cloudyn.png
Sunday December 8th, 2019 8:58PM

Alaska budget woes prod debate over oil-wealth fund checks

By The Associated Press
Related Articles
  Contact Editor

JUNEAU, Alaska (AP) — Daniel Bowen came to Alaska in 2011, looking for adventure and opportunity. He and his wife eventually settled on the Kenai Peninsula south of Anchorage, a salmon fishing haven calling itself "Alaska's Playground."

But the Bowens, both teachers, recently returned to their native Michigan. After years of stress over delayed state budgets, their breaking point, he said, was Gov. Mike Dunleavy's proposed reductions to K-12 spending and health and social service programs.

"We started to realize that Alaska isn't turning out to be where we want to raise our kids," Daniel Bowen said, adding later: "As much as we loved Alaska, we can only take so much, we can only take so much uncertainty."

The state has been roiled by a budget dilemma linked to its uneasy reliance on oil, bringing a reckoning that has scrambled traditional political alliances. For decades, Alaska binged on infrastructure and community projects when oil prices were high and cut spending and closed facilities when they weren't. This time, prices haven't boomed and after years of drawing down savings and cutting expenses, state leaders face tough decisions.

The situation has politicians debating changes to the annual dividend paid to residents from Alaska's nest-egg oil-wealth fund. The checks, seen by many as an entitlement, once were considered almost untouchable. But the budget reality, and differences over taxes and spending, has politicians and residents choosing between the size of the prized checks and public services many expect.

The anxiety is tied to persistent low-to-middling North Slope oil prices. Prices topping $100 a barrel in 2014 went into a free-fall that worsened a budget deficit now in its eighth year. State revenue officials believe prices in the $60 a barrel range to be realistic long-term.

This year, an average of about 508,000 barrels of oil a day has coursed through the 800-mile (1,288-kilometer) trans-Alaska pipeline, according to the pipeline operator. On the pipeline's peak day in 1988, 20 years after oil was discovered at Prudhoe Bay, 2.1 million barrels flowed.

"Alaska needs to think about the new world we have today," said Cliff Groh, a longtime political observer, adding later: "The cavalry" of high prices and booming production "does not seem to be coming."

Oil has been the economic lifeblood of Alaska, whose population of about 735,000 is less than Seattle's. A 1969 oil and gas lease sale was a game-changer, said Eric Wohlforth, a state revenue commissioner in the early '70s and a former Alaska Permanent Fund Corp. board trustee.

"Suddenly we were a place that the bankers looked on with envy rather than just the poor supplicant," he said. The sale reaped $900 million that went toward infrastructure and other needs but was pretty well spent around the time the pipeline came online in 1977, he said.

In 1976, voters approved creating the Alaska Permanent Fund and dedicating a portion of mineral wealth to it. The fund, grown through investments, was valued as of June at $66 billion, with the earnings reserve portion valued at $18 billion.

The fund's principal is constitutionally protected but its earnings are spendable. Lawmakers had long limited use of earnings to such things as fortifying the fund and paying dividends based on an average of fund income over five years.

But last year, after going through billions of dollars in savings and at odds over taxes and further budget cuts, lawmakers began using earnings to help pay for government and sought to restrict what could be withdrawn for dividends and government.

Alaska has no state sales or personal income taxes.

Dunleavy, a Republican, says a longstanding dividend calculation that hasn't been followed for three years should be followed until it's changed. That would mean checks of about $3,000 this year. His support on the issue includes conservative Republicans and some Democrats, though other conservative Republicans and Democrats have resisted.

He has indicated willingness to discuss formula changes but insisted on a public vote. He said Alaskans didn't mind the size of their checks until politicians began tinkering. Checks in recent years ranged from $878 in 2012 to $2,072 in 2015, the year before they were capped.

The Legislature, with a bipartisan House majority and GOP-led Senate, wants Dunleavy to consider a roughly $1,600 check this year. Many lawmakers say the formula is unsustainable and have balked at violating the draw rate and setting a precedent of dipping deeper into the reserve.

Higher-than-expected draws could reduce what's available in earnings and at some point put pressure on the corporation to change its strategies to churn more money into the earnings reserve account, said Angela Rodell, the corporation's CEO.

