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House Majority Press
Capitol Room 116
Juneau, AK 99801
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Renee Limoge
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The 24th Alaska State Legislative 2nd Session House Majority Newsletter - Issue 2, Feb. 28, 2006
The House Finance Subcommittees have been working diligently to review the Governor's new and expanded budget requests. Their goal is to keep spending to a minimum with the hope of creating a "sustainable budget." Once the subcommittees have finished their reviews, the work will begin to create a House Committee Substitute. The Fast Track Supplemental and the Operating Budget will begin moving through the system in the first part of March.
"It is the Finance Committee's job to analyze each and every new program and spending increase with the same scrutiny that they examine their own personal budget. The House Majority Caucus is determined to fund those programs essential to Alaskans," said Representative Mike Chenault (R-Nikiski). These committees have been looking at the increases and programs in an effort to finalize the budget. The subcommittees should be closing March 1st.
House Finance Committee
In continued dedication to expanding public knowledge about alternatives for a possible Natural Gas pipeline development deal, Speaker of the House, Representative John Harris (R-Valdez), hosted representatives from the Alaska Gasline Port Authority. The meeting, which extended into the evening, on Thursday, February 16th, was a forum of hard-hitting questions. Legislators were interested in understanding the key differences between a development deal with the AGPA and a deal with the three big oil companies, along with the benefits and weaknesses each plan projects. Jim Whitaker, the chairman of the Alaska Gasline Port Authority, along with legal councel Travis Gibbs and Bill Walker spoke about the strengths of their proposal.
Governor Frank Murkowski announced this week that he has struck a deal for the development of a North Slope Natural Gas Pipeline, making the need for information even more crucial than ever before. With this in mind the Republican House Majority continues their effort to educate Legislators and the public alike. On January 12th, the former Commissioner of the Department of Natural Resources spoke about the Governor's deal and the risks the state faces. The Majority Leadership still hopes to hear from representatives from the Administration, TransCanada Corp. and the producers involved in the negotiations: Conoco Phillips, Exxon Mobil and BP. These presentations are meant to better inform Legislators and allow the public access to this information as well and are being held in open caucuses.
Transcript of the Open Caucus - February 16, 2006
Transcript of the Open Caucus - January 12, 2006
"It is my belief that the time is now for a constitutional amendment that puts in place a fiscal plan for spending the revenue generated by the state's oil resources. The Governor has just submitted HB 488 and its companion bill SB 305, the Petroleum Profits Tax (PPT), which scraps the current outdated oil taxation system (Economic Limit Factor) and proposes a new taxation system that is more equitable for all Alaskans."
"Oil revenue accounts for the majority of the State's income and the new PPT combined with the gas line will ensure that is the case for decades. I believe Alaskans want a better system for budgeting than 'when you have it, spend it.' On the other hand, the majority of Alaskans do not trust government anywhere near their Permanent Fund or its earnings at this time - maybe never. I'm convinced the public will support HJR 34 if we proceed to a vote. It provides a simple, effective fiscal mechanism to take the rocket shots and crashes out of our economy and it will help government to live within our means."
Rep. Mike Kelly represents House District 7 and is a member of the House Finance Committee
HJR 34 : Constitutional Amendment: Appropriation Limit/Mineral Revenue
Governor Frank Murkowski has revealed his long awaited oil-tax reform plan. The House Majority is excited to begin reviewing this plan. This is a major restructuring of the current system and will also include tax incentives for new development, which will increase revenue to the state.
House Bill 488 has been referred to the House Resources Committee and the House Finance Committee. Senate Bill 305 has been referred to the Senate Resources Committee and the Senate Finance Committee. Referrals were limited in an effort to avoid delay in numerous committees due to the impact of this bill.
Hearings for the bills have already begun. The House Resources Committee heard public testimony last week and will be holding hearings into next week. North Slope producers (BP, Exxon Mobile and ConocoPhillips) and the explorers have been invited to give testimony this week, along with representatives for the administration. Consultants to the Legislature will weigh in on the legislation at the end of next week.
Ultimately, the House will be looking at what is in the best interest of the state. "The House Resources Committee is working hard to find a balance between maximizing a fair share for Alaskans while encouraging exploration and development. The devil is in the details with this bill and I'm proud of the committee for rolling up their sleeves and doing the work," said Co-Chair Representative Ralph Samuels (R-Anchorage).
The current oil tax system, driven by the Economic Limit Factor, has ceased to benefit the state and many members think it should be revised. The new oil-tax plan would be based on a percentage of net profit. Alaska should be receiving a fair share of revenue from its natural resources, especially when oil prices are high. The new oil-tax system should also encourage exploration and development, which will in turn continue to benefit Alaskans.
House Resources Committee Minutes & Audio Recordings
This bill will eliminate the Economic Limit Factor (ELF) as the determination of production tax, replacing it with what is seen as a more progressive and investment-friendly tax system. The ELF no longer works for our state and does not generate an appropriate amount of funds. The new plan is based on the net value and not on the gross value at the point of production, allowing a deduction for all upstream costs. The petroleum production tax will provide a $73 million annual standard tax deduction in an effort to provide an incentive for oil exploration by smaller independent oil companies. Additionally, a 20 percent tax credit is allowed for all the upstream capital investment, along with a credit for operating losses.
In other words, this new plan raises the tax rate from 15 to 20 percent with limited tax repeals along with tax credits allowed against the production tax for 20 percent of any qualified investment and any annual loss.
The current provisions on calculating gross value at the point of production would remain the same, but with significant additions. These additions include authorizing the Department of Revenue to disclose otherwise confidential information to the taxpayers when the information affects their tax liabilities.
More Online Petroleum Production Tax Information
The Alaska State Legislature is looking to find a solution to unfunded liabilities of the Public Employees' and Teachers' Retirement Systems (PERS/TRS). As Speaker of the House and House Ways and Means Chairman, we have spent many days this past year getting our arms around the problem, examining how it is that the state found itself in this predicament and investigating a range of solutions. As you may know, the Alaska State Constitution requires us to provide benefits to members of the state and teacher retirement systems. The state cannot reduce benefits to members of those systems.
Unfortunately, we find ourselves in a situation where the amount we are obligated to pay out annually to fund members' retirement and medical benefits is bigger than the amount being contributed. This has resulted in an unfunded liability and a political hot potato. A number of factors have contributed to the current liability: the 9/11 market crash, poor investment returns, rising health care costs, bad information concerning the amount the state should contribute to retirement systems and over-generous actions of past legislatures and administrations. The result is an unfunded liability of $6 billion that will grow to a $20 billion unfunded liability within the next decade if left alone.
A number of you, no doubt, wonder why this is an important issue, and why the Legislature continues to put such emphasis on solving this problem. It is absolutely necessary that we deal with the current unfunded liability because, rest assured, it will continue to grow if we do not address it. Think of the problem as having a huge credit card debt you don't pay off, but you continue to use the credit card.
Read The Full Text of Rep. Harris & Rep. Weyhrauch Op-Ed
Representative Gabrielle LeDoux (R-Kodiak) will attend the Kodiak Chamber of Commerce's 27th Annual ComFish Trade Show & Policy Summit. Held in Kodiak, Alaska, March 16-18. "Commercial fishing has always been important to Kodiak's economy. From fishermen who risk their lives making their living from the sea, to cannery workers whose families also depend on the catch, Kodiak is a town that benefits from a thriving fisheries industry. As the Representative of District 36, fisheries are an important Legislative duty." Representative LeDoux co-chairs the House Special Committee on Fisheries with Representative Bill Thomas, where they deal with legislation that could seriously impact Kodiak.
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