Alaska Session Preview: What to do about a $2 billion revenue hole


Gov. Sean Parnell (R), left, will be working with a Republican-led state legislature on what to do about a revenue forecast that’s $2 billion smaller than the year before. (AP Photo/Mark Thiessen)

A nearly $2 billion revenue hole is likely to be a key focus for Alaska’s 60 state lawmakers as they reconvene Tuesday.

“The number one topic of the session will be the budget deficit. It will dominate the Finance committees and every other committee. On every bill, the question will be, can we afford it?” Anchorage Democrat and incoming Senate Minority Leader Hollis French told the Alaska Journal of Commerce.

The $2 billion dip in revenue is the result of new oil tax cuts as well as dropping prices and production. The state is projected to bring in $4.3 billion in fiscal 2014, compared to $6.3 billion during the last fiscal year. Legislators are likely to fight over whether — and how much — spending needs to be cut in light of the revenue projections. Gov. Sean Parnell (R) has already issued a stripped-down 2015 fiscal budget.

Voters in August will have a chance to repeal the cut passed last year. But repealing the cut could jeopardize the construction of a possible new gas line, the top House Republican told the Associated Press.

House Majority Leader Lance Pruitt, R-Anchorage, said he doesn’t believe the state will get a gas line if it reverts to the old tax system, which would happen if the referendum were successful. Oil and gas companies pursuing the liquefied natural gas pipeline project — BP, ConocoPhillips and ExxonMobil Corp. — all lobbied for the tax change. Pruitt said he wants people to recognize “we don’t get gas unless we have oil.”

For the companies, the money is in oil, and without a “positive” oil tax structure, the likelihood for them making significant investments in gas is limited, he said. Pruitt said he considers the Legislature taking up tax and royalty terms related to the gas line project something they must do this session.

Democrats fear that any vote related to the gas line will be rushed in order for members to claim they voted for it in time for elections later in the year.

In August, voters will likely also weigh in on two other issues: raising the state minimum wage and legalizing marijuana.

Niraj Chokshi reports for GovBeat, The Post's state and local policy blog.
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