North Slope oil production has been in steady decline since 1988. The trans-Alaska oil pipeline is more than three-quarters empty. It’s no one’s fault, that’s just how oil reservoirs behave. They are not some kind of eternal spring that replenishes itself.
Even as companies work hard to find new oil fields and increase production from the older reservoirs, it’s not enough to permanently reverse the inevitable.
And with that decline, so goes state revenues.
Even today, in its diminished capacity, oil remains the single largest source of tax revenue to the state treasury to pay for public services. That’s by Alaskans’ own doing, as years of elected officials — spurred on by voters — have shied away from new taxes as if they were the plague. Which they are in a way, a plague of losing reelection.
Alaskans have not paid a personal income tax since 1979 and enjoy the lowest state gasoline tax in the nation. No one wins an election by talking about taxes, unless they are promising not to impose taxes, which too many do too much of the time.
Shortsighted and unrealistic, but politically popular.
Meanwhile, Alaska’s population has grown by almost 240,000 people since oil started flowing from Prudhoe Bay in 1977. People who have kids that go to school, who drive on roads and rely on state-maintained airports, who depend on fish and game management, ride the state ferries, call the police and troopers, and sometimes spend time in prison.
Yet unless those additional residents produce a barrel of oil, they are a net loser to the state treasury. It costs money to educate their children and maintain the roads they drive on, but they pay next to nothing toward the expenses.
All the non-oil taxes collected by the state this year — including taxes on motor fuels, cigarettes, alcohol, insurance, non-oil corporations and everything else — amount to less than 8% of total state general fund revenues. Oil dollars, earnings on the state’s oil-wealth savings account and federal money pay the rest.
We’re dependent on others to pay our bills.
No wonder the state is in a fiscal hole that is only getting deeper.
The Legislature is facing the painful checkbook reality that there is not enough money coming into the state treasury to pay for services, fund a long-needed increase in state aid to local schools and pay out a $1,000 Permanent Fund dividend this year unless there are new taxes — or the state once again draws on its remaining savings to cover the bills.
Drawing on savings does nothing but extend the end date on the problem a couple of years.
Alaska needs a permanent foundation for its fiscal house. We need a governor and legislators who will do real work, not just wallpaper over the problem.
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