Be careful what you wish for ...

While having an appealing headline, the substance of a column in yesterday's Alaska Dispatch News deeply concerns us.

The headline of the Charles Wohlforth column is "Yes, put the dividend in the Alaska Constitution," but when you get down to the details (aka, "the fine print") this is what it argues for:

"A dividend of $1,100, close to the historic average, seems about right. It will do the good we need but is not enough to distort behavior and the economy. 

"A constitutional amendment should set the dividend at that amount permanently with a cost-of-living adjustment to keep it from eroding due to inflation."

See https://goo.gl/bi71BY.

The effect of the proposal?  It would cut the current PFD by more than half, then also cap it going forward by disconnecting it from the growth of the Permanent Fund and tying it instead to a COLA (cost-of-living adjustment). As Wohlforth admits in the piece, "history shows that over time, the Permanent Fund grows faster than inflation."

Essentially, it would turn what is now a personal individual investment account designed to realize a portion of the benefit, as it grows over time, from the monetization of the state's commonly held oil resource for current and all future Alaska citizens, into a forever frozen in time (in "real" terms) "UBI" ("universal basic income" guarantee).  Those are two entirely different things.
 
And although in the first couple of years the level appears about the same, because it would disconnect the PFD from the growth of the Permanent Fund, over time Wohlforth's approach would be substantially worse for the overall Alaska economy and families (especially future families) than even SB 26, the Senate's draconian approach this last session.
To put it bluntly, if this were the proposal to "Constitutionalize" the PFD that emerged from the coming legislative session we would oppose it as vigorously as we have the Governor's original proposal, SB 26 and HB 115, as doing much, much ... much more harm than good.

So, what is behind the proposal?  As usual, just follow the money.

Under Wohlforth's proposal, the other half of the current PFD and all future appreciation in the value of the fund would go to government, and through it, to those who government decided (instead of individual Alaskans) was worthy of the money.

Wohlforth really doesn't try to hide this, although the admission is buried deep in his column and has to be pieced together:

"It [his proposal] would allow increasing fund profits to accrue to ... public spending. As the fund's growth outstrips inflation, the portion left over after dividends would become ever larger. 

"It would remove the dividend from the fiscal debate. With the amount of the dividend set, legislators' choice would be between taxes [which they could put off for much, much longer even at higher spending levels] and spending ....

"... Finally, it would resolve a big piece of Alaska's painful adjustment to a new economy [by diverting to government even more private sector money]."

In short, the proposal's basically motivated by the same goals as drives the Alaska Journal of Commerce's Andrew Jensen -- to avoid substantial additional cuts in government spending and avoid raising so-called "new revenue" through taxes that would upset the donor class.

To be sure, Wohlforth's path to the same end result is likely different than Jensen's.  For example, Wohlforth likely wants to spend the extra money on different things than Jensen (social spending v. capital). And while Jensen wants to use PFD cuts rather than taxes to raise "new revenue" in order to minimize the impact on the Top 20%, Wohlforth's reason for wanting to avoid them likely is more that he realizes, at least in the near term, taxes would result in a significant push back on the type of spending he wants by those in position to affect it, while, once fixed and disconnected, a PFD cut no longer would.

But the end result is the same.  Some Alaskans would benefit while the overall economy and Alaska families would suffer.  With one exception, just as the current approaches of the Governor, Senate and House, Wohlforth's PFD cuts would also:

• Have "the largest adverse impact on the economy [of all the new revenue options] per dollar of revenues raised," https://goo.gl/ZxR1Hw at A-15;
• Be "by far the costliest measure for Alaska families," https://goo.gl/ivf9D2 at 1; and
• "[L]ikely increase the number of Alaskans below the poverty line by 12-15,000 (2% of Alaskans)," https://goo.gl/iuTjv2 at 14.

The exception is that, over time, Wohlforth's proposal would result in an even larger "adverse impact on the economy," be even more costly "for Alaska families," and increase poverty levels even more because, as a result of the conversion from following the growth of the Permanent Fund to inflation, the cuts would be far larger.

What does Wohlforth offer as a justification?  His opinion (because there is no study that supports it) that a larger "dividend could hurt Alaska, luring poor families north and discouraging work."

Personally, my response to that is the less polite form of saying "baloney."

And so is the conclusion of the available research on that assertion that has been done on UBI's (which are somewhat analogous on this limited point) elsewhere.  See "Finnish citizens given universal basic income report lower stress levels and greater incentive to work," https://goo.gl/eb8Fbe ("Finland has been giving 2,000 of its citizens an unconditional income for the last five months and some are already seeing the benefits, reporting decreased stress, greater incentives to find work and more time to pursue business ideas.")

Suffice it to say that until Wohlforth comes up with a detailed study that supports his seemingly off-the-cuff conclusion that a lower level "seems about right," the assertion is worth even less than the paper it's written on (because newsprint is fairly expensive these days).  It's more like the ragtag reasoning Sens. Peter Kelly, Peter Micciche, Anna MacKinnon, Kevin Meyer, John Coghill, Cathy Giessel, Mia Costello and the other Senate R's have used on the subject in their effort to protect the Top 20% than anything else.

But to us, Wohlforth's column does have one positive effect.

It points out that some proposals to "Constitutionalize" the PFD can be worse even than the current situation.

Frankly, what I would guess Wohlforth and others now contemplating similar proposals are counting on is that Alaskans, disappointed in the Supreme Court's decision last week, will grab at anything, literally anything, that proposes to "Constitutionalize the PFD."

But we, at least, will not.

Instead, we are going to hold out for the thing that we believe -- and the available evidence and studies support -- best serves the overall Alaska economy and Alaska families.  And that is Governor Hammond's vision for use of the earnings produced from the Permanent Fund outlined in Diapering the Devil, as enshrined in the Alaska statutes since the early 1980's:

"Each year one-half of the account’s earnings would be dispersed among Alaska residents …. The other half of the earnings could be used for essential government services.”

 Diapering the Devil,  https://goo.gl/FFTi9M  at 15, 19.

Once we see something along those lines we will support it.  Until then we intend to continue calling out those who are attempting to use the current situation to lead the overall Alaska economy and Alaska families into one even worse.

Finally, a balanced piece on cashable oil tax credits ...

Yesterday the ADN published what we consider (finally) a balanced piece on cashable oil tax credits.  See "Oil companies owed hundred of millions of dollars by state should have known risk, some say,"  https://goo.gl/ty6qWQ.

In previous pieces, many in the media -- KTVA, APRN, the Kenai's KSRM are three examples that come quickly to mind -- had bought hook, line and sinker claims by some companies that they were owed, "this year" (APRN) the full amount of any outstanding credits and that the state was "delinquent" (KSRM) as a result of their failure to pay them.  See "Now, Alaska Public Media spreads 'fake news.'" https://goo.gl/pXTQf7. 

Yesterday's ADN piece finally balances that out, pairing those claims against the reality of what state law provides.  

