AAA Bond Rating Validates ACES
ANCHORAGE: Fitch Rating Services confirmed what Democratic and some Republican legislators have emphasized throughout the oil tax debate: Revenues and state savings grew as a direct result of Alaska’s Clear and Equitable Share (ACES) tax reform passed under the Palin Administration. The Governor is taking credit for savings his tax plan would have eliminated.
“Sean Parnell can’t have it both ways, trumpeting savings that result from ACES while proposing repeal of that legislation,” said Kay Brown, Executive Director of the Alaska Democratic Party.
According to Governor Parnell, “Fitch Ratings attributed the upgrade to: Very Large Reserves: Alaska has set aside very large reserves for general fund operating needs, principally in the Constitutional Budget Reserve Fund (CBR) and Statutory Budget Reserve Fund.” [i]
The facts are clear: Alaska’s budgetary reserves grew dramatically and the state repaid old debts after the Alaska legislature passed ACES in 2007. From FY 2008 to FY 2012, revenue through ACES was $23.3 billion. This permitted the legislature to repay $5.5 billion in pre-ACES debts while saving money for the future.[ii] Under the pre-ACES “Petroleum Profits Tax” (PPT, which was in place from 2006-2007), revenue would have been $17.4 billion. Under the pre-PPT Economic Limit Factor (ELF), revenue would have been even lower, $7.7 billion. Compared to PPT and ELF, ACES has generated $8.1 to $16.9 billion more in revenue for the state of Alaska.[iii] The oil tax giveaway proposed by the Governor last year is equivalent to reverting from ACES to the PPT system in terms of lost revenue.
In the absence of ACES, the state would have no cash savings and would still owe money to the Constitutional Budgetary Reserve. Since Governor Parnell states that “Very Large Reserves” are the primary reason Fitch gave Alaska the AAA bond rating, it is inconceivable that Alaska would have received the rating without ACES-generated revenue and associated savings.
"Fitch's AAA rating confirms that the ACES oil tax system has strengthened Alaska's finances. Repealing ACES through an oil tax giveaway would endanger our credit rating and squander the money we have saved from Alaskan oil production,” said Senator Bill Wielechowski.