Resource Development Council

A Message From The President

John Shively


I have recently finished my first trip to Juneau for 2007. I did try for a second trip to attend the RDC dinner for freshman legislators, but the weather gods were not with me.

I sense the mood in the capital is both positive and expectant. It is positive because there is a new legislature and new administration, each with high hopes for doing great things for Alaskans. There seems to be a spirit of cooperation between the two branches of government, and the clearly stated desire of Governor Palin to work with the legislature has certainly improved the atmosphere in the capitol building.

The positive attitude is also helped by the surplus we have, partially due to oil prices and partially due to the new production tax the legislature adopted last summer.

The mood is expectant because there are a number of challenging issues facing the legislature. At the top of everyone’s list is the gasline. The governor has announced that she will submit a piece of legislation called the Alaska Gasline Inducement Act that will provide a framework for new proposals from those interested in constructing and operating this multi-billion dollar project. There are many interested parties waiting to see what the governor has in mind.

However, the gasline is only the beginning of a relatively long list of important issues facing the legislature this session. The huge estimated deficit in the public retirement programs affects not only our state government, but every municipal government and school district in the state. I have to admit I have yet to be convinced the problem is as large as some have projected, but it is an issue that will need to be addressed and the costs will be significant.

The governor has indicated she wants to re-establish the longevity bonus and municipal revenue sharing programs and “fully fund” education. These programs have considerable public and political support, but also require substantial funding.

At the same time the governor is asking her commissioners and the legislature to find $150 million in reductions from the operating budget, a difficult task at best. I do have one recommendation in this regard. You have heard this refrain from me before, but the government cannot make dynamic reductions in the operating budget unless the legislature and the administration are willing to repeal some of the laws that drive the cost of government and show some restraint with new laws the legislature adopts each year.

Most new laws drive new costs. Reducing the number of news laws and getting rid of some of the old ones is the only responsible way to reduce the size of government.

All discussion of budget issues leads inevitably to a discussion of the state’s fiscal regime. The governor has suggested the legislature use $1.3 billion of the surplus to repay part of the debt owed to the Constitutional Budget Reserve Fund as a result of previous withdrawals from that savings account. Saving some of this year’s surplus certainly makes sense, given the continued volatility of oil prices and the continuing decline in North Slope production.

However, I am disappointed that there seems to be little discussion of an overall fiscal plan. I thought we might see some discussion of changing the distribution system from the Permanent Fund to the percent of market value approach (POMV) favored by the fund’s trustees and most of us in the business community. However, I have heard no discussion of the POMV, a first logical step in giving the state’s future revenue structure a more stable base. I am hopeful that situation will change before the session ends.

There are many other issues the legislature will be considering. Revised ethics legislation seems to be on the top of most everyone’s list, including the governor’s, and the issue should result in some very spirited debate.

I would be remiss if I didn’t take a paragraph to be somewhat parochial and suggest that the cruise industry is hoping to work with the new administration and the legislature to make some changes in the cruise ship ballot initiative passed by the voters last August. The framers of our constitution provided that an initiative cannot be repealed for two years, but granted the legislature authority to fix problems, if they saw fit to do so. The industry believes that a few surgical changes could make the initiative more functional and help avoid the kind of contentious litigation that could take place if the new law is left as is.

There will be hundreds of bills introduced and many of them will get at least one hearing. As usual, the legislature will have a full plate and more to eat off of. With issues such as the gasline and the significant fiscal issues on that platter, what they choose to digest may well determine whether we have economic feast or famine in our future.