"But some say the companies should have known the potential consequences before they signed up for the state's generous tax credit program. State law shows they risked a slowdown in payments if oil prices crashed and the state's economy tanked. And that's exactly what happened."

To be sure, the article continues to include what we have called elsewhere the "whines" by some companies and their trade group that they are owed the full amount of the credits, now.  See "But you promissssssed," https://goo.gl/mZMH8U.

But at least the article reveals those to be whines, rather than solid claims based in fact or law. The admission that caught our eye most in that regard was this:

"Regardless of the 'fine print,' companies secured financing and made investments on the expectation of timely payment, said [Carl] Giesler, with Cook Inlet Energy."

As we have made clear on these pages and in the article as well, when companies deal with the government (or, in fact, each other) it's all about the "fine print."  That's what contracts and, certainly, financing are founded on.  Just like companies shouldn't expect relief when dealing with others if they (allegedly) overlook the "fine print," they shouldn't expect relief from Alaska.

The "fine print" is there to protect the parties.  The state included limitations on its payment obligations to protect it during periods of low oil prices or production.  The companies accepted the risk at the time they entered the program.  Rather than live by the terms to which they agreed, however, now that the risks have materialized they are attempting to escape them (and leave the state less well off as a result) by claiming that they "expected" something different.

The state isn't responsible for whatever "expectations" or "impressions" the companies now claim.  It is only responsible for the terms of the agreements it entered into.  And those terms provide that the state is obligated to put only a given amount of money into the program each year.

As for the claims that the companies were misled into agreeing to those terms by contrary promises, John Hendrix, the governor's chief oil and gas adviser and a former industry executive, deals with those best:

"Hendrix ... said he's skeptical state officials in the past oversold the tax-credit program. He said no official could have guaranteed the state would always have the cash to pay the full tax-credit bill each year, he said. 'Show me the quotes that validate that,' he said."

Those now claiming that the state is "obligated" to do so have produced none (other than the two-page, cartoon pamphlet mentioned in the article which itself referenced the statutes) and neither now-Senator Dan Sullivan nor Joe Balash (now-Chief of Staff to Senator Sullivan), the two DNR Commissioners during the period the companies claim such statements were made, have stepped forward with any corroboration of the companies' claims.

Rather, all that the companies are claiming was what, allegedly, was in their minds at the time.

That's not persuasive to us, and indeed, shouldn't be persuasive to anyone, especially at a time that the state is ignoring its actual statutory obligations to others. "The Alaska Legislature tosses out the Rule of Law," https://goo.gl/Fb7iv7. 

If the state comes current on those, maybe there is room to start talking about making additional, extra-statutory payments to others.  Until then, no one should be.

Why we will oppose Bill Walker's (as well as a number of R and D legislators') reelection: They don't get that "it's the economy"

An exchange in Governor Bill Walker's interview last week with KTUU's Austin Baird ("Q&A: Why should Bill Walker keep his job for 4 more years?,"   https://goo.gl/JSAHj5), encapsulates our huge frustration with both his -- as well as a number of legislators (both R's and D's) -- actions in office these last three years.

Here is the exchange:

"AB [Austin Baird]:  Are you going to call lawmakers back this fall? 

"BW [Bill Walker]: 'Most likely. We're talking with leadership about timing and whatnot, but we won't do that unless there's a reason to. We won't call them back just to call them back. So we're working on how to tighten up that $700 million gap that's left. If it's possible to do that, we'll call them back, and if it's not then we most likely will not.' [Note: earlier in the interview Walker said 'we've now brought that [the deficit] down based on the legislation that's been passed by both bodies -- not together but separately -- we're down to about a $700 million deficit']. 

"AB: What are you considering putting on the call for a special session? An income tax again, making some version of a Permanent Fund restructure actually permanent... 

"BW: 'It has to be a consensus on how we build some sort of broad-based revenue, and that's certainly not necessarily just an income tax. Maybe that won't be the fix, but it has to be some vehicle that ties our economy with the services we provide. We'll work with them beforehand to decide what's most palatable to both bodies and present something.'"

Our frustration encapsulated in that passage, as well as Governor Walker's actions the past three years, is that there is no recognition -- none -- of the impact government's actions are having on the overall Alaska economy and Alaskans, other than those tied to government.

The "$700 million gap that's left" cited by Walker assumes that the PFD is permanently cut by more than half, and that those funds formerly injected largely into Alaska's private sector through the decisions made by Alaska families, will be permamently redirected instead, going forward, to government for government to make the decision about how those funds are used.
The problem with that is, while it benefits government and those tied to it, it has and will continue to wreck havoc on the overall Alaska economy and Alaska families.

All -- all -- of the economic analyses done these last two years about Alaska's fiscal options have concluded that a PFD cut of the size assumed by Walker: 1) "has the largest adverse impact on the economy [of all the new revenue options] per dollar of revenues raised," https://goo.gl/ZxR1Hw at A-15; 2) is "by far the costliest measure for Alaska families,"https://goo.gl/ivf9D2 at 1; and 3) "will likely increase the number of Alaskans below the poverty line by 12-15,000 (2% of Alaskans)," https://goo.gl/iuTjv2 at 14.

Think about that for a moment.  The actions of Alaska's own leaders these last two years have had "the largest adverse impact on the economy," have worsened the financial situation of Alaska's families more than any other approach, and likely pushed an additional 2% of -- two percent, twelve to fifteen thousand -- Alaskans below the poverty line.

We aren't talking about the consequences here of federal overreach or some other, Outside event or enemy.  This is damage inflicted on Alaska and Alaskans by Alaska's own Governor (and many legislators), and now he (and they) want to make those effects permanent.

Moreover, nowhere in Walker's interview is there an appreciation that he (and supportive legislators) can -- and may be about to -- make the situation even worse as they work to close the "$700 million gap that's left."

In Alaska's current situation, fiscal policy involves two decisions.  The first is whether and, if so, how much "new revenue" to raise.  The second and equally important is, if you decide some "new revenue" is needed, how to raise it.

As ISER's and others' analyses over the last two years repeatedly have made clear, different approaches to "how" such funds are raised have different effects on the overall economy and Alaska families.  Some approaches hurt the overall economy worse than others, and some hurt Alaska families more than others.  While the PFD cut has the worst impact from both perspectives, others are not far behind.

There is no appreciation of those differences, however, anywhere in the interview.  Instead, the only focus is on raising the $700 million in whatever fashion is most politically expedient ("[w]e'll work with them [legislative leadership] beforehand to decide what's most palatable to both bodies and present something.")

Indeed, the only use of the word "economy" in the entire interview comes in this passage, where the focus is on making the economy bend to government, not the other way around:  "it [the $700 million 'fix'] has to be some vehicle that ties our economy with the [government] services we provide."

A Governor truly concerned about the impact of government's actions on the overall economy and Alaska families would have in mind and be focused on offering and allowing to be enacted only those approaches that have at least lower, if not the lowest, effect on both.

