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Rep. Les Gara during constituent meetingA Note from Rep. Les Gara
Good & Less Good Budget News; Que$tions Arising on Guvís Oil Tax Rollback Bill; Anchorage Public Meetings Next Two Saturdays

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Dear Neighbors

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        Things are happening at a furious pace here.  Actually, I just wanted to write that because I think “furious pace” sounds impressive.  Please picture me with rolled up sleeves moving around furiously, even though I’d feel weird about doing that.  I’ve never been big about rolling up work shirt sleeves.

        The truth is a lot is happening that you should know about.  Some of it might make you lose sleep.  Believe me – lots of things around here can put you to sleep.  So I guess losing sleep means things are at least interesting. 

        Interesting… like the Governor’s effort to give away $2 billion of the state’s money to oil companies, with no promise that they’ll produce a single drop of additional oil for that fat dose of corporate welfare.  Interesting… like the near-guaranteed result that Alaska will burn through its $12 billion in carefully saved surpluses before today’s newborns reach first grade under the Governor’s plan.  Interesting…if you think the Governor’s point person on this bill should be giving better answers than “I’ll have to get back to you on that.”  Interesting… if you think catching the Governor’s folks at overstatements is well, interesting.

        So – here’s what I think you may want to know about the budget, two upcoming public hearings, and the oil tax testimony we’ve been hearing. Oh, and what we haven’t heard, like the page of a report the Governor’s Office skipped, showing roughly 75% of surveyed companies either support Alaska’s oil production tax, or say it’s not a deterrent to making investments in Alaska – they skipped that one when making an argument that companies don’t want to invest here, unless we change our law.  Fiction sells a bill better than fact sometimes.

House Passes Budget With Crossed Fingers that the Senate Makes Things Better

        The budget’s always a difficult document to vote on.  I’ve voted against many as poorly prioritized. But I supported this year’s operating budget for a few reasons – despite some flaws I’ve been vocal about and tried to fix.   It’s hard to find a budget 40 people can agree on.  We came close, and Representative Bill Thomas was fair in taking input from myself and many other members – even if he didn’t take it all.

        The Good.  We cut $16 million from the Governor’s proposed budget.  I and others worked hard to get $300,000 added for Head Start funding; $600,000 for early education efforts (maintaining the same amount we worked to get in the budget last year); $225,000 for substance abuse funding for treatable families in the child protection system (so we can get their children back to them if they succeed at treatment, and not place them on six and 12 month-long treatment waiting lists that lengthen the time children are left in foster care); and $250,000 for “therapeutic courts” that keep non-violent offenders out of jail as long as they report weekly to the court to prove they are in substance abuse and job/education programs.

        The Bad.  $2 million was taken away from the state’s Pre-Kindergarten program, which was already nearly worst in the nation. (Over 40 states have statewide voluntary Pre-K; Alaska had a $2 million pilot program that served roughly 300 children).  $2 million was taken from a successful teacher mentorship program that increased the quality of Alaska’s teachers.  We tried to get $250,000 for the Alaska Center for Energy and Power at UAF, which has the potential to make Alaska a leader in renewable energy and energy efficiency – and to leverage significant funds in federal and private grants.  It’s a job creation agency, and in my view, can diversify and improve the Alaska economy.  And we tried to fund high-demand university degree programs at the level the Board of Regents requested, something that would produce Alaska jobs for Alaska students.

        So – some success.  Some failure.  Some of what I wanted.  Some of what I didn’t want to lose.  I do believe the budget will be improved on the Senate side and have had very productive conversations with Senators about improvements I believe they want to make.  In all, the budget included $6.8 billion in state funds, and $2.1 billion in federal funds.

Saturday Public Meetings: Make Us Listen To You!

        Anchorage legislators will be in town the next two Saturdays to take public testimony at the Loussac Library in the Assembly Chambers. Please come and share your thoughts! I will be there this Saturday, but likely in Juneau next Saturday for House Finance Committee oil tax hearings.

        Date: Saturday, March 19, 2011 Time: 10a – 12p
        Date: Saturday, March 26, 2011 Time: 10a – 1p

Worst Oil Tax Negotiation in State History?  Or, Governor, Can They Spare a Drop of Oil?

