I don’t do politics on this blog. It is a promise I made to myself and to the readers at the beginning. I do not wish to break this promise. Nonetheless, like everyone I do have my opinions and some have told me I am pretty good at logically presenting an argument and explaining accordingly. …one even suggested I write for one of our local papers. Maybe that’ll happen sometime, maybe not. So…on this blog I tell some tales, explain some history, and hopefully garner a laugh or two along the way. It’s what I do here. The following post does brush and intermingle with local politics but I feel I can still make this post here because it is not exactly too recent and I tried to make it funny. Well…it is very recent by MY standards….but it is long enough ago that the way most people around me operate it would seem to be ancient and forgotten history. And I guess it is not funny…I mean it could be, if it were not true. Oh well. I tried. If part of what makes something historical is that “nobody” who isn’t some kind of nerd remembers it…then this will qualify. Aside from telling the story, I have another motive for placing it here: This subject comes up enough in other places that I simply got tired of retelling this……with it here, I can just cut and paste the link and Boom! There it is. Available to be read or ignored.
So I was reading a comment elsewhere on a friend’s link to some state budget survey results. This comment was from a state employee who was bemoaning the various budget cuts, pay freezes, hiring freezes, and general discontent of her workplace of late. Now, for those of us who have been in the private sector for a long time, the themes are almost identical and are certainly not new. Job misery is universal I suppose.
All well and good until I came to the closing line of the comment which read, “It’s time for a little tax.” Wait. A tax? Upon whom, exactly?
Now don’t get me wrong, I realize that in modern society in order to provide certain things we must collectively pool some resources to pay for them. (there, I’ve just pissed off my hard core conservative friends……but don’t worry, my liberal friends, I’ll get to you before I am done telling this story……and if you are both irritated, then I’ve done my job. …Call it my own version of fair and balanced.)
So, my issue was that even though we presently have no state income tax I believe that I have indeed paid a state income tax already for the last two years. A rather regressive tax at that, I might add.
You see, in Alaska we have the Permanent Fund Dividend. It is a yearly payment of a portion of the earnings from the oil and other investments made by the fund. I will not bore you with the details of it all but just say that it throws anywhere from a thousand bucks on up into the pocket of every eligible Alaskan. That may not sound like a lot, but it most certainly makes a difference and gives a boost to the local economy as a good portion gets spent. I hate to go shopping. …and I totally avoid it during black Friday, big Christmas sales, and the day PFDs come out.
The PFD was created for a couple of purposes, one of which was to give back to the citizens (more on why later) and to one day help fund the running of the state government. There is presently no specific language to protect the money from being used up by reckless elected officials…..and I am truly amazed it has lasted so long without any state constitutional safeguard. But it has. Remarkably. This is likely because no one ever really tried to get away with using any of it. No one had the unscrupulousity (is that even a real word?….well, I just added it to my computer’s dictionary….so in this microcosm it now IS a real word. Ah, the power of technology!) to actually, to copy Nike, “Just Do It!” Until Governor Walker. I’ll give him this much, he’s got stones. A lot of us would like to stone him, but that’s another story.
So what Walker did basically was he just vetoed 50% of the transfer from the main account to the account used to pay out the dividends. Thus effectively cutting the payments in half. Hence my assertion that I was taxed. The first year he did this it was about 1100 dollars. But why stop there?….if you get away with it once, you can do it again! So he did. This past year…another 1000 or 1100, give or take a bit.
Now, of course this was met with a court challenge. The case came down to the definition of the word “shall” Go look it up. I’ll wait. … ……….ok, so you likely understand this word “shall” to mean that someone WILL do something…as in, “The fund manager SHALL transfer…. ” or something like that which is defined in the Permanent Fund Corporation charter and “instruction manual” for running it. Seems pretty basic. To every sane intelligent person who has even a rudimentary command of the English language it would appear that said money was to be transferred to the payment account. But, we are not discussing sane or intelligent people….or at least not very scrupulous ones. We are discussing a meeting that involved politicians, lawyers, and judges. Somehow “Shall” now had a definition that more closely corresponded to the word “May” …as in “The fund manager MAY transfer…” Or in our case, MAY NOT. Armed with this new legal definition, the coffers containing billions of dollars may now be squandered as only our legislature can. It has taken 40 odd years but they found a way….I can just see the character “Hedley Lamarr” (“that’s HEDLEY, not Heddy”) from the Mel Brooks classic, “Blazing Saddles” acting out the scene reading from the legal book…”Land…see snatch.” “See??!! It can be done!!” Except it’s Walker, and the Permanent Fund……and the movie is not really a comedy at all but more of a foolish sad tragedy that deserves low ratings….about as low as our state’s credit rating.
So now part of the older and thus very long forgotten history. Afterall, WHY would Walker choose to do this now? Well…the state’s broke. Or at least on a path to be. Short answer is like any other such story…Too little income and WAY too many expenditures. Expenditures whose merits can be debated elsewhere as this is not my focus. This is a story, remember? So Governor Walker did this to try to stem the flow of red ink. But it is not really enough….in spite of mediocre cuts. In spite of making state employees feel as uncomfortable in their jobs as private sector workers. They want more.
