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Alaska editorial: Take cautious stance on petroleum tax changes

Posted: Monday, September 17, 2007

Some early observations about the changes Gov. Sarah Palin wants to make to the state's oil tax system and that she presented last week in rough form:

Sound off on the important issues at

First, the petroleum profits tax, instituted during the term of Gov. Frank Murkowski, does work. It is bringing in hundreds of millions of dollars more than the old system, which all parties - even the oil companies - understood had outlived its usefulness and was seriously short-changing the state treasury.

How well is PPT working? So well that it brought in about $1 billion more in state revenue in fiscal 2007 than the old system would have brought in. That's about $200 million shy of the expectation for that year, but it's hard to argue with getting an additional billion bucks from the oil industry. Alaska needs the money to come from somewhere, and it's well-known that most Alaskans don't feel terribly compelled to have it come from their own pockets.

And what about fiscal 2008, the financial year that began on July 1? How much more money is the oil industry projected to be providing this year under the new tax? The answer is about $250 million more. While that's significantly short of the expectation, the current year is only the second year for which the new tax has been in place. Talk about a rush to judgment by those who want to overhaul it.

We bring this up because Gov. Palin and her team should stop calling the petroleum profits tax, or PPT, a failure.

Second, about the governor's proposals, they should be able to withstand public scrutiny if they are sound.

Gov. Palin often says that she wants transparency in government - "transparency," in fact, is a word she regularly uses in an attempt to differentiate her administration from that of her predecessors. With her new tax plan, then, transparency should be taken to include allowing her proposals to run through whichever legislative committees that House and Senate leaders desire. The more committees that the governor's proposals run through, the more transparent the process and the better the chance that people will understand the issue.

What shouldn't be tolerated is a situation in which the governor has prearranged, either with legislative leaders or with other key legislators, to have her proposals sent to the fewest number of committees or the most receptive committees.

There will obviously be legislators who don't like what the governor has proposed. But those disagreements should be allowed to occur, for all to see, in even the most hostile of committees - if there are any - and to be assailed by even the most ardent opponents.

Third, there should be real worry that there simply isn't enough time in a 30-day special session for legislators and the public to adequately study, understand and debate the governor's ideas. Outside consultants should be called upon to study and explain the consequences and benefits of the changes Gov. Palin has outlined, and that alone will take a substantial amount of time. And the transparency that should exist in the process needs to include full opportunity for representatives of the oil companies and any number of organizations to testify before the committees.

We hope that legislators, when they convene next month at the request of the governor, keep these three things in mind and act accordingly to avoid harming Alaska's financial interests.



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