How much is $1 Billion?
28 April 2006This is the third blog in a series. Click here to view previous blogs.
The Alaska State Legislature recently put out an RFP requesting a review of the State Medicaid program. Like every state in the nation, Alaska is facing a Medicaid budget crisis. Last year, the state’s share of the Medicaid budget was $380 million. Total, the state and federal total budget for Alaska’s Medicaid program was approximately
$1 Billion.
Currently, the oil production tax, or severance tax is under scrutiny. (This is the amount that the oil producers are taxed for the oil they take from the ground. See earlier blog posting for explanations of the different types of oil taxes.) In early February, the Governor publicly suggested a 25% production profit tax. He was clear that the tax would take effect retroactively to January 1, 2006, a common practice. This announcement was supported by consultant Dr. Pedro van Meurs, who has in the past been the Governor’s chief negotiator on the gas line.
Then, one weekend in late February, the Governor met with the major oil producers. By Monday, he had a new proposal which moved the effective date to July 1, 2006. This change would result in a loss of $500-$600 million for the State. He also proposed to decrease the production profit tax to 20%, an additional loss of approximately $600 million annually, for a combined total of nearly $1.2 Billion.
So exactly how much is $1 Billion?
The cost of one year of medical care for 132,000 low-income Alaskans
OR
The cost of one weekend of meetings with 3 major oil producers.
-kt