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Alaska Governor Warns State's Fiscal Situation "Critical" As Oil Price Drops

Tyler Durden's picture




 

Narrative, we have a problem. What is billed day after day as 'unequivocally good' is entirely not good for Alaska (oh and Texas and Pennsylvania and...) as with oil prices dropping, AP reports Alaska Gov. Bill Walker has halted new spending on six high-profile projects, pending further review. With oil taxes and royalties expected to represent nearly 90% of Alaska's unrestricted general fund revenue this year, officials warned, "the state's fiscal situation demands a critical look."

 

As AP reports,

Alaska Gov. Bill Walker issued an order Friday putting the new spending on hold. He cited the state's $3.5 billion budget deficit, which has increased as oil prices have dropped sharply.

 

With oil prices now around a five-year low, officials in Alaska and about a half-dozen other states already have begun paring back projections for a continued gusher of revenues. Spending cuts have started in some places, and more could be necessary if oil prices stay at lower levels.

 

How well the oil-rich states survive the downturn may hinge on how much they saved during the good times, and how much they depend on oil revenues. Some states, such as Texas, have diversified their economies since oil prices crashed in the mid-1980s. Others, such as Alaska, remain heavily dependent on oil and will have to tap into sizeable savings to get by.

 

The projects Walker halted spending on include a small-diameter gas pipeline from the North Slope, the Alaska Dispatch News reported. The other projects are the Kodiak rocket launch complex, the Knik Arm bridge, the Susitna-Watana hydroelectric dam, Juneau access road and the Ambler road.

 

"The state's fiscal situation demands a critical look and people should be prepared for several of these projects to be delayed and/or stopped," Walker's budget director Pat Pitney said in an email.

 

According to Walker's order, the hold on spending is pending further review. The administration intends to decide on project priorities near the start of Alaska's legislative session Jan. 20, and no later than a Feb. 18 legal budgeting deadline, Pitney said.

 

State lawmakers have final authority to decide whether the projects should continue to be funded, Pitney said.

 

Contractually required spending and employee salaries will continue.

 

Walker's order asks each agency working on the projects to stop hiring new employees, signing new contracts and committing any new funding from other sources, including the federal government.

* * *

Finally, as we concluded previously,

So perhaps it is finally time to add that footnote to the "unambiguously good" qualified when pundits describe the oil crash:

 

it may be good for everyone... except Texas which is about to enter a recession. And then Pennsylvania. And then North Dakota. And then Colorado. And then West Virginia. And then Alaska. And then Wyoming. And then Oklahoma. And then Montana, and so on, until finally we find just where the new equilibrium is following the exodus of hundreds of thousands of the best-paying jobs created during the "recovery" offset by minimum-wage waiters, bartenders, retail workers and temps.

*  *  *

 

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Tue, 12/30/2014 - 10:43 | 5604887 LawsofPhysics
LawsofPhysics's picture

That's okay, China will happily buy Alaska for pennies on the dollar.

Tue, 12/30/2014 - 10:46 | 5604894 GetZeeGold
GetZeeGold's picture

 

 

How much do you think we could sell the Governor for?

Tue, 12/30/2014 - 10:49 | 5604910 NoDebt
NoDebt's picture

Already done.  Bought and paid for.

Tue, 12/30/2014 - 10:52 | 5604917 Ahoy Polloi
Ahoy Polloi's picture

Looks like the 'Bridge to Nowhere' project is gonna need a taxpayer bailout.

Tue, 12/30/2014 - 11:10 | 5604977 cnmcdee
cnmcdee's picture

For everything else there's Mastercard - because your worth it Alaska...

Tue, 12/30/2014 - 11:53 | 5605122 kaiserhoff
kaiserhoff's picture

Coming to the other 56 states soon.

I hereby nominate "unambiguously good" , for the straw man argument of the year award.

Tue, 12/30/2014 - 14:03 | 5605567 CrazyCooter
CrazyCooter's picture

LoP, get out a globe and some string and find the shortest distance between US soil and various enemies in the east, put on your general hat, and think about where to put all kinds of military hardware (e.g. nukes). Not to mention the massive reserves the federal government won't allow to be developed (i.e. ANWR and off shore).

As far as the governor being "bought and paid for" Walker just pulled a Murkowski on Parnell and beat him in another one of those third party bids that result in week long drug out counts by the thinnest of margins. For those that missed it, Murkowski (sitting senator) was pushed out of the primary by tea party/libertarian Joe Miller. So she teamed up with forces on the left and ran a third party bid ... and won by the narrowest of margins. Murkowskie has been BOOED at state conventions since. My point here is that the Republican party here is so divided, stuff like this happens.