Wait. Why the sudden troubles? Well, I’m glad you asked. You see, this here is an oil state. Ain’t nobody gonna muscle in any major new line of business here. We like our oil. And we like it Big. Big Oil. Ok. Really it is usually ok, albeit shortsighted to have all your eggs in one basket because when the price goes down, so too does your income. Of course, even this is not insurmountable….unless of course you spend like a drunken sailor all the time. But truly, the oil industry has provided a major economic boost for many years. Nothing wrong with that in and of itself and I do not begrudge the oil companies for acting in their best interest–that’s their job. I get it. And so do most others. But it can’t last forever.
The problem comes back to some even older history. Our state constitution is worded to include the idea that the natural resources belong to the people of the state and are to be managed to their benefit. (and thus part of the reasoning why the PFD exists) Now…with regards to the oil business, oil companies are REALLY smart. It’s what they do and they do it well. So here’s the state in negotiations with these big operators….and well, the state did not come out as well as some believe they could have. These sorts of things happen and there are a lot of parts to look at in deciding if it is a good deal or not, I won’t even try to pick all of it apart as I am even less qualified than many to do so….but needless to say…the last round of oil tax structure changes was, in my opinion, a really bad deal.
Of course I am referring to SB21. When this set of taxes and tax credit payments was created, Parnell was governor. Now, Parnell used to be an employee of Conoco-Phillips. I have nothing against Conoco-Phillips. But I do have a problem with Parnell. You see, he oversaw the creation of the oil industry tax structure SB21. So what? Sure, that by itself is not the end of the world and could even be a helpful thing. The problem I have is that there were two, CURRENT, on the payroll Conoco employees who were also in the legislature who helped draft that set of rules. Then….at Parnell’s direction they did not recuse themselves but instead participated in the vote on it……and what do ya know?…It passed. And the oil companies loved it. How shocking. I mean, they should…since it appears that they basically wrote it. Now, if you are sensing a smell akin to four day old salmon left outside on a summer’s day, you are beginning to understand my problem with it. And if you understand my problem with it, then you will understand this telephonic exchange which actually took place:
-one ringy-dingy…..two ringy-dingy…. (admit it, you read that in Lilly Tomlin’s voice, didn’t you?)
me: “Hello?”
pollster: “Hi, I’m calling on behalf of blah blah blah…and we’d like to ask you about how you feel Governor Parnell is doing.”
me: “Isn’t he in jail?”
pollster: “No. He’s your governor.”
me: “Well, he should be in jail!”
-click.
I know how to stop those types of calls in a hurry and have fun while doing it!
Fast forward a little and the prices of oil began to fall. A lot. Down to around 40 a barrel if I remember right. At those levels, the tax and credits system was giving pretty pitiful results. Depending upon price point and production levels it was even possible for the state to OWE more in tax credit payments than were collected in royalties! Yikes! Now that is a bad deal. What happened to that part about managing the resources to the people’s benefit? Where’d that go?
So there was a push to repeal SB21 and go back to the prior system or otherwise renegotiate something. This gained enough support to go to a vote of the people.
In the months leading up to this vote, BP sold off some of its North Slope holdings. (BP, in spite of troubles they have had, is full of VERY intelligent people who know their business and how to run it….if they sold off something it was well thought out beforehand.) So, anyone could see that such an action in a climate of lower oil prices would require a reduction in staff. A no-brainer even for a business school dropout. So those who were paying attention knew the layoffs were coming and not just BP but other operators and a bunch of their subcontractors and the various supporting companies, etc. But for a while the pink slips did not come. Some correctly surmised that they were being sat on until after the vote. During this time leading up to the repeal SB21 vote, there were ads in every single possible media format blitzing the population with the message that SB21 must be kept in place because your jobs depend upon it. Busses with the billboards on them, TV and radio ads, newspaper ads, direct mail flyers, and even those goddamned pop-up ads in my internet browser. Everywhere. Even the labor unions were spouting this same message to garner support of their membership. Complicit in the lie. (see, my liberal friends, I didn’t forget about you)
They must have spent a small fortune buying those ads. And it paid off. They got the election to go the way they wanted it to go. And they were happy. So very happy they were. So grateful that they almost convinced some of their sincerity as they shed a tear the following week when the first groups of layoffs were announced. Yep. About a week!
Again, I do not begrudge the companies. They were acting in their own best interest. I do begrudge our leadership for not acting in our best interest and I do begrudge a portion of my fellow citizens for being ignorant enough to go along for the ride. I really shouldn’t though…they’ve clearly forgotten, and so should I.
Now, the state owes money for those production tax credits to the oil companies and naturally they wanna get paid. The state lacks the funds to continue operating as it has been with oil at the prices it currently resides at. So Walker took a cut into the Permanent Fund. And the legislature, who couldn’t budget their way out of a paper sack before suffocating, is poised to take more. And then they will begin to ask Alaskans to pay a tax to make up the shortfall because it won’t be enough. It is never enough.
Again, I may not have a total grasp on all the nuances but I do understand most of the realities and while I can be convinced that at some point we will need to have some sort of tax system, either a sales tax or income tax, I would really like ….no DEMAND…that the issues of the oil taxing be resolved in a manner most beneficial to the people who are the defined owners of the resource and that the legislature get a grasp upon their budgeting priorities BEFORE imposing a tax in addition to the one I have already paid two years in a row!
Lastly and most importantly, YOU can help! I have access to some chicken feathers. I just need someone to loan me one of those heated roofing tar pots and bring it to Juneau. I promise it is for a good cause! 🙂