Walker's interview indicates that this Governor, on the other hand, is only concerned about closing the $700 million gap some way -- indeed, it appears, almost anyway -- so that government can continue to be "fully funded," regardless of the impact that way has on the overall Alaska economy and Alaska families.

In short, rather than being a Governor concerned about the effect of government on his state's economy and people, the interview reveals that this Governor, instead, is more concerned about protecting government and those tied to it, regardless of the effect that has on his state's overall economy and people.

Instead of being a Governor holding government accountable for the effect it has on its citizens, he is a Governor intent on protecting government (and those tied to it) at the expense of its own citizens.

Taken to its logical conclusion, that approach ends up with Alaskans working to support government (and those who benefit from it), rather than government working to support them.  By making the PFD cut permanent and closing the "$700 million gap that's left" without concern about the impact the approach used has on the overall Alaska economy and Alaska families, we are closer to that "logical conclusion" than many think.

While we have looked for signs the last three years that he might come around, this interview is an indication that the Governor (as well as a number of legislators who think similarly) clearly just don't get it.

As James Carville summed it up concisely for Bill Clinton during the 1992 Presidential election, "it's the economy, stupid."  Governor Walker and others appear to think, instead, "it's the government, stupid."

We think Carville had it right and Walker and the others don't.  That is why we will be opposing Walker's (as well as those R and D legislators that believe similarly) in their reelection bids.

The Supreme Court decision doesn't change the fundamental debate ...

For us, today's Supreme Court decision on the PFD does not change the current fiscal policy debate, at all. The question before the Court was whether the Governor could unilaterally (and indeed, arbitrarily) reduce the PFD, not whether as a policy matter he should.

All that the Supreme Court decided was that he could. None of our arguments ever have been predicated on that.  Instead, our focus throughout has been on whether, as an economic and policy matter, he (or the legislature) should reduce the PFD.

That debate stays the same, and we believe continues to weigh heavily on the side of continuing to keep the PFD as it was envisioned by Governor Hammond, the other founders, and is currently provided by statute.

One of the defining characteristics of the current fiscal debate is that it is composed mostly of this group or that trying to shove the the burden of paying for elevated government spending off on someone else.

Some, primarily from the Top 20% by income and centered in the Senate, favor deep cuts to the PFD, which shoves most of that burden onto the backs of the remaining 80%.

The reason they favor that is because they think the alternative is likely either a progressive income tax, which would shove a large share of the responsibility onto them, or an increase in oil taxes, from which a material share of the Top 20% either directly or indirectly derive their income. The Top 20%'s proposal to cut the PFD is largely a preemptive strike against both. (The same is true of their back up proposal of a statewide sales tax, which has a less, but still significant, disproportionate impact on the "other" 80%).

And there is some truth to their concern.  Both a progressive income tax and an oil tax are prominent components of the House Majority Coalition's approach, for the very purpose of shoving a significant share of the burden of paying for government off on the Top 20% and the oil industry.

Our problem with both sets of proposals has been and remains that, along the way of preemptively protecting their favored group they do significant collateral damage to the overall Alaska economy and Alaska families.

As we have discussed previously on these pages, the Senate's proposed preemptive strike, a deep PFD cut: 1) "has the largest adverse impact on the economy [of all the new revenue options] per dollar of revenues raised," https://goo.gl/ZxR1Hw at A-15; 2) is "by far the costliest measure for Alaska families," https://goo.gl/ivf9D2 at 1; and 3) "will likely increase the number of Alaskans below the poverty line by 12-15,000 (2% of Alaskans)," https://goo.gl/iuTjv2 at 14. (A sales tax is second only to a PFD cut in terms of its adverse impact on Alaska families.)

Conversely, we agree that trying to shove the bulk of the burden mostly onto the Top 20% through a progressive income tax and/or the oil industry through increased, above-market oil taxes also do significant collateral damage.  By (potentially, significantly) increasing the cost of doing business in Alaska, at least to some extent the proposals will have the effect of pushing out of Alaska and to lower cost locations both individuals and businesses in the Top 20%, as well as industry investment that is needed for new oil projects.

From that perspective, we view both approaches as simply the flip sides of the same coin.  Both seek to benefit one group of Alaskans at the expense of another, and both result in collateral damage to the overall economy which neither side seems to care much about in their drive to protect their group from the other.

That is the reason, over time, we have come to favor -- if, in fact, the government is going to pursue some source of so-called "new revenue" -- a "flat tax," one which collects the same amount (as a percent of income) from all Alaskans regardless of their income bracket.

In our view a flat tax results in as close to an "economically and family neutral" approach as possible.

Under a flat tax all Alaskans experience the same, proportional effects from elevated government spending levels.  Unlike both the Senate and House proposals, no one population segment -- or family -- is asked to give to government a greater share of its income so that another segment gets off with less.  All Alaskans also benefit from a lower rate of government take as a result of distributing the burden across as broad a revenue base as possible.

And a side, but nevertheless important benefit of the approach is that all Alaskans have an equally proportionate stake in and reason to support the lowest possible level of government take. No one group economically is positioned to avoid the consequences of elevated government spending, leading them to favor -- or remain indifferent to -- further additions because they are paid for by someone else.

As we have said repeatedly on these pages, we don't believe any of these "tax and spend" approaches -- PFD cut, income tax, oil tax or even flat tax -- are necessary. Instead, we believe using the Hammond 50/50 approach Alaska is well positioned to ride out the current low in the oil price cycle without self-inflicting any further damage on its economy. See "The Special Session version of “Implementing Governor Hammond’s 50/50 Plan," https://goo.gl/nE15Eo.

But, as we also have said repeatedly if as a state we nevertheless are headed down the road of generating so-called "new revenue" it should be done with the least damage and disproportionate effects possible. We believe that replacing both the Senate and House proposals (both the PFD cut and income tax components) with a single rate flat tax -- a tax that imposes an equal distributional burden regardless of income class -- does exactly that.

If government is going to make Alaska's economic situation worse by pulling money out of the private sector and respending it less efficiently through government, at least the burden of the mistake should be spread proportionately across Alaska's families, not concentrated on any one sector.

And today's Supreme Court decision doesn't change anything in that analysis, at all.

Waiting until we get fiscal policy right is better than rushing a bad approach ...

We have disagreed with Ed Rasmuson since the start of the current round of the fiscal debate when he came out swinging for PFD cuts.

We understand his perspective.  On average in Rasmuson's income bracket, PFD cuts amount to less than 2% of annual income.  A small price to pay, in his view, for fiscal stability.

But what he ignored then, has ignored since and continues to ignore even in his most recent op-ed in the Alaska Dispatch News is the toll that approach takes on the overall Alaska economy and the other 80% of Alaska families. See "Here’s my Alaska fiscal prediction — and may events prove me wrong," http://bit.ly/2wlMKOu.

