Brennan: Stakes higher than ever

By Tom Brennan

Trying to guess how the Legislature ultimately will resolve the budget deficit is above my pay grade, but I sure hope they get it right — and make some big decisions this year.

I’m actually hopeful they will do both. After all, failure could have consequences such as making Alaska an economic backwater unlike anything seen here since before statehood.

And 2017 is a unique window of opportunity since next year is an election year and the economic fallout from failure to act now would rattle investors who are already sitting on their money.

To my thinking, the most important commitment Alaska’s legislators could make is using a portion of Permanent Fund earnings to fund state government. That would allow continuation of annual individual dividends on the order of $1,000 or more and, most importantly, it would keep faith with the Alaskans who voted to establish the fund in the first place.

After that should come a reordering of the size of state government to something we can afford with the revenues we can reasonably expect without a Sarah Palin-style dip into our business partners’ pockets.

Downsizing state government, however, is a very tricky business. Those who control budgets within the state system (or any government system) are instinctively good at the old “we’re killing the puppies at midnight” ploy. That is, the budget-tenders like to say that if you cut their budgets they are going to kill off the programs the public cares the most about. And that is when the supporters of those programs come howling out of the weeds shouting down any cuts.

In fact, when budgets shrink, the agencies tend to nurture their highest-priority programs most and those with lower priorities often fall off the charts. The problem tends to be making sure that good programs are not lost because of less valuable bureaucratic priorities. That is when oversight by the news media and elected officials can play a most effective role.

The economic fallout from the state’s declining fiscal situation is already being felt in the economy, especially in places like the stores, bars and restaurants where money is most often spent by young professionals who are now moving Outside by the thousands.

Jobs are being lost in the oil industry, in the oil support industry, in communications, government and a lot more. Many young people, too many, are looking elsewhere for places to launch their careers.

All these things could change, especially since companies like ConocoPhillips, the Spanish oil giant Repsol and its U.S. partner, Armstrong Energy, are continuing to invest in Alaska. And, most importantly, they are discovering promising new fields that are the hope of the future for this oil-dependent state.

But the fields they are finding are not the massive oil structures like Prudhoe Bay. They are the smaller fields often discovered in the shadow of places like Prudhoe, fields capable of keeping oil flowing through the trans-Alaska pipeline for many years to come.

With fracking now an accepted practice in much of the oil-producing world, the likelihood of sky-high crude oil prices seems low, so we are probably not looking at a bonanza like those of years past but a steady flow of crude at roughly today’s prices ($50 a barrel or so) could keep state revenues healthy for many years to come. At least healthy enough to support a government with a less ravenous appetite.

The North Slope is a mature oil province but one with still-great potential. But developing that potential will require good decisions by state government, and we will have to wait and see on those.

Our legislators have a long way to go yet before they can quit for the year. And much important work to do. Let us hope they do it well.

The stakes have never been higher.

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