Parnell was probably the establishment Republican candidate and all those projects being cut are Parnell supported projects. And if the big gas line they are trying to put in is going to be a money loser, he will hang it out to dry I suspect (I have been skeptical all along given volatility in LNG prices and the huge pipeline/facility costs). So, what you are actually seeing is FISCAL DISCIPLINE front and center taking the axe to government largesse. I am also hearing they are freezing government hiring for the state as well. And these are early innings.

Besides, AK has various piggy banks, but that only works if you tighten the belt. I actually think this may be good for us in the long run as we burn some fat and lean up a bit.

The big question is what happens if oil stays low for years (3 or more) at which point things will get ugly up here.

Regards,

Cooter

Tue, 12/30/2014 - 15:29 | 5605944 Pure Evil
Pure Evil's picture

Well, you could charge everyone an entrance and exit fee like Delaware and Maryland for anyone that drives I-95.

Oh yeah, that's right they call it a toll road.

From Jersey over the bridge into Delaware you pay a toll. Then you pay a toll to exit Delaware and enter Maryland. Then you pay tolls to escape Baltimore.

Quite the scam.

Coming soon to an I-95 near you in Virginia.

Tue, 12/30/2014 - 16:36 | 5606318 Oracle 911
Oracle 911's picture

 "China will happily buy Alaska for pennies on the dollar."

More like Russian buyback is coming.

Tue, 12/30/2014 - 11:10 | 5604978 Thomas
Thomas's picture

In September while speaking at ND Univ and NDSU I got in several debates in which the academics were bitching that the state is bankrolling all the profits rather than spending it on a good cause (academics, of course). I have not pinged them since then but I've got to wonder if the merits of saving the profits rather than spending them as they roll in is looking meritorious. 

Tue, 12/30/2014 - 14:05 | 5605573 CrazyCooter
CrazyCooter's picture

That is EXACTLY what is saving Alaska's ass right now.

Oil WILL go up and down, so might as well plan on it or one will blow out with the first major move.

Regards,

Cooter

Tue, 12/30/2014 - 11:12 | 5604979 Dr. Richard Head
Dr. Richard Head's picture

What will happen to the strippers and hookers of North Dakota?  What a shame.  

Tue, 12/30/2014 - 11:50 | 5605124 kaiserhoff
kaiserhoff's picture

Worry not.

They are a movable feast;)

Tue, 12/30/2014 - 12:11 | 5605190 Never One Roach
Never One Roach's picture

<< What will happen to the strippers and hookers of North Dakota?  >>

 

I, for one, hope some relocate to  my neck of the woods. After all, man cannot live on bread alone.

Tue, 12/30/2014 - 12:26 | 5605231 mrdenis
mrdenis's picture

On a bus to New Jersey ,they have the best unemployment benifits and health care ...hell if you plsy it right you can draw a state pension as well ....

Tue, 12/30/2014 - 11:40 | 5605086 detached.amusement
detached.amusement's picture

I cant believe that project was ever even considered, that is just insane.

 

as is trying to build a bridge out of juneau to the north....its all f'n ice field...glacier bay....where's the road going?! 

Tue, 12/30/2014 - 12:18 | 5605208 manofthenorth
manofthenorth's picture

SO, get your fucking stories straight. The would have been bridge in Ketchikan ( the bridge to nowhere) would have gone to the airport. Palin fucked that whole thing up by playing games with the big league politicians from "Merica. They had already built the road from the airport to the site where the bridge would have been built, so now we have a road to nowhere on Gravina Islansd from the airport to the waters edge and you still have to take a ferry to the airport.That project made perfect sense and was paid for. Typical, politicians fucking up everything they touch.

The road that some want to build out of Juneau would go to , well nowhere. It would extend the dead end another 70 miles and still require a ferry ride at the end. I build roads and love roads but this Juneau access road is probably the worst idea in a long time. Glacier Bay is 40 miles to the west and not really anywhere near Juneau and would not be a potential road route. The road would go north towards Haines and Skagway to connect with the ALCAN highway but can not because of the geography. Nearly the entire length of the road would have to be carved from solid rock. The ocean on one side and 5000-7000 glacier covered peaks on the other. Avalanches and rockslides would be a constant problem. Just plowing snow all winter would cost a small fortune. The number of people who would ever find cause to use this road could never justify the cost which I assure you will become the most expensive road ever built in North America by the mile.

Alaska will weather this downturn better than other producer states because it has saved billions of dollars and invested them into its Permanent Fund. Alaska will be fine, the lower 48 is fucked however.

Some thoughts from Robert Service;

'm scared of it all, God's truth! so I am;
It's too big and brutal for me.
My nerve's on the raw and I don't give a damn
For all the "hoorah" that I see.
I'm pinned between subway and overhead train,
Where automobillies swoop down:
Oh, I want to go back to the timber again --
I'm scared of the terrible town.