The economic analyses published these last two years consistently have reached the undisputed conclusions that cutting the PFD:

• "Has the largest adverse impact on the economy [of all the new revenue options] per dollar of revenues raised," https://goo.gl/ZxR1Hw at A-15;

• Is "by far the costliest measure for Alaska families," https://goo.gl/ivf9D2 at 1; and

• "[W]ill likely increase the number of Alaskans below the poverty line by 12-15,000 (2% of Alaskans)," https://goo.gl/iuTjv2 at 14.

In our study earlier this year of the effect of various fiscal options on the archetypical family of four, those in Rasmuson's income bracket lose very little (less than 2% of income) under the Senate's PFD cut-only fiscal plan.  That plan, however, results in the loss of more than 30% of the income of the lowest 20% (by income) of Alaska families, more than 15% for the next 20% (20-40th income percentile), nearly 9% for the next 20% (40-60th income percentile) and still more than 5% (more than double the effect on Rasmuson's) for the next 20% (60-80th income percentile).

Because it also is heavily weighted with PFD cuts, even the House's so-called "balanced" plan still provides a huge advantage to the Top 20%.  Under that plan the lowest 20% still suffer more than a 24% loss in annual income, the next 20% (20-40th percentile) more than 12%, the next 20% (40-60th percentile) more than 7.5% and the next 20% (60-80th percentile) more than 5.5%.

The Top 20%?  Even under the House plan, inclusive of the income tax the archetypical family of four still experiences only a 4.5% reduction in income, more than 5 times lower than the income cut imposed on the lowest 20%, 4 times less than the next 20% and still less than half of the next 20%. See "Studying the Impact of the Senate and House new revenue measures,"  http://bit.ly/2v4Ti4f.

In sum, while Rasmuson and others in his income class would pay some of their income to help fund government under either plan, the remainder of Alaskans would proportionately pay a lot more, the overall Alaska economy and most Alaska families would be worse off and roughly 2% of the total Alaska population would be pushed below the poverty line.

From the perspective of the overall Alaska economy and the vast bulk of Alaska families, those should not be -- and our guess is if put to a direct public vote, would not be -- acceptable outcomes.

In his most recent piece, Rasmuson laments the potential failure of the legislature to come to grips again this coming session with the state's fiscal situation in the way he desires.  We suppose we might also if our goal was permanently to push the costs of government off on someone else without regard to the adverse impact that might have on the overall Alaska economy, the bulk of Alaska families and Alaska poverty levels.

But another year of continued public discussion and education on the issue is infinitely better than Rasmuson's favored solution of adversely affecting the overall economy and Alaska families permanently through formalized, long term PFD cuts.

Put differently, it's better to continue the current status quo than enact something that permanently puts the overall Alaska economy and the bulk of Alaska families even further into the hole just to help out a government-favored few.

For obvious reasons -- because they anticipate they would lose -- advocates of deep PFD cuts have opposed holding a public referendum on whether to make a permanent change to the way the PFD is calculated.  But if Rasmuson's newest prediction and lament -- that the legislature now is unlikely to do that next session -- comes true, then we will come to that anyway, albeit indirectly in the form of the 2018 gubernatorial and legislative elections.

While we would prefer a direct up or down vote, an indirect vote is still an acceptable outcome to us because it will put the heat on candidates directly to speak on the issue rather than hide behind the charade, if Rasmuson's favored outcome had passed earlier, of "well I would have voted differently but it's already done now so it's time to move on."

Because the issue has such a deep impact on the overall Alaska economy and the bulk of Alaskans, in our opinion it should be decided through an election, even if somewhat indirectly, rather than rushed through the heavily lobbyist-influenced, Juneau bubble driven legislative process.

That public debate also will help focus on the fallacies underlying two other parts of Rasmuson's piece.

The first is Rasmuson's -- and others' -- attempts to reclassify the PFD as as part of the "general fund" budget.  It is not.

Like the payments to the members of the Osage Nation we discussed in a previous piece, see "The PFD isn't 'state revenues,'"  http://bit.ly/2ipWGRa, by explicitly providing that the funds are to be paid directly from the Permanent Fund Corporation to the dividend fund and then from that fund directly to the Alaskans that qualify, the statutes governing the PFD make clear that the funds bypass the general fund and are designated for a specific use.

Essentially, like the federal government in the case of the Osage Nation, the state serves only as a temporary collection and distribution agent through which the funds flow briefly on their way to the qualified Alaska recipients.

Attempting blithely to reclassify them as "general funds" -- and thus, redirectable at government whim -- is a transparent attempt to minimize the efforts of Governor Hammond and those who spent so much time and effort carefully to make certain they were separately protected.

The second is Rasmuson's claim that "the earnings reserve ... is part of the Permanent Fund" (which then leads to his bootstrapped claim that "we are imperiling the corpus of the Permanent Fund").

No less than the Constitution refutes that.  Article 9, Section 15 -- which establishes the Permanent Fund -- reads as follows:

"At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law."

The earnings reserve account is made up of the income produced from the Permanent Fund.  The provision makes clear that those funds are separate and not part of the Permanent Fund. Additionally, Section 15 makes clear that the income from the Permanent Fund can be separated from the general fund if otherwise provided by law. The PFD statutes otherwise provide by law, legally segregating the funds covered by those statutes both from the Permanent Fund and the general fund.

Without those two foundations Rasmuson's claim that the earnings reserve is somehow protected, that the Permanent Fund is in peril and that the PFD is somehow part of the general fund fall apart.  That is not how the founders of the Permanent Fund and PFD constructed them.

In short, we think Rasmuson's lament is good news rather than bad. The overall Alaska economy and the great bulk of Alaska families will be better off if the changes favored by Rasmuson and others in the Top 20% are not enacted this coming session, and those issues instead become a centerpiece of the 2018 election.

Between the CBR ($3.9 B as of July 31) and earnings reserve ($10.8 B as of June 30) Alaska currently has something approaching $15 billion in remaining savings.  There is time enough to let Alaskans weigh in and get this right, rather than getting something that makes the overall economy and the situation faced by the vast bulk of Alaska families even worse.

Why do we care ...

Some recently have questioned why we have and continue to spend so much time discussing the issues around the cashable oil tax credits program.

That's a very easy question to answer.  Some companies and their hangers on are trying to convince the state currently to fork over around $750 million of the state's money -- for those that like to use the CBR to define the state's savings, about 20% of the state's remaining financial reserves -- when, according to the statutes that have governed the program since its inception the state only currently (i.e., this year) owes about $77 million.

At a time when the state is in a challenging financial situation and already defaulting on other, statutory obligations to the state's own citizens (see "The Alaska Legislature tosses out the Rule of Law,"  https://goo.gl/ZXh5RN), it is simply neither good fiscal practice for the state to be paying more than it is statutorily obligated on any program, nor fair to Alaskans not being paid even their minimum statutory entitlement for others to receive more than theirs.