        Let’s not fool anyone.  Credible rumors (we’ll work on substantiating them) are that the Governor’s Office sat down with oil company representatives to craft his oil legislation.  Not members of the public outside the industry.  Just the companies that will enjoy the $2 billion the bill proposes to shave off the share Alaskans get for their oil revenue every year.  Which leads you to ask, who’s running this state?  These are the same companies that, when asked, have refused to commit to produce a single new field, or single extra drop of oil, if we give them this huge dose of corporate welfare.

        Two weeks ago the Commissioner of Revenue surprisingly testified that 44% of companies found Alaska to be a bad place to do oil business.  His reading of the “Fraser Report”, which he claimed to glean this information from, was at best, mistaken.  Here’s what the report actually says.  Of the scores of large oil companies surveyed on Alaska’s production tax (the tax Governor Parnell wants to change) . . . . .  Roughly 75% find that our production tax, which includes substantial investment credits, either is a favorable tax, or doesn’t deter investment.

        Today we received a presentation from Roger Marks, who previously testified against the current tax law, and has been hired to do the same again.  Here’s the kind of stuff we got from him:  a chart questionably showing Alaska had the highest oil tax rates of roughly a half dozen jurisdictions.  Wow!  Well, wow until I asked him if he left off the scores of jurisdictions that have higher taxes than Alaska from the chart.  He did, in fact, leave those off the chart.  Nor did he volunteer the obvious.  We don’t nationalize oilfields and kill workers here.  Last month Conoco had to pull its last employees out of Libya, which had a higher tax than Alaska, and is, um, dangerous.  Two years ago Conoco had to write off their Venezuela facilities when they were nationalized.  It seems he could have mentioned, without being confronted, that this is a favorable aspect of Alaska’s investment climate.  Alaska’s safety is an incentive for oil companies. He sort of conceded it when asked.

        This point is nicely summarized in a press release from a Spanish company named Repsol, which has promised nearly $800 million in upcoming Alaska exploration investment.  In that press release they called Alaska’s North Slope “an especially promising area for Repsol because it is oil rich and carries low exploratory risk.”  After this press release came out “unidentified” sources claimed their commitment was conditioned on passage of the Governor’s oil bill.  Well, nothing surprises me around here.  But these are the facts:  their press release was carefully worded and said nothing of the sort.  The press release, likely written by sophisticated folks, said it had committed to invest in Alaska.  Plain and simple.  I have no doubt that any smart oil executive will try to get a tax break when they can.  Maybe Repsol’s story will change – in an effort to get the best deal possible for their shareholders.  But to date no Repsol representative has conditioned their promised investment on passage of the Governor’s bill.  And if they change their tune, it will smack of smart politics, not reality.

        Finally, a few thoughts on what we can do to spur investment on the North Slope.  Oil, gas and water separation (processing) facilities are expensive.  It’s why small fields usually cannot be developed on the North Slope – the income from a small field can’t justify the cost of a major processing facility. 

        I support bills by Reps. David Guttenberg and Berta Gardner to try to increase the chances the major oil companies will grant access to new companies to their existing facilities, or let new companies pay to expand them.  I would consider changing our tax credit system to allow more significant credits to help build production facilities like these; or to pay for needed exploration wells.  But I won’t vote to give away $2 billion, and empty the state’s savings accounts, on a lark.  On no promise from industry that they will substantially expand their production.  On a naïve hope and a prayer that raw corporate welfare will work.

        The oil bill will be in the House Finance Committee and Senate Resources Committee for another week or two, or more.  Stay tuned

        Finally, on Monday the House Finance Committee will be in Anchorage to hold hearings with ANCSA corporations.  I don’t know which ones will be invited, or if those that don’t support this legislation will be invited. I hope voices from both sides of the debate will be allowed to testify. That will occur at the Legislative Information Office, 716 W 4th Ave, from 9a – 12n and 1p – 5p.  We’ll see.  I was disappointed to be told that public testimony will not be allowed at this hearing, something I disagree with. Public Testimony will be allowed at the end of the Finance Committee’s hearings in a few weeks – so we’ll keep you up-to-date when it is allowed.

        As always, let me know if our office can help on anything.

        And, as a final happy note, so far we have matched roughly 35 laptops with foster youth through our and Facing Foster Care in Alaska’s efforts on this front.

Best Regards,

[signed] Les Gara


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