Legislature considers borrowing $1 billion to pay oil debt
JUNEAU, Alaska (AP) — The Alaska Legislature is considering a proposal to borrow up to $1 billion from global markets to cover a debt it owes to oil and gas companies.
Gov. Bill Walker’s administration said the borrowing could be a way to reduce that deficit at the expense of some longer-term risk, the Juneau Empire reported .
Revenue commissioner Sheldon Fisher and tax division director Ken Alper presented the plan on Wednesday to the Senate Resources Committee.
“The large, overarching goal of this is to provide additional stimulus into the economy,” Fisher said.
The state promised billions of dollars in tax credits to smaller oil and gas companies between 2003 and 2017. But when petroleum prices plunged, the state could no longer afford the program.
The state has been paying only the minimum amount on what it owes for the past several years, as was required by state law. But as of Dec. 31, the state owes $806 million in credits. If estimates hold true, the debt will be closer to $1 billion once expected applications are filed this year.
Under the proposal, the state would borrow money to pay the credits. In order to receive that money immediately — instead of years down the line — oil companies would agree to be paid less than what they’re owed, as much as 10 percent under some circumstances.
That cut would compensate for the fact that the state would have to pay interest on the money it borrowed.
“It’s almost free money, if you will, to be able to accelerate the payment into the current time period,” Fisher said. “So far, I have not met anyone who does not want to participate.”
Fisher said many companies have taken out loans against their expected credits and are in desperate need of cash.
Republican state Sen. Bert Stedman of Sitka was skeptical of the plan. He said the program doesn’t solve the debt, but merely spreads it out over years.
“I’m concerned we’re just shifting this problem to the next governor or the governor after,” Stedman said.
The proposal remains in the Senate Resources Committee.
Information from: Juneau (Alaska) Empire, http://www.juneauempire.com