Carl Davis, research director with the Washington, D.C.-based Institute on Taxation and Economic Policy, said cutting the dividend is regressive, hitting lower-income families particularly hard. He sees no conflict between paying a dividend and taxing residents.

While some Democrats want to debate oil taxes and whether companies are paying enough, Dunleavy has focused on cutting a budget he considers unsustainable.

There would not be an "honest discussion" about spending if tax bills also were being introduced, said Dunleavy's revenue commissioner, Bruce Tangeman.

Dunleavy vetoed more than $400 million, riling critics who say it's too much, too fast and prompting public outrage that is fueling a recall attempt. The Board of Regents, facing a potential 40% cut in state support for the university system, has taken initial steps toward consolidating its three accredited campuses into one.

Lawmakers, unable to reach the higher threshold required to override Dunleavy's vetoes, passed legislation seeking to reverse many of the cuts. Dunleavy has the option of cutting again.

Larry Persily, a former deputy revenue commissioner, said the choices are painful.

"These are a lot of different math problems made worse by the fact that we've lived two generations without taxes, two generations with free money and two generations of candidates who won if they could wrap themselves in the biggest dividend flag. As I've told some groups the last couple weeks, 'Guys, we did this to ourselves,'" he said.

  • Associated Categories: Associated Press (AP), AP National News, Top General short headlines, AP Online Headlines - Washington, AP Online Congress News, AP Business, AP Business - Corporate News, AP Business - Industries, AP Business - Utilities, AP Business - Personal Finance
© Copyright 2019 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Alaska budget woes prod debate over oil-wealth fund checks
For decades, Alaska has had an uneasy reliance on oil, building budgets around its volatile boom-or-bust nature
9:59AM ( 13 minutes ago )
UK economy shrinks for first time since 2012 as Brexit bites
The British economy shrank in the second quarter of the year for the first time in six and a half years largely because Brexit uncertainties weighed heavily on business investment
9:56AM ( 16 minutes ago )
Over 2 million Muslims in Mecca for start of hajj pilgrimage
More than 2 million Muslim pilgrims gather in holy Saudi city of Mecca to perform initial rites of hajj pilgrimage
9:50AM ( 22 minutes ago )
Associated Press (AP)
Trump heads for golf club holiday with summer storms looming
It's President Donald Trump's summer (vacation) of discontent, and storms are looming
8:49AM ( 1 hour ago )
Biden centers campaign where he started: Trump's character
Joe Biden is anchoring his presidential campaign around questions of character _ both his and President Donald Trump's
8:44AM ( 1 hour ago )
Armed man arrested at Missouri Walmart; no shots fired
Police in Springfield, Missouri, say they have arrested an armed man who showed up a Walmart store wearing body armor, sending panicked shoppers fleeing the store
8:44AM ( 1 hour ago )
AP National News
The Latest: Schumer, Pelosi discuss gun bill with Trump
The top 2 congressional Democrats say President Donald Trump has assured them he will review a House-passed bill that expands federal background checks for gun sales
8:41AM ( 1 hour ago )
Trump sounds conciliatory note to NRA on gun control
President Donald Trump says leaders in the House and Senate are having "serious discussions" about background checks for buying guns and that he's been talking to the powerful National Rifle Association
8:38AM ( 1 hour ago )
Andrew Yang qualifies for fall presidential debates
Democratic presidential candidate Andrew Yang has qualified for the next presidential debates
8:04AM ( 2 hours ago )
AP Online Headlines - Washington
Trump, getting facts wrong, says he may free Blagojevich
President Donald Trump has sent his clearest signal yet that he may about to sign papers freeing former Illinois governor from a federal prison
10:13PM ( 11 hours ago )
Biden, Bullock kick off Iowa State Fair blitz talking guns
The Iowa State Fair presidential blitz is under way, with former Vice President Joe Biden and Montana Gov. Steve Bullock blistering President Donald Trump
9:30PM ( 12 hours ago )
Trump picks new acting national intelligence director
President Donald Trump has picked Joseph Maguire, the nation's top counterterrorism official, as acting national intelligence director
8:58PM ( 13 hours ago )
AP Online Congress News
