Empire editorial: Oil-tax hike a good first step

Posted: Sunday, January 16, 2005

Gov. Frank Murkowski surprised more than a few people - including those in the oil industry - this week with his State of the State speech, in which he announced a hike in oil production taxes.

The tax hike goes into effect Feb. 1 and could add $120 million to $150 million a year to state coffers, according to early estimates. But that wasn't the only change the governor wants to bring about. He also advocated full funding of the power-cost equalization program, which would give small-town residents relief from the outrageous utility bills that are the norm in many Alaska towns. And he reiterated his intention to boost funding for public schools by $126 million over the next two years.

The speech was a welcome one, with plans that address some major problems.

It's no surprise that the oil industry would immediately whine about the change in the oil production tax regime, known as the Economic Limit Factor, or ELF. The industry pays its PR staff well, and they're simply doing their job to put the heat on to prevent future oil-tax increases.

But it's mystifying why Democrats were as negative as they were about Murkowski's plans, making jabs about the smallness of the oil-tax increase at their press conference. The governor embraced the very issues that Democrats often champion, so the negativity came off as pure and petty partisanship. That's especially foolish when the Democrats have as little power as they do and a Republican governor is actually working on causes the Dems claim as their own.

Some $120 million in additional taxes is nothing to sneeze at, but larger changes in ELF need to be considered, as the Democrats have proposed. Still, Murkowski should be lauded for taking a first step in making sure the state gets a fair share of enormous oil revenues.

In his State of the State address, Murkowski urged legislators not to push aside thoughts of a long-range fiscal plan while oil prices are high and revenue is rolling in. He encouraged lawmakers to pass the fiscal plan he pitched last year - largely involving dipping into the Alaska Permanent Fund to cover government costs - or come up with a plan of their own. The governor should not merely encourage legislators to do their job; he should be actively lobbying to move his own plan forward. While his past plans have run into roadblocks in the Alaska Legislature, that's no reason to sit back now and leave long-term planning up to lawmakers, who have been notoriously sluggish about fiscal solutions.

Murkowski's tax hike announced this week was an excellent start. The governor needs to make it the first piece of his efforts this year to stabilize the state's finances for the future.



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