I want to go back to my lean, ashen plains;
My rivers that flash into foam;
My ultimate valleys where solitude reigns;
My trail from Fort Churchill to Nome.
My forests packed full of mysterious gloom,
My ice-fields agrind and aglare:
The city is deadfalled with danger and doom --
I know that I'm safer up there.

I watch the wan faces that flash in the street;
All kinds and all classes I see.
Yet never a one in the million I meet,
Has the smile of a comrade for me.
Just jaded and panting like dogs in a pack;
Just tensed and intent on the goal:
O God! but I'm lonesome -- I wish I was back,
Up there in the land of the Pole.

I wish I was back on the Hunger Plateaus,
And seeking the lost caribou;
I wish I was up where the Coppermine flows
To the kick of my little canoe.
I'd like to be far on some weariful shore,
In the Land of the Blizzard and Bear;
Oh, I wish I was snug in the Arctic once more,
For I know I am safer up there!

I prowl in the canyons of dismal unrest;
I cringe -- I'm so weak and so small.
I can't get my bearings, I'm crushed and oppressed
With the haste and the waste of it all.
The slaves and the madman, the lust and the sweat,
The fear in the faces I see;
The getting, the spending, the fever, the fret --
It's too bleeding cruel for me.

I feel it's all wrong, but I can't tell you why --
The palace, the hovel next door;
The insolent towers that sprawl to the sky,
The crush and the rush and the roar.
I'm trapped like a fox and I fear for my pelt;
I cower in the crash and the glare;
Oh, I want to be back in the avalanche belt,
For I know that it's safer up there!

I'm scared of it all: Oh, afar I can hear
The voice of my solitudes call!
We're nothing but brute with a little veneer,
And nature is best after all.
There's tumult and terror abroad in the street;
There's menace and doom in the air;
I've got to get back to my thousand-mile beat;
The trail where the cougar and silver-tip meet;
The snows and the camp-fire, with wolves at my feet;
Good-bye, for it's safer up there.

To be forming good habits up there;
To be starving on rabbits up there;
In your hunger and woe,
Though it's sixty below,
Oh, I know that it's safer up there!

 

Tue, 12/30/2014 - 14:15 | 5605598 CrazyCooter
CrazyCooter's picture

Good comment. The road out of Juneau is a joke; boondogglin' at it's finest. And to put a youtube to a comment made, this is a video of an avalanche that hit Thane Road a number of years back, which is the only road going south out of Juneau. Lots of folks live in this area (affluent) in addition to some school stuff and industry.

https://www.youtube.com/watch?v=2dI1aQesXpg   (2012)

https://www.youtube.com/watch?v=OsxoQAfyn1Y   (2007)

And if you pay attention, you will notice the distinct lack of trees in certain patterns ... from which one with gumption could extrapolate.

Regards,

Cooter

Tue, 12/30/2014 - 15:08 | 5605842 manofthenorth
manofthenorth's picture

Locals call the section of the east side of Lyn Canal north of Pt. Sherman, where the Kennsington Mine is, the "wall". Over a mile straight up out of the water. No other place I know of where you can see mountain goats 100 feet away from sea lions on the same rocky shore in winter. Great place to see wildlife, terrible place to build a road. Great videos, the big run out under Lions Head Mountain is many fold larger than the Thane road big one. The high tension power lines from the hydro plant were taken out by a big slide just south of there a few years ago. SUPER tough real estate to build and maintain anything on.

Stay warm and dry Cooter

MON

Tue, 12/30/2014 - 11:52 | 5605127 Treeplanter
Treeplanter's picture

Gov. Palin cut spending during surplus and put it aside for a rainy day.  That's Tea Party style common sense.  These jokers have since spent it.  The bridge was to the Ketchican Airport.  Not exactly nowhere.  The Feds larded it up beyond the original need.

Tue, 12/30/2014 - 13:14 | 5605399 noben
noben's picture

So we've gone from "Drill, baby, drill!" to...

"Fill, baby, fill!"

Fill those holes! Both the Well holes and financial holes.

p.s. Short the song "North to Alaska" being played, and Long the line of neo-Alaskans heading south or applying for Gov jobs.

Tue, 12/30/2014 - 10:59 | 5604937 Oldballplayer
Oldballplayer's picture

"I can see the ruble crash from my front porch!"

Tue, 12/30/2014 - 11:35 | 5605070 Snoopy the Economist
Snoopy the Economist's picture

Come on that's funny - why the downarrows?

Tue, 12/30/2014 - 12:02 | 5605159 headhunt
headhunt's picture

Do not talk poorly of anything 'Putin' on ZH, many here sleep with a blowup version of Putin.

