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Time for fiscal fix now, not later

Posted: Sunday, April 18, 2004

Currently, Alaska crude oil prices exceed $35 per barrel, which keeps declining state oil revenues relatively high.

If Alaska had another source of potentially large revenues new oil or new natural gas, for example now is the time to initiate action to market those new resources. This is because Alaska's budget gap, between what is needed for essential operations and services and its revenues from all sources, is probably as small as the gap will be in the next several years. A rapid fall in the current highly inflated price of Alaska oil could result in large additional state budget cuts, coupled with new and increased taxes and fees.

Providing adequate essential operations and services are part of our state government's charter. While many readers may argue what "adequate" means, it does not mean returning to an 1840 or even a 1950 economy or style of living.

Alaska is now one of the United States of America and all of Alaska's citizens should understand the need for unity. All of us should support adequate public education whether we still have children in schools or universities. All should expect adequate and equal protection under the law to avoid anarchy and chaos in our society. All should support health and social services, even though all do not suffer from domestic unrest, senility, depression, drug addiction or other afflictions.

We all expect an adequate and a reasonably maintained transportation infrastructure. And, if a public disaster occurs earthquake, flood, forest fire, volcano eruption or oil spill individually we do not expect to fund or perform the necessary corrective measures. That is part of "governance" by our state and funded by state and-or federal money.

Nobody should take these rights and privileges for granted. There is no "free lunch," but Alaska comes about as close to it as you will get anywhere in the world!

To assure the present and future budget gap is addressed in an orderly manner, the state needs more than the annual ad hoc fiscal "planning" of the past. With the minimal but growing gap between income and expenses, the state's task at hand should be how to realize significant new revenues in a relatively short period of time (three to five years), without depleting the state's bank account.

The known reserves of North Slope natural gas are huge tens of trillions of cubic feet! Many commercially viable natural gas fields have less than 5 trillion cubic feet. A serious problem seems to be getting the necessary parties (state administration, Legislature, oil and gas and construction companies) to act quickly.

For those who want to avoid more taxes and fewer state services, and who want a long term permanent fund and dividend program, you should write the governor and your legislators.

The only near term hope for that avoidance and dividend protection over the long term is new revenues from North Slope natural gas. The technology and expertise to market these reserves exist now. The only missing ingredient seems to be the will for the responsible parties to act soon.

In the meantime, even with high oil prices, the annual budget gap will grow and the burden of new state revenues will be increasingly on working Alaskans.

In addition, Alaska will have fewer dollars available to develop other resources for more revenues. All of our elected officials should try to find an answer to this fiscal problem by more than just raising taxes, inventing new fees or using the permanent fund and dividend program earnings. They should set their special interests aside and resolve this issue in a unified, bipartisan manner, and in as short a time as possible. The message conveyed to them by all voters should be: "If you are not part of the fiscal solution, then you are part of our problem." Being an election year, voters might even be able to get their attention.

Richard Hahn is a retired mechanical-nuclear, licensed professional engineer, with more than 37 years of large, complex project management experience, both in the private sector and with the U.S. government. He was a charter member of the U.S. Senior Executive Service, from its inception under President Jimmy Carter in 1979 until his retirement in 1997, when he moved to Alaska. He lives in Soldotna.



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