Rep. Les Gara

GUEST COMMENTARY: Pay now or pay later when it comes to education

Public education matters because a student’s opportunity to achieve matters. The Legislature has an opportunity to end years of continuing cuts to teachers, guidance and career counsellors, teacher training, end even courses. We’ve lost over 500 teachers, counsellors and education support staff in recent years. Bigger class sizes, demoralized teachers, and rolled back curriculum don’t increase academic achievement. Education should be more than crowd control. Adjusted for inflation, classroom funding for our public schools has fallen by $90 million since the 2014 legislative session. As a state we can do better than give students less than they need to reach their goals and dreams. We can plead austerity as a state, and the inability to come together to fix our deficit has been frustrating to me. But it is wrong to tell a parent of a 7-year-old that they can come back to second grade later, when the adults who represent them get their act together. We can do better than tell a student in Cordova that basic chemistry classes can’t be offered every year. That’s why I and Rep. Harriet Drummond have filed House Bill 339, to reverse the trend of disappearing school support. The bill has growing support in the Legislature, over a dozen co-sponsors, and would provide a needed, modest boost of $100 per student in school funding. That basically keeps schools even with the rate of inflation. As costs of supplies and health insurance and medical costs go up with inflation, flat or reduced school funding causes damage to our ability to deliver the education children and youth deserve. We can start to reverse these cuts now, or we can pay later. We’ll pay for more unemployment, lower graduation rates, fewer students who graduate ready for college or vocational education, and a weaker workforce. We’ll pay with more people on Medicaid, housing assistance and other expensive public benefits. I’d rather pay now to educate students, so they can stand proudly on their own, and so they can reach their dreams. Here are a few examples of what’s happening to public schools around the state. On the Kenai Peninsula many schools don’t have “frills” like music classes. A quality education includes courses and activities that excite and inspire students. In some Bristol Bay schools, grades are now being combined into single classrooms to save money. In the Lake Iliamna region, school has been cut by 20 days to avoid laying off teachers. In Kodiak the district lost 18 education positions last year, and they are on pace to lose 16 more next year with flat funding that again and again falls behind inflation. In Nome schools have lost 13 positions since 2015. Class sizes are going up from already excessive levels, from Juneau to Anchorage to Fairbanks. If a school doesn’t cut teachers, they cut courses, counselors, school days and teacher training. Right now, many students in rural Alaska take online courses that involve no teacher interaction. Taking courses with bland written materials students can read on a computer, without a teacher available for questions, is reading and not effective student learning. We can do better. I also think we should fund education “early”, so schools don’t have to warn teachers they might be laid off because of budget uncertainty. Our bipartisan House Majority coalition passed an early funding bill months ago, and our Republican colleagues on the Senate side seem willing to do the same. But early funding that doesn’t keep up with inflation will lead to another year of more layoffs and staff and curriculum cuts. I get the Legislature hasn’t fixed four years of the worst budget deficits in state history — and won’t use this column to point fingers at my colleagues on either side of the aisle. Soundbites, and big philosophical differences about whether oil companies and the wealthiest Alaskans are chipping in a fair share to help close the deficit aside, the biggest cause of our massive recent deficits has been a massive drop in oil prices. In a state very dependent on revenue from the oil we own in common, a drop from $120 per barrel oil (prices that brought in strong revenue), to prices of less than half that, cut more than half the revenue the state uses for basic services like schools, public safety, child protection, help for seniors, and safe roads. Deficits of $2.3 billion, or $2.7 billion if we ever adopt a needed construction project budget again to put people to work and maintain our roads, schools, energy projects and infrastructure, are too big for most to comprehend. And that’s after Republicans, Democrats and Independents have already cut $3.5 billion, or 40%, from the budget since 2013. It’s clear budget cuts alone aren’t enough to solve the deficit. And as we cut into our schools, our classrooms, our university and our ability to prepare students for success, we are just leaving a legacy of lost opportunity. I’ll keep trying to find compromise to solve the deficit, even though some say that can’t happen in an election year. But the answer to adult problems isn’t to create problems for children and youth who deserve a chance in this world. Rep. Les Gara is a Democratic legislator from Anchorage and is vice chair of the House Finance Committee.