Tue, 12/30/2014 - 12:42 | 5605293 tarabel
tarabel's picture

 

 

Your point has just been proven in real time.

Heil, Grandmother Putin.

My turn.

Tue, 12/30/2014 - 12:54 | 5605329 Tall Tom
Tall Tom's picture

But I will see the US Dollar crash and the destruction of the US Economy from my front porch.

 

In fact everytime that I buy Gold I am wagering upon that outcome.

 

I hope that you can see the humor in that...

 

As for me...LMAO.

Tue, 12/30/2014 - 13:17 | 5605413 mog
mog's picture

Why we think highly of Putin.

Paul Craig Roberts spells it out in his latest blog.

http://kingworldnews.com/paul-craig-roberts-russia-china-can-save-world-...

Putin is the hope of much of the planet.

Tue, 12/30/2014 - 11:31 | 5605052 HardAssets
HardAssets's picture

Just websearch the following:
Comprehensive Annual Financial Report (CAFR)

You may be very surprised - since governments at all levels constantly moan at how 'dire' conditions are. They never mention the returns on their huge investment portfolios. But, of course, taxes will need to be raised while 'services' are cut.

Ya really gotta wonder if all the USA is nothing but a corrupt cesspool designed by criminals to steal as much from the people as possible.

Tue, 12/30/2014 - 12:02 | 5605150 headhunt
headhunt's picture

They have to pay their union member salaries and pensions so they need more of your paychack.

To a communist this is fair, they think a lot like the muslims, if you are not a member you get dinged with a 'dhimmi' tax.

Tue, 12/30/2014 - 12:18 | 5605213 Never One Roach
Never One Roach's picture

I'll believe gubmints are in 'dire circumstances' when they stop paying those retired firefighters, mayors, etc $500k+ a year pension with full health benefits.

Tue, 12/30/2014 - 13:02 | 5605363 game theory
game theory's picture

It is hard to fight the disease of public pensions.  If you talk about how gov't workers are looting the system with their pensions, you are branded as evil. Where I live, I've yet to see an end to the scam of padding fire/police pay with overtime. Meanwhile, other services are obviously suffering because of budget problems. 

Tue, 12/30/2014 - 14:25 | 5605639 forensicator
forensicator's picture

@lawofphysics -  they can perhaps wait and get it for free a few islands at a time.. Obozo gave a couple of Islands away recently

Tue, 12/30/2014 - 15:46 | 5606038 mt paul
mt paul's picture

It's all good

 

as long  as they don't cut

my seal eating budget..

Tue, 12/30/2014 - 16:06 | 5606166 brennanblue
brennanblue's picture

They already offered to buy all of the LNG on Alaska's north slope in 2010, in the form of a non-conforming bid to the 'Alaska Gasline Inducement Act' - itself a half-billion dollar giveaway.  Sinopec offered to purchase approx 5 TCF of NatGas, build an in-state pipeline, and LNG facilities in Valdez.  Problem was, they weren't vying to build the pre-selected pipeline route through Canada (held up by keystone), and the major oil companies (BP, ExxonMobil, ConocoPhillips) already held the leases. Alaska's former governer / conoco lobbyist didn't want to ruffle feathers by yanking the leases for non-production (warehousing the gas).  the 907 may be hurting financially for a minute, but we aren't going anywhere.  per capita, AK is probably more well armed than TX.

Tue, 12/30/2014 - 10:46 | 5604896 Anunnaki
Anunnaki's picture

The high cost of low price

Tue, 12/30/2014 - 10:45 | 5604897 SheepDog-One
SheepDog-One's picture

They're havin fun in their 4X4 trucks up there I done seen a TV show on it! Chicks in the snow in bikinis too....Alaska is rockin folks.

Tue, 12/30/2014 - 11:11 | 5604987 Polymarkos
Polymarkos's picture

Yeah...snow bunnies...yeah....that's why the college campuses here are rated as having the ugliest girls in North America....

Tue, 12/30/2014 - 11:25 | 5605029 ihedgemyhedges
ihedgemyhedges's picture

Ugly girls in Alaska make up for their looks however by perfecting their moose mousse recipes.....

Tue, 12/30/2014 - 10:48 | 5604898 Cognitive Dissonance
Cognitive Dissonance's picture

So does this mean the state of Alaska will suspend the 'citizen' dividend for 2015?

Tue, 12/30/2014 - 10:51 | 5604914 insanelysane
insanelysane's picture

The scary thing for the Alaskan government is that each Alaskan owns at least 1 firearm and is used to getting a free check from the government to buy 4 wheelers and snow machines.

Tue, 12/30/2014 - 10:55 | 5604933 Headbanger
Headbanger's picture

Yeah but the real scary part is all the chain saws...

Tue, 12/30/2014 - 11:03 | 5604952 new game
new game's picture

nailguns?

