Warning from left: Deficit could eat Alaska’s ANWR money

Photo by Liz Ruskin

The U.S. Senate tax bill would open the Arctic National Wildlife Refuge to oil lease sales and split revenues with the state 50-50. Some Alaskans insist the state should get 90 percent, as promised in the statehood act. But if the tax bill passes, some opponents warn the state’s actual revenues from ANWR, no matter how much the oil companies bid, could be zero.

Listen now

Matt Lee-Ashley, a deputy chief of staff at the Interior Department during the Obama administration, sees lots of reasons not to pass the tax bill. He works for the Center for American Progress, a liberal think tank. But here’s what he wants Alaskans to know: That $1 billion the Congressional Budget Office projects the state would get from the first decade of lease sales in the refuge may never materialize.

“For the the next 10 years, if the tax bill passes, there would be no money going back to the state of Alaska from mineral (and petroleum) leasing in the state on federal lands,” Lee-Ashley said.

Matt Lee-Ashley. Photo: Center for American Progress

At issue is a deficit-control law known as PAYGO. Lee-Ashley acknowledges this zero-day scenario is not certain. But legally, if Congress passes the tax bill and takes no further action, that could trigger automatic spending cuts under PAYGO. And far more than the ANWR revenues are at stake.

Congress passed PAYGO, or the “Statutory Pay as You Go Act,” years ago try to stop itself from adding to the deficit. If Congress spends more than it brings in, PAYGO imposes immediate budget cuts. And Lee-Ashley says that’s where Congress is heading.

“The tax bill obviously will would result in a massive increase of the budget deficit and therefore trigger cuts to other federal programs,” Lee-Ashley said.

Some programs are protected. PAYGO can’t touch Social Security payments, for instance, or veteran’s benefits. Medicare, the insurance program for older people, is partially protected but could lose $25 billion a year. Lee-Ashley points to a report from the Congressional Budget Office that says the remaining unprotected programs don’t add up to nearly as much as the Republican tax bill is projected to cost.

“And therefore those programs would be entirely eliminated,” Lee-Ashley said.

Among the 200-plus programs that would be subject to the automatic ax are social service block grants, certain highway and airport funds, student loans, money for crime victims and the payments to western states for oil drilling on federal lands. (That’s the category that would include ANWR revenues.) Unless otherwise protected, in the event of a big deficit, these programs could be reduced to zero.

“Not very likely,” Jim Capretta said. Capretta worked at the White House Office of Management and Budget under George W. Bush. He’s now at the American Enterprise Institute, a conservative think tank. He says it’s possible PAYGO cuts could hit hard, but it’s not probable, for political reasons.

“Most Democratic representatives in Congress are likely to find those cuts unpalatable, just as many Republicans would, including a very large cut in Medicare,” Capretta said. “And so I think there will end up being bipartisan support to waive the cuts.”

Congress can pass another bill saying the PAYGO ax doesn’t apply, or doesn’t apply to certain programs. Republican leaders have already pledged to stop a PAYGO cut to Medicare.

Jim Capretta. Photo: American Enterprise Institute.

A PAYGO waiver would have to be separate from the tax legislation, and it would likely take 60 votes to get it passed. But Capretta says that shouldn’t be a problem, because these cuts would be so unpopular, Congress would feel compelled to block PAYGO from going into effect

“It’s just the amounts that are required now under the tax bill would be so large that I think they would almost surely have to be undone,” Capretta said.

For Alaska’s congressional delegation and others in favor of oil development in the Arctic Refuge, the benefits go beyond the revenue the state is supposed to get from the first lease sales. To them ANWR means jobs, a boost to the economy and, if all goes well, more oil for the Trans-Alaska Pipeline.