OPINION: Support candidates who back oil tax fairness

As many Alaskans justifiably celebrate receipt of our Permanent Fund dividends in October, it is important to understand the small fortune your family has lost in PFDs over the last decade because we give away our oil for a fraction of its value. And by “lost” I mean: You did not receive the full PFD amount because Alaska did not have sufficient revenue to pay the full amount, costing a family of four almost $60,000. The money your family lost went to some of the largest corporations in the world.

First, let’s understand the full PFD amount. There is an Alaska statute which provides a method to calculate each year’s PFD amount. But the statute cannot mandate that the amount is actually paid; to do so would violate Alaska Constitution Article 9 Section 7: “Dedicated funds prohibition.” Each legislative year, the Legislature must, dependent upon the available monies, set the budget amounts for all categories of government spending, including PFDs. No past legislative statute can control any future year’s spending on any category, including PFD amounts.

Next, let’s better understand the revenue lost by Alaska. A revenue standard from oil for states within the United States and countries around the world is about one-third of oil’s gross value. This one-third — 33% — for the combination of royalty and production revenue is paid when oil is sold.

Alaska only gets 12.5% royalty, as compared to Texas and North Dakota, which both receive a 25% royalty. They also receive production revenue.

Previously, Alaska received in production revenue enough to be close to the combined production and royalty one-third — 33% — standard. In 2013, Alaska greatly reduced its production revenue, making the combined revenue to Alaska closer to 16%-17%. Recall such things as the $8 per barrel credit Alaska must pay to oil companies. Stated differently, Alaska now receives about one-half — 16%-17% — of the standard one-third. This is Alaska’s lost revenue.

Because Alaska lost revenue, it had to dip into savings.

Alaska spent about $18 billion, starting after 2012, from its Statutory Budget Reserve, or, SBR and Constitutional Budget Reserve, or CBR, accounts just to keep its doors open and to pay smaller PFDs.

Alaska spent about $22 billion from 2018 to now directly from the Permanent Fund through the POMV, percent of market value, withdrawal. Again, this was necessary to keep Alaska’s doors open and to pay smaller PFDs. A combined $40 billion in savings were withdrawn.

Promises were made in 2013 by oil revenue cutting advocates: by cutting oil taxes, more oil jobs would be created, more oil would flow through the pipeline and Alaska would have more revenue. An indirect promise: PFD payments would be secure. These are false trickle-down promises that lower taxes make more of everything.

Actual results of 2013 cutters’ promises: fewer oil jobs/workers, lower oil volume and slashed revenue to Alaska. PFDs were no longer paid according to statute and your dividends shrank.

Each person’s cumulative direct PFD loss, as a result of the 2013 oil revenue cut, is now approximately $14,600. The biggest yearly PFD loss, at $2,755, was in 2021. $1,061 was lost in 2016. $1,868 is your PFD loss this year. Each year from 2016 to 2024, you have a loss — an average of $1,622 per year. For a family of four, the loss totals $58,400. Blame your loss on the cuts to oil and on the individual legislators who voted for the cuts and those legislators who continue to support the cuts.

Don’t bring up the Willow project in NPR-A, aka National Petroleum Reserve Alaska, as saving Alaska. First, the Willow project was originally developed under the prior tax structure, called ACES, ”Alaska’s Clear and Equitable Share. It took a long time to bring that project forward, as it was on the west side of the Colville River, on federal land, and no bridge crossed the river. Plus, Alaska will receive no royalty from Willow; the federal government owns NPR-A. NPR-A contributes $0 royalty and little tax revenue. Plus, Alaska pays billions for up-front development costs to NPR-A private developers, a significant loss of current revenue to Alaska. And Alaska receives no ownership interest for the billions of dollars we pay.

Consequences from cutting revenue in 2013: flat-funding education for seven straight years, aggregating deferred maintenance, a government less and less capable of providing basic services, limited capital budgets, schools closing, population losses concentrated in our working ages, a crumbling ferry system, and the list goes on and on.

Save Alaska and yourself; vote for those who will repeal SB 21 — the oil tax bill that brought us the 2013 revenue cuts.

Joe Paskvan is a lifelong Alaskan and retired attorney. He served in the Alaska State Senate from 2008 to 2012, including a year as co-chair of the Senate Resources committee. He lives in Fairbanks.

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