Tue, 12/30/2014 - 11:12 | 5604982 Poundsand
Poundsand's picture

And you wouldn't believe the number of people who have built those revenue checks into their normal budgets.  When a family of five each get a check, of around $1500 - $2000 per year, it's a pretty big deal.

Pull that check and see how many new trucks get sold in 2015.

 

Tue, 12/30/2014 - 11:40 | 5605089 detached.amusement
detached.amusement's picture

ding ding ding, people COUNT on those checks

Tue, 12/30/2014 - 13:04 | 5605377 Tall Tom
Tall Tom's picture

And how will that affect the economy in Alaska when the base income of the population declines?

 

Without that cash flow to their citizens the Alaska State Government will garner even less taxation revenue which will exacerbate the State Government Budget deficit.

 

State Government can only garner revenue by taxation when the currency is spent. State Government cannot cause inflation to create value out of savings because they cannot print currency.

 

Alaska is going to be a pretty cold and dead place this winter. And it will get worse.

 

Raising taxes will exacerbate it as well. They are between a roick and a hard place.

 

THAT IS WHY SURPLUS BUDGETS NEED BE MAINTAINED. They must LIVE WITHIN THEIR MEANS, PREFERABLY BELOW THEIR MEANS AND SAVE.

Tue, 12/30/2014 - 14:20 | 5605623 CrazyCooter
CrazyCooter's picture

Stupid is as stupid does.

I save mine. I know parents who put the PFD into a savings for each child (starting at birth) until they are 18 for college money.

Just depends on how one makes life decisions.

But mostly you are correct.

Regards,

Cooter

Tue, 12/30/2014 - 11:09 | 5604970 Polymarkos
Polymarkos's picture

A nasty little secret about the Permanent Fund Dividend...it's 'compensation' to all Alaskans for 'giving up' their mineral rights. Basically, it's a cookie to keep the peasants from drilling in their backyards and coming up with billions of their own.

Tue, 12/30/2014 - 10:49 | 5604904 buzzsaw99
buzzsaw99's picture

the oklahoma governor was doing her best to bankrupt the state even with $100 oil. her panties (ew) must be in a nasty wad right about now watching oil and natty prices.

Tue, 12/30/2014 - 10:51 | 5604913 Seasmoke
Seasmoke's picture

Doesn't anyone save for a snowy day any more???

Tue, 12/30/2014 - 10:55 | 5604931 sodbuster
sodbuster's picture

Not government- at any level. Makes too much sense- if they have it- spend it, and then a whole lot more.

Tue, 12/30/2014 - 11:48 | 5605117 NotApplicable
NotApplicable's picture

There is no such thing as saving in ZIRP World.

Tue, 12/30/2014 - 12:45 | 5605307 Kprime
Kprime's picture

best be thinkin bout saving for an Oil-less day.

Tue, 12/30/2014 - 10:50 | 5604916 waterwitch
waterwitch's picture

Palin can fix it! Drill baby drill!

Tue, 12/30/2014 - 13:26 | 5605443 Tall Tom
Tall Tom's picture

DRAFT PALIN FOR PRESIDENT...

 

(While she is dumb as a nail at least she is better looking than Hitlery...or O-BUTTFUCKER..or is it O-BUTTFUCKEE...only Reggie knows.)

Tue, 12/30/2014 - 10:52 | 5604923 Savvy
Savvy's picture

FFS in 2009 crude was $40/bbl, they were doing fine then! So was Alberta's tar sands. What changed in 5 years?

Tue, 12/30/2014 - 11:00 | 5604939 ShorTed
ShorTed's picture

Government spending appears to have increased, not sure why.

/s

Tue, 12/30/2014 - 11:50 | 5605123 hedgeless_horseman
Tue, 12/30/2014 - 10:53 | 5604924 Pumpkin
Pumpkin's picture

Collateral damage.  Putin laughs.

Tue, 12/30/2014 - 10:54 | 5604925 Dr. Engali
Dr. Engali's picture

I hear you can see Russia from Alaska. Maybe they can help.

Tue, 12/30/2014 - 11:01 | 5604944 Headbanger
Headbanger's picture

Yeah, they'll buy it back!

Tue, 12/30/2014 - 11:05 | 5604957 Polymarkos
Polymarkos's picture

If Pootin and his gang have their way, they'll take Russia back at the earliest opportunity. And I wonder, as an Alaskan, if I wouldn't be better off under Russia than Comrade Obama&Co. We'd have more freedom, better economic opportunity, and a gubbamint that would be honest about it's tyrannical nature.

Tue, 12/30/2014 - 11:57 | 5605033 Dr. Engali
Dr. Engali's picture

Uh oh, it looks like I've hurt some Palin lover's feelings. Hey guys, you may not realize it, but she's cashed out and taking you chumps  for a ride.

