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."
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.
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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.
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Picture via Pixabay.