Wednesday, November 14, 2012

The Senate gets it, the House ... hmmmm

In a companion piece published today I suggest that the hard work for those -- including me -- advocating a change in oil taxes lays ahead in the upcoming session, rather than behind in the elections.  The challenge is to make the hard decisions necessary to reduce spending to sustainable levels, both in order to preserve fiscal stability for future Alaskans and to avoid the short-run revenue reductions necessary to achieve long term revenue growth from undermining the first objective.

The key to achieving both goals is to retain focus from the outset on the primary objective, which is to keep faith with both current and future Alaskans by reducing spending to sustainable levels.  With that, the second goal -- achieving tax reform in order to build future production and future wealth -- becomes much easier.

It is a daunting but achievable set of goals, assuming that the focus remains on both.  

The new Senate Majority appears to understand the focus.  In the press statement following their initial organization, the new Senate Majority listed three goals:
  • Increasing oil production in Alaska and, in turn, the flow rate of the Trans-Alaska Pipeline.
  • Delivering affordable energy to Alaskans to their energy needs, as well as commercializing our vast supply of natural gas and exporting it to create a new economy in Alaska.
  • Develop sustainable capital and operating budgets for current and future generations
The first and third points obviously hit the mark dead on.

The House Majority is much less clear on the second point.  In their release, the House appears to list five priority areas:
  • Oil tax reform, 
  • Affordable energy, 
  • Quality education, 
  • Public safety, and 
  • Responsible investments.
Interestingly, despite the fact that one of the co-heads of last year's House Special Committee on Fiscal Policy is an incoming Co-Chair of House Finance, budget issues didn't make the top five.  Indeed, while it is not clear what "responsible investments" means, some speculate it is code for "capital items."

Certainly its early in the session and these are preliminary lists.  More importantly, if a split exists, it is more important for the Senate to understand the priorities than the House.  The most controllable part of the overall budget is the capital budget, and the Senate takes the lead on that budget.  If the House fails to find reductions in the operating budget sufficient to create room within sustainable levels for a capital budget, the Senate largely can enforce the result on its own by simply recommending no capital budget.

Of course, it will be better if both bodies are in alignment.  There is hard work ahead, and it will be easier on both -- and better for the state -- if both -- and the Governor -- are focused on the same objectives.