Missing the point.

• Author: Keithley, Bradford G.
• Position: OIL GAS & FISCAL POLICY

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At the time this piece publishes, those seeking signatures on petitions to hold a referendum to overturn SB21, the governor's oil tax reform bill, will be in the final days of their effort. If they succeed, a long campaign of more than a year will follow on the issue, with a vote scheduled for the August 2014 primary ballot.

At least at an early stage, most observers expect the petition drive to succeed in gaining enough signatures to put the issue on the ballot. The issue will not go away, however, even if the backers of the referendum effort fail in those current efforts.

Early indications are that the wisdom of the Administration's bill likely will play a central role in the anticipated Republican primary battle next year between Governor Parnell and challenger Bill Walker, and thereafter in every contested race in the 2014 legislative elections.

Even beyond that, we should anticipate frequent comments on the issue--and occasional, if not regular efforts to repeal or modify it--as legislators and others debate beyond the 2014 elections whether the bill is succeeding in its central purpose to increase North Slope production above levels which otherwise would have resulted under "Alaska's Clear and Equitable Share" (ACES), the state's previous tax approach.

The Arguments

To this point, a central theme of the referendum effort has been that SB21 will have devastating consequences to state government finances, resulting in cuts to education and capital budget spending on which, at least according to one Senator, the Alaska economy "depends." The petition drive's initial sponsor, former Republican legislator Ray Metcalfe, even has gone so far as to suggest that the passage of SB21 ultimately will result in cuts in the Permanent Fund Dividend, the sacred third rail of Alaska politics (similar to social security at the federal level).

Both by implication and explicitly, the proponents of the referendum argue that these cuts will not occur if Alaskans repeal SB21 and retain ACES.

For their part, the legislation's defenders have claimed the reverse, arguing that SB21 somehow will save current state spending levels. Indeed, as discussed further below, Governor Parnell has gone so far as to outline a five-year fiscal plan which depends on such a result--and puts future Alaskans at significant financial risk if the legislation does not achieve that objective.

Unfortunately for Alaskans, both sides are wrong.

At current...