Another Blow For Alaska -- November 17, 2015

Updates

November 20, 2015: Alaskans would rather let the state go broke and increase taxes. 

Alaska’s finances are unlike those of any other state. It has no income tax, no statewide sales tax and among the lowest per capita tax burdens in the U.S. Instead of from taxes, its money comes overwhelmingly from two sources: oil revenue, which provides close to 90 percent of the discretionary budget, and federal funds, of which Alaska has historically been among the top per capita recipients.

Revenues have slumped along with oil prices, however. In fiscal 2012, when oil prices spent much of the year above $100 a barrel, general fund revenues topped $7 billion. This year, with oil prices down to about $40 a barrel, the state expects to collect just $2.2 billion. Even after billions of dollars in budget cuts in the past two years, the state still faces an estimated $3 billion shortfall heading into the next fiscal year.

Alaska’s problems go beyond oil prices. Federal funding has fallen since stimulus funds dried up after the recession, and the state’s influence in Washington has waned since the electoral defeat of longtime U.S. senator Ted Stevens in 2008. The prices of other natural resources, such as gold and salmon, have also declined. Most significantly, the state’s oil production has been falling for decades, dropping below 500,000 barrels per day in 2014 from a peak of more than 2 million barrels per day in the late 1980s. Lower production means it takes higher prices to generate the same amount of tax revenue; the state estimates that it would take prices of $110 a barrel or more to balance the state budget at current production levels.

Making matters more difficult: Alaska may be entering a recession, if it isn’t in one already. “It’s at that point where my gut says we’re tipping toward recession,” economist Jonathan King of Anchorage consulting firm Northern Economics said earlier this week.
On Friday, the federal Bureau of Labor Statistics reported that after two months of job losses, Alaska added about 2,000 jobs in October compared with a year earlier. But the oil industry continued to cut jobs, as did the government, which makes up a larger share of employment in Alaska than in any other state but Wyoming. Alaska’s unemployment rate, at 6.4 percent in October, is well above the national mark of 5 percent.

Original Post

Seeking Alpha is reporting:

• Statoil says it is exiting its Alaskan operations and closing its office in Anchorage, saying its leases in the Chukchi Sea are no longer competitive within its global portfolio
• the decision means STO will exit 16 operated leases and its stake in 50 leases operated by ConocoPhillips
• it follows Shell's September decision to pull out of controversial drilling off Alaska's Arctic cost after failing to find sufficient signs of oil and gas to make further exploration worthwhile

I've lost the bubble on whether Alaska has raised its taxes on oil production or if it is still being discussed.

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California, Too

The Los Angele Times is reporting that California taxpayers are going to pay a lot more to bailout pension fund for state employees. 

The board of California's largest public pension fund approved a plan Wednesday to lower its estimate of future investment returns — a move that will require taxpayers to pay billions of dollars more than expected over the next decades.

For years, the California Public Employees' Retirement System has estimated it will earn an average of 7.5% or more a year from its investments. Under the new plan, the pension fund will slowly reduce that rate to 6.5%.

The plan that will reduce the rate in small increments over the next 20 years.

The vote was criticized by Gov. Jerry Brown, who had urged the board to move more aggressively to 6.5% rather than stretching the change over decades.

With investment income contributing less to the cost of government worker pensions, taxpayers must pay more.

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If This Doesn't Put A Smile On Your Face ...

I will come back to these videos later, but if you haven't seen them, wow ... what a thrill awaits you.

A reader alerted me to Jools Holland's second episode in this documentary series, but it was so incredible, I had to go back to the first episode.

If you don't have time to look at a YouTube video today, simply click on the video below, move to 3:50, and let it play in the background while you scroll down the blog. This piano teacher charges $4 / second, according to Jools.

Walking To New Orleans, Fats Domino, Jools Holland's Walking To New Orleans And this is why I love to blog.