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.

*  *  *

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
LawsofPhysics's picture

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

GetZeeGold's picture

 

 

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

NoDebt's picture

Already done.  Bought and paid for.

Ahoy Polloi's picture

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

cnmcdee's picture

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

kaiserhoff's picture

Coming to the other 56 states soon.

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

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

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.

Oracle 911's picture

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

More like Russian buyback is coming.

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. 

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

Dr. Richard Head's picture

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

kaiserhoff's picture

Worry not.

They are a movable feast;)

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.

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 ....

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?! 

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!

 

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

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

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.

noben's picture
noben (not verified) GetZeeGold Dec 30, 2014 1:14 PM

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.

Oldballplayer's picture

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

Snoopy the Economist's picture

Come on that's funny - why the downarrows?

headhunt's picture

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

tarabel's picture

 

 

Your point has just been proven in real time.

Heil, Grandmother Putin.

My turn.

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.

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.

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.

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.

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.

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. 

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

mt paul's picture

It's all good

 

as long  as they don't cut

my seal eating budget..

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.

Anunnaki's picture

The high cost of low price

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.

Polymarkos's picture

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

ihedgemyhedges's picture

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

Cognitive Dissonance's picture

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

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.

Headbanger's picture

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

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.

 

detached.amusement's picture

ding ding ding, people COUNT on those checks

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.

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

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.

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.

Seasmoke's picture

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

sodbuster's picture

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