US wholesale prices rise just 0.2% in July
US wholesale prices rise just 0.2% in July, as inflation remains tame
8:34AM ( 1 hour ago )
Global shares mostly turn lower again amid trade tensions
Markets in Europe have turned lower and U.S. markets look to open with losses on Friday as worries persist about the trade dispute between the U.S. and China
8:00AM ( 2 hours ago )
US-China trade war weakening demand for oil
The International Energy Agency says the U.S.-China trade war and a decline in world economic growth are weakening demand for oil
7:48AM ( 2 hours ago )
AP Business
Immigrants lock doors, rally around children of detained
Nearly half of the immigrant workers detained in the largest immigration raid in at least a decade in the United States have been released.
7:28PM ( 14 hours ago )
Uber posts biggest quarterly loss ever after stock payouts
Uber posted its largest quarterly loss ever after making huge stock-based payouts in the months following its stock market debut
6:44PM ( 15 hours ago )
Uber loses $5.24B in 2Q after post-IPO stock payouts
Uber lost $5.24 billion in the second quarter after making huge stock-based payouts in the months following its initial public offering
4:36PM ( 17 hours ago )
AP Business - Corporate News
The Latest: Workers released after raids included juveniles
Federal officials say the of hundreds of workers released after a large-scale immigration raid at Mississippi poultry plants included juveniles
6:17PM ( 15 hours ago )
Technology companies power broad rally for US stocks
Technology companies powered stocks broadly higher on Wall Street Thursday driving the S&P 500 to its best day in more than two months and erasing its losses for the week
5:03PM ( 17 hours ago )
Rejected for a personal loan? Here's how to recover
Use your personal loan rejection as motivation to recover and secure approval on your next application
12:58PM ( 21 hours ago )
AP Business - Industries
Bolton warns foreigners that violate Venezuela asset freeze
Donald Trump signs executive order freezing Venezuelan government assets in significant escalation of tensions with Nicolás Maduro
5:39PM ( 2 days ago )
Trump freezes Venezuelan government assets amid tensions
Donald Trump signs executive order freezing Venezuelan government assets in significant escalation of tensions with Nicolás Maduro
7:46AM ( 3 days ago )
Trump freezes Venezuela government assets in escalation
Trump signs executive order freezing Venezuela government assets in significant escalation of tensions with Maduro
6:03AM ( 3 days ago )
AP Business - Utilities
Japanese economy grew better than expected April-June
Japanese government data is showing Japan's economy grew at a better-than-expected 1.8% seasonally adjusted annualized rate during the April-June quarter on healthy consumer spending and capital investment
10:59PM ( 11 hours ago )
US long-term mortgage rates fall sharply: 30-year at 3.60%
US long-term mortgage rates fall sharply: 30-year average at 3.60%
1:50PM ( 20 hours ago )
Billionaire: Epstein misappropriated 'vast sums' from wealth
The retail titan behind Victoria's Secret says the financier Jeffrey Epstein misappropriated "vast sums" of his fortune while managing his personal finances
11:41AM ( 22 hours ago )
AP Business - Personal Finance
Walmart removes images of violence in stores after shooting
Walmart says it's removing all signs, displays from its stores that depict violence, following a mass shooting at its El Paso, Texas location that left 22 people dead
10:00AM ( 13 minutes ago )
UK economy shrinks for first time since 2012 as Brexit bites
The British economy shrank in the second quarter of the year for the first time in six and a half years largely because Brexit uncertainties weighed heavily on business investment
9:56AM ( 16 minutes ago )
Over 2 million Muslims in Mecca for start of hajj pilgrimage
More than 2 million Muslim pilgrims gather in holy Saudi city of Mecca to perform initial rites of hajj pilgrimage
9:50AM ( 22 minutes ago )
UN food agency to boost aid for 4 Central American countries
The World Food Program says it's planning to nearly quadruple the number of people that the U.N. agency helps in four central American countries affected by drought, seen as one of the drivers of migration through the region
9:43AM ( 29 minutes ago )
The Latest: 8,000 Pakistanis protest near Indian embassy
About 8,000 supporters of a Pakistani Islamist party are marching toward the Indian embassy in Islamabad to denounce New Delhi's actions to change the special status of the disputed Himalayan region of Kashmir
9:39AM ( 33 minutes ago )