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The ACES Effect

As we venture into 2013—having made it through the end of the Mayan calendar—we’ve got some tough decisions to make (since the world didn’t end after all). In order to successfully go forth, we need to rein in a bit—quite a bit, actually. As we’ve held our breath through the D.C. fiscal cliff politics, what stands out most are the bitter arguments for reductions: spending reductions, tax-break reductions.

In Alaska, phenomenal oil revenues have spurred the State Legislature to spend at an unsustainable level. Add to that the ACES effect and we are approaching an Alaska fiscal cliff of Denali proportions. One parallel with the feds is the need to reduce spending, and we’re working on that. Where we branch off down another trail though is with taxes: Some folks in D.C. want to raise taxes, but in Alaska some folks want to reduce taxes, specifically ACES taxes.

Otherwise, well, we all know what’s happened since ACES—Alaska’s Clear and Equitable Share—passed. The ACES effect has caused big oil to take a big pause and instead of drilling for oil in legacy fields to fill up the trans-Alaska oil pipeline (as they were doing before ACES), drilling has stepped up in other states and other countries. Instead of investing the ACES windfall revenues into a sustainable future, the State Legislature has spent much of it. Instead of recognizing the long-term harm ACES is causing the state, the Legislature has been too blinded by the short-term gains of high oil prices to notice, apparently, that ACES has shut things down a bit. Instead of reforming ACES, we haven’t yet—but we have another chance to change things around this session.

The ACES effect is the denial by the Alaska State Legislature—with respect to the Alaska economy—to recognize the need to change petroleum tax policy that has proven instrumental in declining petroleum production, threatening the future of the pipeline and jeopardizing the state’s economy. The ACES effect begs for tax policy reform.

I’ll get off my soapbox now and let you in on a bit of the January issue. We are always proud to be a sponsor of Junior Achievement Alaska and have a special section about the organization, which is celebrating 40 years in Alaska this year (begins on page 12). The president and chair have extended an invitation to everyone to attend this year’s event to support JA, and we hope to see you there. The 2013 Economic Outlook is infused with 18 of Alaska’s leaders’ comments on the coming year’s economy (begins on page 42). The team has put together another really great issue of Alaska Business Monthly magazine—enjoy!

 

—Susan Harrington, Managing Editor

This originally appeared in the January 2013 print edition of Alaska Business Monthly.

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