Tue, 12/30/2014 - 12:03 | 5605157 Bunghole
Bunghole's picture

Those are the conservatives that still think Fox News and Drudge are reliable sources of unbiased news.

I too fell for the ruse of the conservative internet back in 2007/2008.  Weasel Zippers, Ace of Spades, Hot Air, Gateway Pundit, Townhall, etc.

They all work for the same master.

Tue, 12/30/2014 - 10:53 | 5604926 discopimp
discopimp's picture

Well at least they are quicker to react then California.  In California it takes 100s of water boards to figure out we live in a desert and then act suprised when it doesn't rain, then like rabid animals run to the voters to be bailed out.  Now thats real planning for you! 

Tue, 12/30/2014 - 11:01 | 5604945 q99x2
q99x2's picture

Close the boarders and kick out the NWO. They fucking suck.

Tue, 12/30/2014 - 11:02 | 5604947 yogibear
yogibear's picture

Add Alaska in as a state that has fiscal troubles.

What's wrong with cutting spending to reflect reduced income? It's called budgeting.

None of the lawyers/politicians seem capable of doing a simple thing such as cutting spending.

Tue, 12/30/2014 - 11:07 | 5604968 NoDebt
NoDebt's picture

They can't cut spending because everything they do is hyper-important and the world would end without them doing it.

Remember, without the government you wouldn't exist.  Not the other way around.

Tue, 12/30/2014 - 11:04 | 5604950 alexmark2013
alexmark2013's picture
Oil Rig Count Falling In Price Pullback, The Onshore Drilling-Rig Count Falling By 37 Last Week http://investmentwatchblog.com/oil-rig-count-falling-in-price-pullback-the-onshore-drilling-rig-count-falling-by-37-last-week/
Tue, 12/30/2014 - 11:05 | 5604951 yogibear
yogibear's picture

Russia can sustain 20% interest rates. 

If it happens in the US it implodes. Who's better off?

Tue, 12/30/2014 - 11:54 | 5605129 headhunt
headhunt's picture

No country can sustain 20% interest rates for long.

Tue, 12/30/2014 - 11:59 | 5605142 Ghordius
Ghordius's picture

real, not much. but nominal? if you have inflation at 18%, 20% nominal rates are the same as 2% with 0% inflation

Tue, 12/30/2014 - 12:10 | 5605184 headhunt
headhunt's picture

The real cost is still there.

Someone has to pay the real cost someday, somehow.

 

Tue, 12/30/2014 - 11:06 | 5604964 Sandmann
Sandmann's picture

Maybe they should sell Alaska back to Russia ? Or they could raise the sales tax from 0% and let consumers benefit from the "huge boost to real incomes" as oil prices collapse ?

Tue, 12/30/2014 - 11:06 | 5604965 madcows
madcows's picture

You see, this is the silly thing about government budgeting.  They always set their budgets based on expected income for the year, rather than based on last year's revenue.  If they would just change their mindset, and set spending based on what they have versus what they anticipate, then there would never be these crisis.

Tue, 12/30/2014 - 11:23 | 5605017 Polymarkos
Polymarkos's picture

One thing I notice with the gubbamint here in Alaska...they NEVER cut the welfare spending. They have, however, taken the unemployment 'benefits' insurance to new lows, now making it nearly impossible to get 'benefits.' But never do they cut the freebies for the natives, never does Juneau (the seat of state gubbamint) see a big layoff. It's the same pattern with the Fed Gubbamint too...co-inky-dink? Methinks not.

 

Alaska is a rentier state; oil is God here. The State and the Feds do all they can to prevent anyone from tapping the natural resources here; it's their piggy bank. They claim it belongs the the people of the United States, not to Alaskans. Funny...California seems to belong to Californians...and Noo Joizee seems to belong to the denizens of that state... Woe betide any fool who thinks HE can muscle in on the resource extraction game here.

 

Our leadership sucks. This place could be a powerhouse, but instead they waste all revenues on things like the Healy Power Plant (mothballed--no one needs it out in Healy so the cost to benefit is in the red,) the new 240 million dollar prison (partially mothballed--we cannot afford to operate it, let alone find enough nutters who'll pass the psych eval to become prison guards,) the Bridge to Nowhere, the 78 million dollar high speed ferry we had no one skilled enough to sail, let alone a dock that could handle it,  and so on. Criminal, this waste of potential.

 

 

Tue, 12/30/2014 - 11:43 | 5605104 detached.amusement
detached.amusement's picture

spot on

Tue, 12/30/2014 - 11:46 | 5605105 detached.amusement
detached.amusement's picture

man, I did not hit that button twice!