GUEST COMMENTARY: Senate offer on oil tax credits doesn't fix deficit

We have to end unaffordable oil company cash subsidies that are estimated to cost the state $1.5 billion over the next ten years. Some legislative leaders say they will only end those unaffordable subsidies during this Special Session if we “replace” them with new subsidies that cost Alaskans almost as much. Through press statements, they’ve offered to replace $1.5 billion in cash payments by the state with a $1.45 billion reduction the state receives in oil company tax payments. They also want a separate $10 million per year reduction in already meager oil company production tax payments to Alaskans. There’s a path to meaningful compromise and closing our deficit. This isn’t it. Progress in politics requires legislators to put down their ideological swords. And it means special interests, including our partners in the oil industry, need to truly chip in so a deficit solution is fair to all, and not just the loudest, wealthiest interests. Politics, when it works, requires ideological purists to put on their adult clothes. Most, but often not all, legislators recognize that. Last week our Republican-led Senate told the press they will only end unaffordable oil company subsidies if we adopt almost equally unaffordable new oil company subsidies in their place. That might be great for our oil industry partners, but it’s not great for you. It doesn’t materially reduce a crippling deficit that’s harming our economy, nearly drained our savings, and that’s making Alaskans feel insecure in their jobs. Our House Majority Coalition of Independents, Democrats and Republicans came together this year out of a deep concern that prior legislatures have let annual $2.5 billion to $3 billion deficits fester, while draining our once healthy savings. The reality our House Coalition recognizes, and has to keep recognizing, is that the public also elected a Republican-led Senate. Our House Coalition passed a modest 25% tax on oil company profits, so we can receive fair revenue. We ended unaffordable subsidies. The House bill would reduce Alaska’s deficit by roughly $1.5 billion to $2 billion over the next ten years. It intentionally recognizes that a fair deficit fix can’t just rest on the backs of those with little privilege, little wealth, and no lobbyists. This House Coalition plan didn’t meet with Senate approval, and we all have to keep working to find common ground. But common ground isn’t leaving the deficit unsolved, and our economy in peril. Solving our budget deficit is now a math problem. A solution doesn’t leave lots of room for people to stand on ideological purity. Fair oil reform has to be part of a needed deficit reduction plan, in part because there is no source of revenue, on its own, that can solve a $2.5 billion to $3 billion deficit in a state that has largely run out of savings. We cannot afford a current oil tax system that taxes most oil fields in Alaska at either a 0% or meager 4% oil production tax. Currently the oil tax rate in North Dakota is 250% higher than Alaska’s, and Conoco calls North Dakota a good place to do business. Additionally, North Dakota oil royalty payments are about double Alaska’s oil royalties. So let’s drop the soundbite that Alaska, with its vast oil resources, is somehow a bad place to do business. Statesmen and stateswomen can bridge differences. Both sides agree $1.5 billion in oil company cash subsidies over the next ten years are unaffordable. Let’s focus on that area of agreement. The House has offered a compromise to eliminate the $1.5 billion in poorly crafted, unaffordable oil company cash subsidies. Legislators can join and do what we can agree upon now. Let’s agree to work this summer and fall, with oil consultants we’ve recently hired, to fix the rest of our oil tax system so that a full solution can be passed when session starts in January. And let’s fully fix our deficit. I want an Alaska people believe in, where people want to raise their families. Haggling over ways to NOT solve our deficit is going to drive away the Alaskans we need to teach our children, care for our seniors and build a better state.   Rep. Les Gara is an Anchorage Democrat and Vice Chair of the House Finance Committee

GUEST COMMENTARY: An Alaska we can all believe in

The debate in Juneau is about what kind of state we want to live in. I want an Alaska we can all believe in, not one where too many of our neighbors are talking about leaving. I think the Alaska House Majority Coalition and the GOP-led Senate, despite divergent views, can find common ground. Your views matter. I believe legislators will listen if you speak up. Here’s where we are today. On one side, the GOP-led Senate is standing by major additional cuts to public education and our university. These cuts also hit Alaska’s abused and neglected children, and seniors and Alaskans born with disabilities who battle every day for a life with dignity. Alaska is already facing a dwindling ability to battle and prevent crime with inadequate troopers, prosecutors, and police. That’s not the Alaska I believe in. Then there’s the economy, the recession, and the job losses we face. Our neighbors are talking about leaving Alaska. They see little commitment to the schools where they send their children, or to supporting the economy their businesses rely on. According to the University of Alaska’s Institute of Social and Economic Research, cuts beyond the $3.4 billion in budget cuts since 2013 will kill more private and public sector jobs, extending a recession we should fix instead. Studies show that each extra $100 million in budget cuts, by circulating less money to our businesses, the housing market, and the economy, will cost us another 1,000 – 1,500 jobs lost, mostly from the private sector. That’s on top of the 6,500 jobs Alaska lost last year. Let’s get one red herring off the table. We all believe in cutting waste. But since 2013 the Alaska Legislature has cut over 40 percent from the state’s budget. We have the second smallest per capita budget in the past 42 years, when adjusted for inflation. The Senate effectively conceded there’s not a ton more waste to cut to fill the $2.6 billion budget deficit, when they aimed the bulk of their proposed budget cuts at public schools and other Alaska priorities. Many legislators of all parties privately admit we’ve cut too far. This makes the Senate proposal more perplexing. Our Senate colleagues have passed $65 million in public education cuts, which will likely lead to the loss of 400 – 600 more teachers, counselors, and support staff statewide at a time when our schools have already been losing counselors and student support. The Senate has proposed over $5 million in cuts to the Pioneer Homes, which they now concede was a mistake. They have proposed $39 million in cuts to the department that protects our seniors, disabled Alaskans, innocent children who’ve been victimized by child abuse and neglect, and many others living on the edge. The Department of Health and Social Services, which has already been cut by roughly $200 million since 2015, cannot absorb those additional cuts, beyond the $30 million in careful efficiency cuts the governor and the Alaska House Majority Coalition found, without hurting our most vulnerable neighbors. Our only state mental health institution is already so underfunded that people are shorted on treatment for mental illness and to prevent suicides. Thirty percent of released patients are readmitted within six months. The Alaska House Majority Coalition found another $81 million in cuts this year, without harming these Alaskans. There is room for consensus. The Senate says they need make these cuts because we have a $2.6 billion budget hole. But they only partially fill that hole, with a plan that cuts the PFD to $1,000. We shouldn’t do only part of the job or put it on the backs of the poorest and most vulnerable Alaskans. We can find a fair resolution. The Alaska House Majority Coalition has said part of the plan must be a fair share for our oil and an end to unaffordable oil company subsidies. We propose an increase from last year’s dividend to $1,250, instead of the Senate’s $1,000. And we proposed a very modest school tax that seeks a contribution from those most able to pay, with the funds going to public education. If approved, the school tax would be the fourth smallest income tax in the nation. Under that proposal, a joint filer, for example, would pay no income tax on their first $31,000 in income, and would only pay $25 on each $1,000 in income above that. Rates would modestly rise on Alaskans with greater wealth and a greater ability to contribute. I wish there were a magic way to end job losses. All legislators want a bright future for our residents. We need a balanced approach that fully solves our deficit. We can’t kick the can down the road anymore. ^ Rep. Les Gara, D-Anchorage, is the vice chair of the House Finance Committee. You can find legislator e-mails by calling 269-0111.

