Amid big cuts, Senate Democrats say governor's plan leaves oil industry 'harmless'

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JUNEAU, Alaska (KTUU) — Amid widespread cuts proposed to state services, the governor is proposing to spend tens of millions of dollars on refundable oil and gas credits to the statutory formula in FY2020. He is also asking the Legislature to pay back an additional $100 million to the impacted members of the oil and gas industry that were not paid back by the previous Legislature.

Two Senate Democrats questioned the plan in light of a more than billion dollar proposed reduction in state spending.

During a Senate Finance Committee hearing Monday, Sen. Donny Olson, D-Golovin, said that the oil industry would “probably embrace this budget, because they are left harmless.”

Sen. Bill Wielechowski, D-Anchorage, told Channel 2 that the administration was “using any possible means to shovel money to private industry.”

The Office of Management and Budget’s policy director Michael Barnhill told a Senate Finance Committee hearing on Tuesday that the state was still required to pay $800 million in refundable credits.

The administration is proposing to pay $154 million in FY2020 on top of an additional $100 million that was not paid under the statutory formula for 2019.

Jeremy Price, a deputy chief of staff for Gov. Dunleavy, said the previous administration had “paid next to nothing” in refundable credits and paying the credits back was an important component for “stability in the private sector.”

Oil and gas industry representatives echoed that sentiment. Kara Moriarty, the executive director of the Alaska Oil and Gas Association, said in a phone interview that the minimum payments would continue financing companies for work that had already been paid for.

She said the industry would have preferred for the Legislature to pay back the credits through the bonding program passed in House Bill 331.

The bill would allow the state to issue up to $1 billion in unsecured bonds to pay down the existing credits. A lawsuit, dismissed in January by the Alaska Superior Court, is holding up the bonding process as an appeal to the Alaska Supreme Court is expected.

Wielechowski asked why the administration was proposing to pay back the oil and gas tax credits while also calling for a statute to be repealed to repay school debt reimbursement bonds.

For the administration, it came down to making tough choices in a difficult fiscal environment.

“In a perfect world, we would have enough revenue to go around to pay all obligations and any wish list of items that Alaskans wanted,” Price said.

Larry Persily, the former U.S. Federal Pipeline Coordinator and a current industry analyst says he was a little bit “surprised politically” at Dunleavy’s decision to pay an increased amount of refundable tax credits, “even if I agree that we owe it.”