Few issues affect Alaskans more than the health of our economy. During the 42 years my family and I have lived here, we’ve experienced both good and bad economic times. As a two-term Anchorage mayor, as a businessman, as a parent and now as a grandparent, I know and appreciate the benefits of a thriving economy.
Since the beginning of Alaska’s partnership with the oil industry we’ve had long periods of healthy economic times accompanied by prosperity in both the private and public sectors of our economy. Schools have been built around the state, our university system has grown dramatically, and health and human services facilities have been built debt-free, all largely funded by the oil industry/State of Alaska partnership.
In Anchorage alone, we built the Sullivan Arena, the Loussac Library, the Alaska Center for Performing Arts, the Egan Center and the Dena’ina Convention Center — all without any debt. The partnership has worked well for Alaska and has given us an unmatched quality of life. All of this was accomplished with an oil tax rate that was more competitive and far lower than the old tax system, ACES.
In addition, that partnership has allowed us to accumulate over $76 billion in liquid assets including $50 billion in the Permanent Fund. The fund has paid every Alaskan who has lived here since its inception more than $35,000 in dividends — that’s $175,000 for a family of five. And that fund has nothing to do with taxes. It’s funded with 25 percent of Alaska’s fixed royalty. If production increases, our royalty share goes up. If production goes down, our royalty share into the Permanent Fund goes down.
But we’ve also had shorter periods of unhealthy economic times accompanied by hardship for tens of thousands of Alaskans. In the mid-80s when the price of oil dropped from $30 to $9 a barrel, the state, the oil industry and our citizens all suffered. Thousands of our neighbors lost their homes, businesses went bankrupt, banks closed and left the state and citizens left our state. Anchorage lost 13 percent of its population and 25 percent of its assessed value. The Interior, the Mat-Su Valley, the Kenai and the rest of Alaska suffered equally. But the State of Alaska/oil Industry partnership survived, and in the late 80’s we began a long period of sustained, gradual growth.
The continuation of our economic growth is now threatened. We’re facing a $2 billion deficit. This deficit is the direct result of lower oil prices and decreased production. The claim that this deficit is a result of the new tax structure is a myth. The deficit would be virtually the same under either the old tax structure (ACES) or the new tax structure now in place.
We can’t do anything about oil prices but we can do something about production. We can discourage it or encourage it. ACES discouraged production. We’ve watched our oil partners’ investments and oil service companies’ employees move to Texas, California, North Dakota, and other states who welcome their investment dollars and our employees. The tax structure now in place, created by Senate Bill 21, encourages production. Our North Slope partners have already committed to $4.5 billion in new projects since Senate Bill 21 was passed and signed by the governor.
Now comes another very important decision point for Alaskans — a decision that will determine Alaska’s future for years to come. In August we will vote on a ballot issue that asks whether we want to encourage our healthy partnership that provides 90 percent of our state government’s funding or discourage it. Do we want to keep the new tax passed by the Legislature last year which has already resulted in new investment and new jobs, or do we want to return to the failed tax of the previous administration that contained some of the highest taxes in the world and it did nothing to encourage production of a single, new drop of oil on the North Slope?
If we vote to repeal our current tax and return to the old tax, not only will our oil partner’s investments go to other states and our production continue its decline, but it would also be likely to end plans for a large-diameter natural gas pipeline and LNG plant to get North Slope natural gas to Alaska communities along a pipeline route and to profitable markets in Asia.
In August, I’m voting to keep our economy and our permanent fund healthy. I’m voting against repealing our tax structure. I’m voting “no” on Ballot Measure 1.
Rick Mystrom is a former two-term mayor of Anchorage, a former member of the Anchorage Assembly, and a successful businessman.