permits from the U.S. Army Corps of Engineers.

It’s not clear how much such a program ultimately might cost, and the state would still have to meet federal requirements if it assumed control over dredge-and-fill permitting.

The bills combined with efforts by the legislature to control spending will help create a bright future for the state, the governor said.

Near the end of the session, Parnell proposed a five-year fiscal plan as he and lawmakers looked to rein in spending and absorb the near-term hit of the oil tax cut.

The plan, which assumes there will be some new production, called for a spending cap of $6.78 billion in unrestricted general funds for the fiscal year beginning July 1. There would be an annual step-down in spending after that and a draw of up to $700 million a year from savings.

Unrestricted general funds refer to money that is not restricted in its use by the law, constitution or other things.

A project deemed to be of statewide benefit wouldn’t count against the cap, Parnell said, though he also said during a news conference Tuesday that savings to Alaskans over the course of the plan should exceed $5 billion.

Parnell also announced vetoes of $2.5 million from budgets totaling $13.2 billion for next fiscal year, largely attributable to what his budget office called calculation errors.

Last year, he announced $66.6 million in budget vetoes. In 2011, Parnell vetoed about $400 million, making good on a threat to hold the state to a spending limit.

While Parnell’s budget office showed unrestricted general fund spending of $6.83 billion for the coming year, Parnell said $20 million of that is a placeholder for supplemental spending. Considering differences in accounting between his budget office and the legislature’s, he said the number fell well within the spending range he was looking at and lawmakers adhered to.

Overall, the operating and capital budgets include $1.1 billion less in unrestricted general funds than the current year, according to the Office of Management and Budget. The current year’s budget totals $13.5 billion.


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