Those advocating for the higher payment have tried various arguments -- that the state "owes" the larger amount, that the state "promised" to pay it (even if it doesn't currently, strictly "owe" it), and that even if the state neither strictly owed nor exactly promised the amount, that the state nevertheless should pay it to "preserve the state's reputation."

In various columns we have responded in various ways by calling "BS" on all of those arguments because they deserve it.

Last evening we had a relatively straightforward exchange with Alaska Journal of Commerce editor Andrew Jensen that, in the last back and forth provided us with the opportunity to sum up our motivation even more clearly.

Here is what we said in response to a comment from Jensen:

... you should keep in mind I have been in and around the industry for nearly 40 years now and have seen repeatedly the various games that various segments of the industry play. These guys read the statutes and knew the risks going in. Now that one of those risks has come to pass -- the drop in oil prices and resulting fall in production tax revenues, and thus, the level of the annual repayment obligation -- they are playing the "victim" card in an effort nevertheless to extract a financial benefit to which they otherwise are not entitled. 

Normally, I wouldn't care much and would watch their efforts unfold (amused) from the sidelines, but given the state's current fiscal situation its become a game with material fiscal consequences to Alaska and thus, one which needs to be called out. My disappointment with the stories in your and other publications is that you are falling for their tactics hook, line and sinker and not even attempting to present a balanced view of what is going on. I have been in conference rooms back at company HQ's or banks when that has happened elsewhere and everyone has a good laugh at the "rubes" that fell for it. I am disappointed to see that working here.

That's about as clear as we can put why we care about the issue -- and why we are concerned others don't.

Those interested in the full exchange from the beginning can find it here: https://goo.gl/uBcKpt.

But you promissssssed ...

Recently some have argued that the state should pay more than the statutorily required level of cashable oil credits because the companies allegedly were "told" that the state would do so.

This from Twitter denizen "Hank," not his real name which he declines to give "for business reasons," is a good example:

Brad still doesn't get it. state officials TOLD the companies that they would get fully paid every year. And this was the practice. (1) — Hank (@AKFacts1) August 20, 2017

While they did not earlier in the debate, over time those making the argument effectively have come to concede that they have no legal basis for their assertion  Again, "Hank":

4) this does not mean that they have a legal claim against the state for not paying more.

— Hank (@AKFacts1) August 20, 2017

But they nevertheless claim an entitlement because:

3) These companies relied on the state's representations. Perhaps they shouldn't have. But they did and feel burned.

— Hank (@AKFacts1) August 20, 2017

Frankly, that rationale is utter nonsense.

Even if some state officials did make promises unqualified by references to the statutory limitations (and we doubt that they did), the officials making them had no authority financially to obligate the state beyond the terms of the underlying statutes.  And as we consistently have made clear on these pages (and even "Hank" effectively concedes), those statutes limit the state's actual cash obligation each year to a percentage of the revenues the state receives from production taxes. See "How gullible is Alaska," http://bit.ly/2xfvzuI.

To argue that "the companies" somehow were misled into overlooking those statutory limitations isn't credible.  All of the companies involved and their lenders -- all of them, every last one -- have lawyers, financial officers and financial advisers.  And the first thing that those professionals do when engaging in their "due diligence" before participating in any governmental program is to read the fundamental statutes that establish and govern it.

If those professionals didn't do their reading, or did and nevertheless concluded that some state officials verbally could somehow magically bind the state beyond the terms of the underlying statutes, perhaps the companies have grounds for looking for compensation to the malpractice or liability insurance of their advisers.  But the State of Alaska certainly isn't the one on the hook for that.

Some argue that payments beyond the limits of the state's statutory obligations are nevertheless also justified because the state's credibility somehow is on the line. In a recent interview, for example, Senator Cathy Giessel, head cheerleader for the effort to get the state to pay more than what the statutes require, argues:

"There’s now a phenomena out there spoken about by companies and investors called the ‘Alaska risk factor,’ and it refers specifically to the unpredictability of the State of Alaska, particularly in paying off the credits that we agreed to pay, said Giessel."

See "Alaska ended cash credits to oil companies, but still owes nearly $1 billion," http://bit.ly/2uvsbL

But that isn't a state issue.  If anything, it involves only the individual credibility of those who purported to commit the state to more than the statutes provide.  Individual government officials may promise what they think they can deliver or how they may vote when the issue arises, but until the statutes are actually changed the state hasn't agreed to anything.

Those officials -- if there are any who made such "promises" -- shouldn't now be heard to push the state to pay more because their individual credibility is on the line.  If they promised -- or in Sen. Giessel's words, "agreed" to do -- more than the statutes provided, any consequences should fall to them.  The state's bank account shouldn't be tapped to come flying to the rescue of their tattered individual credibility.

Frankly, the statements made by those who claim the state is obligated to do more than the statutes require increasingly is striking us as the equivalent of the classic child's whine when confronted with a parental "no" -- "but you promissssssed."

As most parents will know, usually that situation arises when the child selectively hears what they want to hear, not what the parent actually said.

That is the case here.  The statutes lay out what the state is obligated to do.  The claim by the companies that they are "entitled" to more is nothing more than a whine hoping to motivate the state into giving more than the statutes provide.

As we said in an earlier column the relevant question comes down to "just how gullible is Alaska."

We hope the answer is, not at all.

Now, Alaska Public Media spreads "fake news" ...

A piece Friday by Rashah McChesney of Alaska Public Media's "Alaska Energy Desk" discussing the cashable oil tax credit program contains "fake news."  There isn't any other way to describe it.  See "Oil company sues over Alaska’s beleaguered cash-for-credits program,"  http://bit.ly/2vTHDSX.

Here is the part that's fake. "The state will owe an estimated $1 billion in unpaid cash credits this year and the legislature appropriated $77 million."

And here's the reason it's fake.  The state "owes ... each year" only what the statutes obligate it to pay.  The statutes authorizing the cashable oil tax program -- which in this respect have been the same since the program was established -- provide that the state is obligated to pay annually no more than a statutorily established percentage of the production tax revenues the state is anticipated to receive.

This year that percentage works out to the $77 million appropriated by the legislature. The statutes don't obligate the state to pay any more than that amount this year.  And without an obligation, no more than that is "owed ... this year."

This isn't the first time McChesney and Alaska Public Media have wandered down this path.  In a piece the previous week McChesney generally took the same tack in a story about another company, saying "[c]ompanies waiting to get reimbursed for cash credits they’d already earned — they’re going to be waiting for awhile."  See "BlueCrest is latest company to stop work, citing state’s defunct cash-for-credits scheme," http://bit.ly/2xeQZrR.

And McChesney and Alaska Public Media aren't the only news sources that have repeated this particular piece of fake news.  Last week we analyzed a piece in which KTVA's otherwise credible reporter Liz Raines fell for the same spin, hook, line and sinker. See "KTVA (and others) still don't get it about cashable oil credits ...,"  http://bit.ly/2xeUrmn.

