New Version of HB 247 Will Cost Alaska Hundreds of Millions of Dollars
June 06, 2016
“The people of Alaska will consider this Special Session a failure if we don’t address this unsustainable credit system for the North Slope, which is one of the most expensive components of the system of subsidizing the oil industry in Alaska. The Conference Committee version of the bill does not do that, so I was a no vote. I want a strong and vibrant oil and gas industry in Alaska, but paying out more in tax credits than we receive in production taxes is just a bad business deal for the people we are elected to represent,” said Rep. Tarr. “Additionally, the public was left out of the process because the meeting was noticed late Sunday for an 8:00 a.m. Monday meeting.”
HB 247 was originally put forward by Alaska Governor Bill Walker and his version of the bill would have offset Alaska’s fiscal gap by approximately $500 million. The bill was dramatically changed through the Republican-controlled committee process in the House and Senate to strip away nearly all savings and continue the unsustainable oil industry subsidies. Eventually, a bipartisan group of lawmakers in the House and Senate came together to pass a version of HB 247 that would protect Alaska from being overwhelmed by these tax credits, incentives, and subsidies for the oil industry. However, the Senate Majority promptly gutted that version of the bill in favor of continuing the unsustainable oil tax credit system. The Republican-controlled HB 247 Conference Committee waited until day 15 of the Special Session to meet and in the span of one meeting that lasted just over an hour, they forwarded a new version of HB 247 largely similar to the Senate version of the bill.
“The subsidies and incentives included in this bill makes it impossible for the Alaska Legislature to pass any version of a fiscal plan that is fair to the people of Alaska,” said Alaska Independent Democratic Coalition Leader Rep. Chris Tuck (D-Anchorage). “Today’s vote showed a lack of leadership by the House and Senate Majority members on the Conference Committee because they missed the opportunity to rollback and moderate these oil industry subsidies, which are threatening to overwhelm our budget, our economy, and potentially our future,”
Alaska’s oil tax credit system has become a huge cost driver and the repurchased part of the credit system is now the third largest state expenditure behind education and the Alaska Department of Health and Social Services. In the next fiscal year, the State is expected to pay out an estimated $825 million in refundable tax credits, while the state is forecasted to only take in $54 million in production taxes. FY 2017 will be the third year in a row that production tax revenues are less than credit payments. The provisions included in the current oil and gas tax code, and continued in the version of HB 247 advanced by the Conference Committee, for the State of Alaska to cover a third of oil industry losses increases the state’s fiscal liability to the oil industry to over a billion dollars.
The Conference Committee version of HB 247 was expected to be advanced to the House and Senate Floors later Monday afternoon.
The Alaska House of Representatives tonight approved reforming the State’s oil and gas tax credit system, following months of debate. The House-Senate Conference Committee Report for House Bill 247, which passed 21-19, protects the State at lower oil prices and brings certainty to the State’s outstanding and future tax credit liability.
Edited by Mary Kauffman, SitNews
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