COMMENTARY: Misleading language in oil tax law allows claim of high tax rate

Last week an op-ed went out that somewhat mangled the reality of Alaska’s nearly non-existent oil production tax. I appreciate the opportunity to set some facts straight, so we can all have a fair discussion on an important topic. According to the Department of Revenue, next year oil companies will generate more in state-owed oil company tax credit subsidies than they owe in oil production taxes. In the following two years, unless the law is changed, generated tax credits will erase more than half our oil production tax revenue, at a time when schools are struggling and we have a $3 billion deficit. A recent editorial made some claims about our current oil tax rates. They were incorrect. To help, I’ll share some analysis from a 2017 State Department of Revenue Report. Alaska’s current oil production tax rate falls at lower prices under a sliding scale tax formula. The average North Slope so-called “New Field” (a definition that includes at least three old fields) pays a zero percent production tax, no matter how profitable, for the first seven years at all prices under $70/barrel. That’s according to the Department of Revenue report. That same report notes that the remaining North Slope fields, on average, pay a small flat four percent gross tax, no matter how high profits are, all the way up to prices of $73/barrel. Zero percent and four percent oil production taxes (this doesn’t include royalties) are a pathway to austerity at a time of $3 billion budget deficits. At higher profits, companies should pay a fair share, to help balance out a fiscal plan so we can have a stable economy and budget, and good schools, and a trained work force. The recent editorial addressed Alaska’s mythical “35 percent” production tax rate. There is no 35 percent oil tax rate under Alaska law. I’ll just let an excerpt from a recent Alaska Dispatch piece set the record straight. The Dispatch wrote: The state has a 35 percent oil tax, declared Dan Seckers, a tax attorney for ExxonMobil in Anchorage. “I’m sorry I can’t let you get away with that,” Rep. Les Gara said. He said that is true only if or when oil ever reaches $160 a barrel. “The lower the price, the lower the actual tax rate,” he said. Gara is correct. The system in state law has a built-in tax reduction at lower prices. He quoted from a chart prepared by the Department of Revenue that shows the effective tax rate is 12.1 percent when oil is at $60 a barrel. For oil that comes from areas such as Point Thompson, eligible for an extra tax break, the tax rate is zero at $60. Oil is now at about $50 per barrel. “There is no 35 percent tax rate, it is price sensitive,” said Gara. Seckers wanted to argue this. “Sorry, I think you’ve misspoken on this, he told Gara. “The statutory tax rate in Alaska is 35 percent. You don’t believe me? Ask your director of tax under Section 011e.” That section mentions 35 percent and there is no question it is in the statute, but it doesn’t mean much. No company pays anything close to that percentage or will be in danger of paying that amount unless oil increases by more than $100 per barrel. At $160, the tax would be close to 35 percent. Seckers did allow that Gara is correct that the “effective tax rate” is far lower. Case closed. The effective tax rate is what matters. But I understand Seckers’ misplaced insistence on 35 percent, as otherwise he would not be able to testify repeatedly at hearings that Alaska has an oil tax rate under SB 21 that is three times higher than anywhere else in the United States. “You know what the next tax rate is in the United States on production?” Seckers asked the House Resources Committee during a Feb. 1 meeting. “Twelve and quarter. Louisiana. You guys are almost three times as high as any other state in terms of production tax. Why was that (SB 21) an improvement so to speak? Well, because it was predictable.” What’s predictable is that it is misleading to say we have an oil tax that is three times higher than anywhere else in the U.S. And what’s also predictable is that this is a word game, the result of deceptive language that found its way into SB 21. The result is that the real tax rate, which varies with the price, is far below 35 percent under any circumstance that we have seen. Thank you for letting me set the record straight. I hope we can have a discussion based on facts, and find solutions to move this state, and our needed partnerships with the oil industry, forward.
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