This past week on our Michael Dukes Show segment we also talked about another, similar story from KSRM's Dorene Lorenz, which went so far as to assert that the state is "delinquent" on the payments.  See "State Pushes In Clutch On Oil Exploration Incentives," http://bit.ly/2vTKwmA.  (We discuss it at the beginning of our Michael Dukes Show segment. See "This week (August 15, 2017) on The Michael Dukes Show,"  http://bit.ly/2xf9BIh.)

If Lorenz (Raines or McChesney) wanted to dig into a story where the state truly is "delinquent" on its statutory obligations they would be much better off analyzing this and last year's PFD, where first the Governor and then the legislature blatantly have ignored explicit statutory language which says at the end of each fiscal year the state "shall transfer from the earnings reserve account to the dividend fund established under AS 43.23.045, 50 percent of the income available for distribution under AS 37.13.140."  See "The Alaska Legislature tosses out the Rule of Law,"  https://goo.gl/ZXh5RN.

The state's unilateral reduction of the PFD in both years to 25 percent of the income available for distribution is an actual delinquency.

But the cashable oil tax credit payments?  Nope, not "delinquent" or "owed .. this year."

The actual facts?  The state's statutory obligations each year are being met as they come due.  That is the factual story that all three reporters have missed.

Who has been for and against preserving the PFD thusfar in the 2017 sessions ...

Yesterday we reacted to Rep. Chris Birch's announcement of his intention to run for reelection, or if Sen. Meyer decides not to run for reelection, that seat.  Here is what we said (https://goo.gl/nrpHZA):

"Chris Birch lost me when he voted to cut the PFD. 

According to every economic study done the last two years, cutting the PFD has the "largest adverse impact" on the overall economy of all the new revenue options, is "by far" the worst option for Alaska families and at the level of cuts supported by Birch, put an additional 12 - 15,000 Alaskans (2% of the population) below the poverty line. 

By supporting PFD cuts Birch has prioritized continued government spending and protecting the Top 20% of Alaskans from paying their fair share of those costs, at the expense of the overall Alaska economy (at the very time it continues to slip deeper into recession), working Alaska families and those teetering on the poverty line. 

We will be looking forward to supporting other candidates in his district who bring a brighter outlook for the overall Alaska economy and a fairer outcome for all Alaskans."

Later in the day a reader asked us who else we viewed similarly in this coming election cycle -- who has "lost us" by voting to cut the PFD this session.  Here is the gist of our response:

"There are several votes this past session that could be used as a litmus test, but most involve the same vote split and Rep. Birch is on the wrong side of all of them.

From the House side, probably the most charitable (from the perspective of giving members the benefit of the doubt) was the floor vote March 17 on Amendment No. 102 to the FY 2018 Operating Budget. 

The Amendment read: "Delete "The sum of $793,795,000." Insert "The amount authorized under AS 37.13.145(b) for transfer by the Alaska Permanent Fund Corporation on June 30, 2017, estimated to be $1,501,000,000."

Here was the vote (https://goo.gl/yF14XF): 

Yeas (a vote for paying the full FY 2018 PFD): Chenault, Eastman, Johnson, Millett, Neuman, Pruitt, Rauscher, Reinbold, Saddler, Sullivan-Leonard, Talerico, Thompson, Tilton, Wilson 

Nays (a vote to cut the FY 2018 PFD): Birch, Drummond, Edgmon, Fansler, Foster, Gara, Grenn, Guttenberg, Johnston, Josephson, Kawasaki, Kito, Knopp, Kopp, Kreiss-Tomkins, LeDoux, Ortiz, Parish, Seaton, Spohnholz, Stutes, Tarr, Tuck, Westlake, Wool 

On the Senate side, the most direct measure likely was the vote on SB 26, which would restructure the Permanent Fund going forward by, among other things, permanently reducing and capping the PFD. 

Here was the vote on that (https://goo.gl/3AyFxi): 

Yeas (a vote permanently to reduce and cap the PFD): #Bishop, Coghill, #Costello, #Egan, Giessel, #Hoffman, #Kelly, #MacKinnon, #Meyer, #Micciche, Stedman, Stevens, von Imhof

Nays (a vote for retaining the PFD as is): Begich, Dunleavy, Gardner, Hughes, Olson, Wielechowski, Wilson

All of the House members are up for reelection this coming year. Those Senators voting "Yes" on SB 23 (in other words, to cut the PFD) up for reelection this year are preceded by an #."

KTVA (and others) still don't get it about cashable oil credits ...

In a story Tuesday KTVA tried -- and failed yet again -- to get the cashable oil credits story right. See, "Alaska ended cash credits to oil companies, but still owes nearly $1billion,"  http://bit.ly/2uvsbLt.
In an apparent effort at a deeper dive, KTVA bought hook, line and sinker the story line being peddled by some oil companies that the state is not performing on obligations related to the program.  

Here is KTVA's take:

"Alaska advertised itself to companies in the Lower 48 with brochures carrying a promising message: 

'For the entire lifecycle of your project, the State of Alaska is there for you. We do not just talk big, we follow through big — with cash!,” a 2014 brochure published by the Alaska Department of Revenue reads. ... 

"For years, Alaska did follow through on its promise — with cash. But suddenly, everything changed. Low prices meant less money for state coffers, and ... the state hasn’t paid them off since. 

"Companies began halting projects in Alaska — saying they’d been banking on the state’s promise.

'There’s now a phenomena out there spoken about by companies and investors called the ‘Alaska risk factor,’ and it refers specifically to the unpredictability of the State of Alaska, particularly in paying off the credits that we agreed to pay, said Giessel."

As was clear in the materials circulated at the time what the state agreed to pay was defined by statute, not what some are now backreading into brochures.  And this is what the applicable statute, AS 43.55.028, http://bit.ly/2tYCbyJ, provided at the time, provides now, and indeed has provided from the beginning of the program :

(a) The oil and gas tax credit fund is established as a separate fund of the state. The purpose of the fund is to purchase transferable tax credit certificates issued under AS 43.55.023 and production tax credit certificates issued under AS 43.55.025 and to pay refunds and payments claimed under AS 43.20.046, 43.20.047, or 43.20.053. 

(b) The oil and gas tax credit fund consists of: 

(1) money appropriated to the fund, including any appropriation of the percentage provided under (c) of this section of all revenue from taxes levied by AS 43.55.011 that is not required to be deposited in the constitutional budget reserve fund established in art. IX, sec. 17(a), Constitution of the State of Alaska; and 

(2) earnings on the fund. 

(c) The applicable percentage for a fiscal year under (b)(1) of this section is determined with reference to the average price or value forecast by the department for Alaska North Slope oil sold or otherwise disposed of on the United States West Coast during the fiscal year for which the appropriation of revenue from taxes levied by AS 43.55.011 is made. If that forecast is 

(1) $60 a barrel or higher, the applicable percentage is 10 percent; 

(2) less than $60 a barrel, the applicable percentage is 15 percent.

