Monday, December 14, 2009

Palin's (and Parnell's) Surplus

Some good news for Alaskans. Thanks to ACES (Alaska's Clear and Equitable Share, a bill Palin championed) the state could be looking at a $500 million dollar surplus next year:

Alaska would have surpluses at the end of the current and 2011 fiscal years under budget proposals unveiled Monday by Gov. Sean Parnell, thanks largely to high oil prices and an oil-tax system that has drawn complaints from much of the industry.

Under the Republican governor's $10.5 billion spending plan for fiscal 2011, the state would wind up with a surplus of nearly $500 million. Of that, Parnell is proposing to put $400 million into a new college scholarship program. He is also proposing healthy increases in state capital spending, which he called "an investment to build our economy and our future....."

Alaska relies on oil royalties, taxes and fees for nearly 90 percent of its general government revenues.

For the current fiscal year, which ends June 30, Parnell expects a surplus of $384 million -- a brighter picture than was visible in the spring, when the legislature drew up the spending plan amid highly volatile oil prices and when budget deficits were expected.

"That surplus means we will not have to draw on our savings," he said in his speech. "But it does not mean we should wildly spend more money...."

Parnell defended the state's oil tax system, called Alaska's Clear and Equitable Share, or ACES.

The system, passed by the legislature in 2007, was a hallmark accomplishment of his predecessor, Gov. Sarah Palin. It sharply increased marginal tax rates when oil prices are high, while offering investment credits for exploration and development.

Although companies have complained publicly, Parnell told reporters at a news conference, he has not yet seen evidence that the tax system should be changed.

"If they want changes, I want them to justify it, because I'm not about taking money out of Alaska coffers so it can go to investments in Nigeria. I want jobs for Alaskans," he said.

He said he is unconvinced that delays or cutbacks in Alaska oil activity are a response to the state's oil tax.

"Show me the data, because, bottom line is, there's a lot of work that's not happening around the world due to global recession. There's a lot of work not happening in Alaska because of federal regulatory delays," he said.

In meetings with industry officials to date, Parnell said, four or five companies have reported to him that ACES is working the way it should. Representatives from two or three independent companies -- including Renaissance Alaska LLC -- have thanked him for the new tax system because they are in line for generous exploration credits, he said.

Representatives from two companies -- ConocoPhillips and Armstrong Resources LLC -- have told him they do want changes to the tax law, he said.


I personally think they probably will have to put like a ten year tax rate or cap guarantee or something into the mix before the pipeline will get built. That's reasonable; Palin has said as much. As a matter of fact, the Palin adminstration originally put a ten year predicatability thing into AGIA ( I think it was AGIA) but the legislature took it out over concerns of constitutionality (which was dumb, in my opinion).

But those negotations will only be fair to all involved if the state maintains its position of strength. The minute they start to prostrate themselves before the oil companies again, it's all over. They'll smell the weakness and zero in on it like blood in the water. I hope Parnell inherited some of Palin's backbone.

Parnell may not rival Palin for star power, but so far, he seems to be doing just fine:)

Sean Parnell and his family.

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