Tue, 12/30/2014 - 12:41 | 5605287 Emergency Ward
Emergency Ward's picture

-- How can the fucking Saudis be so insensitive to the needs of the Alaskans!?!?

Wed, 12/31/2014 - 11:45 | 5608983 Polymarkos
Polymarkos's picture

Damn those sand trolls!

Tue, 12/30/2014 - 13:14 | 5605404 One of We
One of We's picture

It's always been a fight between the fed/state gov/greens and working men trying to make a buck but I'm also in no hurry to have my state worked over by the corporate rape squad....

Something that pisses me off about the Alaskan "representation" is the form letter "nothing to see here" bullshit you'll get from Murkowski, Begich, and Young when you ask why were doing jack shot to raise awareness about the Fukushima disaster.  Don't want to harm the Wild Alaskan brand today while they let the product be destroyed by the day.....

Tue, 12/30/2014 - 14:26 | 5605648 CrazyCooter
CrazyCooter's picture

You are spot on regarding Juneau. I heard they are freezing hiring at the state though. Maybe Walker will finally do a little shrinking of government.

Also, the state no longer has defined benefit (since 2007?) and the pay really isn't all that, so I think it might actually prove a loser in the long run if the job stability gets discounted.

Also, many don't realize the demographics here ... 40 year olds with kids are LEAVING and the 60 age bracket is swelling.

Real estate crash coming (my opinion), but it might take years still.

Oh, and the city is broke too I think ... lots of activity on the "tax it if it moves" front lately. They really screwed the pooch on the pensions.

Tide going out soon, let's see who is naked!

Regards,

Cooter

Wed, 12/31/2014 - 11:49 | 5608997 Polymarkos
Polymarkos's picture

The State of Alaska learned a hard, hard leasson with that Tier 1 retirement package; they thought the oil boom would never end. Ooops.

Glad the State is freezing hiring. I've tried many times to get on that wagon, and it was all a waste of effort.

I may have to leave the state if my income prospects don't pick up. I've been through the wringer here jobs-wise and cannot seem to land a solid job. I don't know enough of the right people, it seems. That Old Boy Network is alive and well here.

 

Anchorage sucks too. Bad leadership. The whole paradigm of leadership here is the thinking the oil boom never went bust. They seem to believe the people OWE it to them to give them all the wealth they want to squander. We need a guillotine.

 

 

Tue, 12/30/2014 - 11:22 | 5605019 NOTfromSanFrancisco
NOTfromSanFrancisco's picture

 

 

All occupants of states where tax rates are lowest because of tax revenue from oil production should get ready to see significant increases in state taxes and fees as the oil price continues to fall... Supply and demand goes for tax revenue too...

Tue, 12/30/2014 - 11:24 | 5605027 Polymarkos
Polymarkos's picture

Only Anchorage has no sales tax; everywhere else has long been robbing the citizenry on every purchase.

Tue, 12/30/2014 - 14:30 | 5605661 CrazyCooter
CrazyCooter's picture

When you exclude "moochers" from the equation (i.e. net recievers of benefits), there isn't enough population/economic activity to replace the short fall. State population is ~750k. How many of those actually work? 3.5B spread across 250k is 14k. Think you are going to sock 14k in taxes to 250k population to cover the gap?

They will try, but many who work up here are barely making it anyway, so they will just pack and leave, which drives up the moocher ratio. Just watch.

Regards,

Cooter

Tue, 12/30/2014 - 11:33 | 5605055 Calculus99
Calculus99's picture

It's good for Vermont, no?

Tue, 12/30/2014 - 11:40 | 5605090 shovelhead
shovelhead's picture

They could replace some lost oil revenue with a tax on baby seal clubbing.

http://cutepics.org/wp-content/uploads/2011/06/cute-baby-seal.jpg

Tue, 12/30/2014 - 12:21 | 5605217 Savvy
Savvy's picture

If baby seals looked like spiders no one would give a buck about them.

Tue, 12/30/2014 - 12:02 | 5605154 Neo
Neo's picture

so..6 months ago when oil was still around $100, I guess the state had no fiscal issues? Right? It's the drop in the futures price that caused the state to run up a deficit of $3.5 BILLION in less than 6 months.

What a load of horseshit.

Tue, 12/30/2014 - 12:05 | 5605163 silentboom
silentboom's picture

This is why the government should not be "investing" in any project.  I don't even want these assholes building roads at this point. Complete and utter incompetence and waste.

Tue, 12/30/2014 - 12:21 | 5605221 xerxiesx
xerxiesx's picture

Don't worry you guys, none of this affects the US where we can just print money.  This only affects emerging markets like Russia, where they actually have to balance a budget.  

Tue, 12/30/2014 - 12:49 | 5605320 Tursas
Tursas's picture

Could we sell this loss making state to Russia?

