Saturday, April 13, 2013

Short Takes| A conversation with Dave Stieren ...

I was on the Dave Stieren Show Thursday to discuss the current status of oil tax and fiscal policy reform.

The discussion ended up being part of a larger discussion that transcended the current legislative session, which Dave started earlier in the show, continued after our conversation and returned to again in his morning commentary Friday.  Our discussion  focused mostly on my sense of where oil tax reform and fiscal policy will stand at the end of this session, and how they may play as issues during the 2014 electoral season.

When put that way, my take was that this legislature has stumbled to a result on oil tax reform which will produce some investment, but is not a long term fix to Alaska's issues.  As I explained during my segment, the level of spending -- and the pressure to maintain state revenues (demonstrated by the continued debate about putting the base rate at 33 or 35%) -- has gotten in the way of developing a sound oil tax policy.

And as Dave and I discussed during the segment the state is nowhere near fixing its spending (fiscal) policy.  Indeed, if anything, it has become worse this session as a result of the Governor's apparent satisfaction with leveling annual spending at $6.8 billion -- which seems like a significant cut only because last year's budget was the largest in the state's history.  To put that level in perspective, $6.8 billion is the second largest budget in the state's history, and now the Governor proposes essentially to freeze spending at that level for the next five years.

As I pointed out in a written commentary also on Thursday, even if oil tax reform produces a significant production response, the state cannot sustain that level of spending without a significant call on its fiscal reserves, which at the end of the five year period will leave state government at the edge of a serious fiscal cliff.  Essentially, that policy appears designed to spend away Alaska's fiscal reserves, needed to sustain future spending levels, simply in order to avoid making hard decisions now.

Dave's opening segment on the issue is the first 11 minutes of the second hour of the Thursday show, which is here.  My segment is later in that hour, starting at 22:35 and running to the end.  Dave then continued the discussion for the first 10 minutes at the beginning of the third hour of the show, which is here.  Dave's Friday morning segment is not yet available; I will post it when it is.