The only obligation of the state is to appropriate annually the percentage of the production taxes received by the state ("all revenue from taxes levied by AS 43.55.011") provided in subsection (c).  And the state has done that every damned year since the start of the program.

While the state could appropriate more money to the fund, as it did in some prior years, it is not now and never has been obligated to do so.  No one representing the state could promise or, contrary to Sen. Giessel's claim, agree to pay more because the statutes -- which were referenced in the materials distributed to the potential participants and clear on their face -- didn't authorize anything more.

What Sen. Giessel and others are urging now is for Alaska to go beyond, indeed far beyond, the obligations made in the statute, not live up to them.  They want the state now to pay annually to the oil companies additional monies that the state never promised, agreed to pay or have even the remotest statutory or legal obligation to pay.

The reasoning behind the statute was clear.  In times of high revenues the state would pay more into the fund and companies would recoup their claims (by cashing in the credits) at a fairly fast rate.

In times of lower revenues, however, the state was "obligated," "promised," and "agreed to pay," only lower amounts into the fund and the companies would recoup their claims at a slower rate.

Now that oil prices have dropped and the lower revenue -- and thus, slower recoupment rate -- apply, the companies are trying to change the rules through a PR effort.  It is bad enough that some legislators, trade groups and industry mouthpieces are going along with that.

It is just plain disappointing that one of the state's news organizations continues to fall for the "alternative facts" hook, line and sinker.

Come on, KTVA, you are better than that.

Must Read Alaska has this one wrong ...

Thursday, Must Read Alaska posted a commentary headlined "In Alaska, it’s unions vs. workers in the private economy,"  http://bit.ly/2hwpjM8.

The gist of the commentary was that, by supporting Governor Walker and various other candidates, the unions have helped to create an "anti-development" state government which is undermining supposedly "shovel ready" construction projects which otherwise would employ Alaska workers.

Must Read Alaska is reading the situation wrong.

We believe the struggle really is between those in the Top 20% who want to maintain continued state spending on things that benefit them (like construction projects) while paying no taxes on the one hand, and the remaining 80% of Alaskans who would end up bearing the burden of such projects through the continuation of deep PFD cuts to fund them.

What Must Read Alaska attempts to paint another way, is actually the remaining 80% fighting back and saying, "no more capital spending" until the state figures out some way to do it other than by shoving the financial responsibility onto their backs.

If the Top 20% were prepared to pay a proportionate share of their income even remotely equal to what they propose the other 80% give up through PFD cuts, then there might be enough funding available to pursue the projects.

Without that, however, all that Must Read ultimately is advocating is that a large majority of Alaska families continue to suffer significant reductions in their income in order largely to benefit a handful of Top 20% construction contractors and subcontractors.

Whether or not they realize it, Must Read also is advocating a position which would significantly worsen the overall Alaska economy. According to the March 2016 ISER study, there is a huge difference in the effect on the overall Alaska economy between money spent on construction budgets and, alternately, to fund the PFD.

Because a large part of a state dollar spent through the capital budget leaves the state immediately for steel and other speciality goods, spending a state dollar on capital projects only returns $0.65 in overall Alaska income. According to ISER, a dollar distributed through the PFD, on the other hand, ultimately returns $1.40 in overall Alaska income, more than two times that spent on a state capital item.

Continuing to suck dollars out of the private sector through PFD cuts in order to recycle them through government capital spending certainly would benefit a few -- particularly state construction contractors and subcontractors -- but at the expense of the large majority of Alaska families and the overall economy.

Frankly, it's thinking like this -- "let's build big projects" -- that led to the surge in state overspending during the 2010-14 Parnell-era timeframe and sowed the seeds of the state's current fiscal difficulties. While some in the Top 20% want to continue to "let the good times roll" through continued government capital spending directed to projects that will benefit some of them, that will only send the overall Alaska economy even further into a tailspin.

From the perspective of the overall Alaska economy and the large majority of Alaska families, the state is much better off restoring the PFD and letting individual Alaskans and Alaska families decide where to spend the money, instead of redirecting the money through government in order to benefit a select few construction contractors and subcontractors.

Bottom Line:  At least in this case the conflict isn't between unions and the private sector workers, it's between what some in the Top 20% want for themselves and their friends on the one hand, and the health of the overall Alaska economy and Alaska families on the other.

How gullible is Alaska ...

A rash of news articles and commentaries this week are focusing on oil company BlueCrest's announced decision to "pause" activity at its Cook Inlet Cosmopolitan Unit while it arranges a new round of financing.

From all of the headlines and commentary many seem to think that the project has been cancelled, and that it's the state's fault that it has. 

For example, this is how the Alaska Dispatch News headline read, "Oil company says it likely can’t continue to drill unless state pays tax credits," http://bit.ly/2vonMgQ. KTVA's lead was "BlueCrest Energy halts project on the Kenai, says state credits are the cause," http://bit.ly/2we899p.

In response, many are calling for the Governor and legislature to reverse course and "honor" the state's alleged "commitments." For example, the Alaska Chamber has started running a Facebook ad campaign based on that very theme. http://bit.ly/2uaRNAZ

But for those that read further down -- and you have to read all the way to the 26th paragraph, fourth from the bottom, of the ADN article to get there, but for those that do -- you soon realize this really is about something else: BlueCrest only has hit a "pause" while it deals with a financing issue.

"Johnson said BlueCrest officials decided on Tuesday to pause drilling after they realized they can't secure a loan fast enough to drill a third well.

"'There's a limit on how quickly you can borrow tens of millions of dollars,' he said. 'It's not easy to do.'"

So, what is really going on here?

It's all about financing options.  Blue Crest, like any profit-maximizing enterprise, wants to arrange the lowest cost financing it can.

Financing from the State of Alaska through the cashable oil tax credit program is the cheapest of all -- it doesn't cost the company a thing:  no interest, no equity stake, no obligation to repay if things don't work out, no obligation even to continue drilling if you decide it's not worth it.  It's just a straight up, no cost subsidy, designed to artificially lower the cost of exploration and development in Alaska (and in doing so, subsidize Alaska's high cost oilfield service sector) by transferring part of the cost to the state.

The financing does come with one risk, however.  As we have discussed previously on these pages, under the program the participants share with the state the risk of lower oil prices and production levels.  If the state's revenue from oil production taxes -- which are largely driven by oil price and production levels -- decline, so does the extent of the state's obligation to contribute to the fund that cashes out the credits.

In short, if lower oil prices result in the state receiving reduced revenue from oil production then the state has the right -- and indeed, from an overall fiscal policy perspective, some would argue the obligation -- to stretch out the rate at which it pays the credits.  See "Oh good lord," http://bit.ly/2vpnpmr.

The companies participating in the program knew -- and by participating in the program, accepted -- that risk from the outset; the terms have been in the statutes since the program first began.

But that doesn't mean they agreed not to try to push the envelope a little -- or a lot -- if the risk of lower oil prices, and thus stretched out payments, materialized.

And as those risks have materialized, the companies -- BlueCrest is only the latest -- have done exactly that: tried to push the envelope.