Tue, 12/30/2014 - 12:21 | 5605223 Mad Muppet
Mad Muppet's picture

Budget? Not a chance. They take their 'income', spend it all on fancy new palaces (schools, courts, offices, parks and police palaces), then have to hire a bunch of new people to fill all those vacancies...the better to serve you. Then when they run out of money because of the new higher price of doing business, they need to raise taxes... a lot. Now, flush with all this new tax revenue, guess what they do? Wash, rinse, repeat.

Tue, 12/30/2014 - 12:25 | 5605227 roadhazard
roadhazard's picture

I can see $1.50 gas from my house.

Tue, 12/30/2014 - 13:24 | 5605439 Quinvarius
Quinvarius's picture

This only encourages the bankers to make the price lower.

Tue, 12/30/2014 - 13:28 | 5605452 CzarVladimirI
CzarVladimirI's picture

Good thing they just voted to legalize pot. Surely the sales taxes on that will make up for any shortfall. Grow baby grow!

Tue, 12/30/2014 - 13:55 | 5605535 directaction
directaction's picture

Currently, the Alaska oil pipeline moves around 525,000 bbls/d. When daily flow drops to 350,000 bbls/d, either by declines delivered by nature or via uneconomical prices, the oil flow stops because the TAPS can't operate under lower capacity. When that occurs, and it will occur in the next few years or sooner, state revenue ceases, too. 

Maybe then Russia will buy it back, for maybe around $6 million bucks. 

Tue, 12/30/2014 - 14:33 | 5605672 CrazyCooter
CrazyCooter's picture

False. Go read the TAPS property tax assessment from a few years ago (2012?). At that flow rate they have to install additional headers. Flow rates can go as low as ~100k/bbl/day with additional heaters on the line.

Regards,

Cooter

Tue, 12/30/2014 - 15:17 | 5605875 directaction
directaction's picture

Study outside the lines.

They can also accomodate flow rates as low as ten bbl/d, but at what cost?

However below 350,000 bbls/d the cost of restructuring the TAPS pumping and flow infrastructure will be immense, maybe exceeding the original pipeline construction cost. 

Tue, 12/30/2014 - 14:51 | 5605762 Ewtman
Ewtman's picture

The collapsing price of OIL has so many unexpected consequences. An it ain't getting better for a while...

 

http://www.globaldeflationnews.com/oil-light-sweet-crudeelliott-wave-upd...

Tue, 12/30/2014 - 15:16 | 5605877 wmh_ZH
wmh_ZH's picture

Texas! North Dakota! Alaska! The oil "price fixing" is a Red State thing. Must be Obama is to blame. LOL!!!

Tue, 12/30/2014 - 17:47 | 5606717 Bumbu Sauce
Bumbu Sauce's picture

rofl, the PDS'ers make a showing.

Wed, 12/31/2014 - 01:06 | 5608094 Bemused Observer
Bemused Observer's picture

Deflation will reduce revenues to government, that is a fact. So what? Do what we all have to do...reduce spending.

If I get my hours cut and earn less money, it isn't the taxpayers obligation to make up the difference so I don't have to make changes. I spend less, or figure out some way to increase income.

Oh boy...this deflation is going to create all SORTS of frenzy among the parasites long used to more taxes, more taxes, more taxes...

Start downsizing government! Like any corporate entity (so respected and admired by TPTB)a slowdown means workforce reductions...so get to it already!

When HP sees sales decline, they fire thousands. This is considered regrettable but necessary by our politicians and business leaders. Well, "sales" are declining in THEIR 'industry' now. Time to hand out pink slips. Too bad, so sad. Don't let the door hit you in the ass on your way out.

We don't NEED all these elected officials. There is too much redundancy, not enough efficiency...the shareholders (taxpayers) demand management cut the waste, and just like the HP's of the world, we see LABOR as the most expendable...that's YOU, Senator Shitforbrains, and YOU Representative Whatmeworry, as well as all the local mandarins and their staffs who cling to the taxpayers backs like clusters of ticks...What the FUCK is an 'Alderman" anyway!? And if my governor needs a full staff including a PR firm he can pay for it out of his own damned pocket...maybe he should just control himself and he wouldn't NEED a PR firm.

When I worked in a county nursing home, the offices were FULL of people who all got those jobs because they knew somebody, etc. There were more fucking office workers than there were residents in that damned place.
But when cuts had to be made, those residents got cold sandwiches 6 nights a week instead of 2, or had their bus trips into town cancelled rather than a single seat-warmer in the offices being let go.
Somewhere along the way it was forgotten that the nursing home was supposed to care for the elderly and infirm, and NOT to provide a salary/benefits to the friends and family members of elected officials...

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