Many companies, like many consumers, treat financing terms as negotiable.  They respect the terms if the future stays as anticipated (or turns out better for them than) at the time the financing was negotiated.

But if things change adversely, then companies try to change the terms of the financing as well.

During the current oil downturn banks and other sources of debt financing have become accustomed to approaches from oil companies seeking a variety of changes in the terms of their loans, such as extensions of their repayment obligations or even the conversion of all or a portion of the debt (with the attendant obligation of repayment) to some sort of equity.

What is going on here with BlueCrest is the Alaska version of that.

As the tie between the terms of the cashable oil tax credit program and oil price levels has become a constraint, BlueCrest and others are attempting essentially to renegotiate the terms of the financing by pushing the state to contribute additional funds to the program earlier than (i.e., in advance of) when required.

As BlueCrest's Johnson admits (albeit in the 26th paragraph of the ADN article), it's not that the companies don't have other financing options, it's just that they cost more and take some time to arrange.

If instead Alaska can be convinced essentially to waive the terms of its program, so much the better.  Zero cost financing always trumps other options.

And unlike dealing with other sources of financing (which always extract some sort of fee for changing the terms of their deals), the costs involved in such efforts appear to be minimal.  All that it appears to require to persuade at least some (like the Alaska Chamber) is a dash of extreme verbal hyperbole (about no one ever "trusting" Alaska again) and some lobbying fees.

Other, commercial sources of financing quickly would see through -- and even more quickly dismiss -- the hyperbole.  The response would be essentially, "let's see, the terms of the program explicitly give us the right to do what we are doing. You are way off base (i.e., "nuts") to claim that it's 'untrustworthy' to utilize those rights when the risks we explicitly agreed to share materialize."

And they would be immune to political lobbying.

But BlueCrest and others are hoping the state will react differently to the hyperbole (what some call "puffing" or in other contexts, "alternative facts") and lobbying. 

Maybe Alaska is that gullible -- some in the business community and legislature, see http://bit.ly/2wsKj93, appear to be -- but we certainly hope those making the final decisions aren't.

Oh good lord ...

The Alaska Journal of Commerce's Andrew Jensen and I must have different Alaska Statute books sitting on our desks (or in my case, in my browser bookmark list).  I just checked; mine is up to date.  Jensen may want to check his.

In yet another of his editorial screeds, Jensen writes this under the headline "The deadbeat, do-nothing Legislature,"  https://goo.gl/vweoFh:

"Instead of beginning to settle the hundreds of millions in unpaid liabilities owed to small oil companies that already spent the money in good faith, the Legislature ended the program and will stiff those companies for a third straight year after Gov. Bill Walker vetoed $630 million in payments in 2015 and 2016. 

"Deadbeat and do-nothing barely begins to cover it."

When used as a verb, Google defines "stiff" this way, https://goo.gl/9YUciW:

1. cheat (someone) out of something, especially money. ("several workers were stiffed out of their pay")

2. ignore deliberately; snub.

Let's set the record straight in the event anyone relies on the Journal of Commerce editorial page anymore accurately to report the facts (surely a dwindling subset of the population these days).

The state has "stiffed" none of the oil companies -- none.  As we have explained repeatedly, the last two years as well as this coming one the state has paid annually exactly what it has owed the oil companies involved in the cashable oil tax credit program under the statutes as they have been in effect since the day the program began.  See "Today's vote will demonstrate whether Alaska legislators believe in the rule of law,"  https://goo.gl/UgNgy9.

Let me say that again. Each. Year. The. State. Has. Paid. The. Oil. Companies. Exactly. What. They. Are. Owed.

The statute provides that the state shall pay each each year into the "oil and gas tax credit fund" -- from which payments are then made to the qualifying oil companies -- a statutorily-established percent of the production tax revenues projected to be taken in by the state that year.  The state may pay more each year, but the state's statutory annual obligation is limited to the percentage.

The state has paid the specified percentage every year of the program, including the last two and, as a result of the capital budget, the next upcoming.  It has complied with the statute and has paid exactly what it has owed.

In some past years the state used the discretion provided under the statute to pay more, but that doesn't obligate it to do so in other years.

Under the statute, the oil companies share with the state some of the risk of falling oil prices and production levels.  If production tax revenues decline, so do the state's annual obligation to pay into the fund.  Now that the risk has matured, the oil companies would like to dodge their share of it by cajoling the state into voluntarily paying more into the fund than required by the statute.

Understandably given the state's fiscal situation, the state has declined.  That isn't "stiffing" the oil companies; it's simply applying the statute as written.  Those truly concerned about the state's overall fiscal situation -- instead of one subset of it -- would be screaming if the state did anything else.

Jensen clearly needs to go read the statutes -- and maybe his dictionary -- again.

But we do agree with Jensen on this -- the Legislature is a deadbeat.

While not the oil companies, we agree the Legislature in fact has "stiffed" someone this session; well, approximately 635,000 someones.

As we have explained previously on these pages, the Alaska Statutes clearly require the state each year (by using the word "shall") to "transfer from the earnings reserve account to the dividend fund established under AS 43.23.045, 50 percent of the income available for distribution under AS 37.13.140."

For the first time since the founding of the Permanent Fund Dividend program in the early 1980's, the Legislature has refused to comply with that obligation, transferring less than half of the amount required under the statutes.  See "The Alaska Legislature tosses out the Rule of Law," https://goo.gl/Fb7iv7.

The result?  The Legislature is shortpaying -- yes, "stiffing" -- each and every one of the 635,000'ish Alaskans that likely will qualify for the PFD this year a little north of $1,200 (or nearly $5,000 for the archetypical family of four).

And in doing so, the state also is shortpaying -- again, "stiffing" -- the overall Alaska economy the nearly $1.1 billion in additional income, counting the multiplier effect, that otherwise would flow into the hands of Alaska families and individuals, and through them, Alaska businesses, in the coming year.

That's an additional reduction in overall Alaska income of roughly 2.5% in an economy that already is in a worsening recession.

You would think the editorial page of an organization that publishes under the name the Alaska Journal of Commerce and claims to provide "the most in-depth and accurate information about business in Alaska" would be concerned about -- or at least mention -- such an effect on the overall Alaska economy and Alaska business when writing under the headline the "deadbeat" Legislature.

But no, the Journal's editorial page apparently prefers to focus instead only on what essentially amounts to fake news -- that the state is "stiffing" oil companies.

One of the problems Alaska faces currently is that its government continues to lurch from one side to the other trying to help out specific segments of the economy at the expense of the whole. It is focusing on saving specific trees while the forest as a whole withers.

Similar to the important role played by the editorial pages of the Financial Times, the Wall Street Journal and The Economist at the national and international level by keeping policymakers eyes focused on the overall economic prize, the editorial page of the Journal of Commerce could do at the state level.

Unfortunately, it's not.  It's become just another special pleader in a state that already has more than enough.