Alaskans Getting the Government We Paid For

Legislators Say Buck Stops With ... Assemblies and Councils

 

Coarse Grind – Satire and Humor

The Alaska State Legislature is not getting into the taxing business unless it’s absolutely necessary, said Sen. Pete Kelly (R-Fairbanks). The statement, among other things, prompted an oil lobbyist to say, “Hey, if you’re not in the tax business, can we get all that money back? Times are tough, man.” But Kelly was talking about taxing regular Alaskans, and/or using part of their Permanent Fund Dividends money to pay for things like schools, roads, troopers, fire suppression and such. Many Republicans and Democrats in both legislative houses seem to agree. The Democrats don’t want taxes until the oil companies are pulling their weight, and don’t really want to us the PF earnings unless they can blame it on someone else. The Republicans don’t want taxes or PF earnings usage until they’ve slashed government spending back to pre-Colombian levels and until they’ve figured out a way to blame Democrats for all of it. Governor Walker is willing to take the blame, but he’s still so popular nobody in the Legislature cares.

So, in a brilliant stroke, some members of the Senate Finance Committee figured out how to fix at least part of Alaska’s fiscal problem without getting into the tax business. They’re going to force municipalities and communities into the tax business instead! Two bills sponsored by the Senate Finance Committee will shift the burden of the Public Employees Retirement System and the Teachers Retirement System (PERS and TRS), to municipalities, but don’t worry, these bright backroom boys have a third bill that will make some of Alaska’s school kids pay part of the bill for the first few years – that’s right, they’re killing the Alaska Performance Scholarship program and an education grant program to help municipalities ease into the new paradigm. Hey, if these money-grubbing performance scholarship kids are so bright, surely they can figure out their own scholarship program.

Those living in unincorporated places or in communities where there’s no real tax base don’t have to worry at all. No taxes for you! No revenue either, but hey, you can’t expect elected official to figure out everything. They’re just “citizen” legislators, anyway – not REAL ones. Lighten up, already.

So, fear not, Alaskans, the Legislature is doing everything it can to make sure you pay higher property and sales taxes instead of income taxes and perhaps a reduced PFD. But local government is the best kind, right? That’s why they’re gutting municipal revenue sharing, too, so you’ll have even more opportunities to pay for government through increased local taxes. That way, when you get angry you can vote out the assembly bums instead of the legislative bums. Can you think of a better use for your PFD (that will run out in four years)? I sure can’t. So there you have it. We Alaskans have paid no state taxes for decades. Finally, we’re getting the government we paid for.

Democrats: Majority is Sidestepping Public Process

Single Committee Referrals Raise Ire of Senate Minority

 

Medium Grind -- News and Analysis

If you’re a legislative nerd in Alaska, and if you’re in the mood for fireworks, you know the House floor is normally more fertile ground than the Senate floor. But Monday the Alaska State Senate put on the best show. Of course following the drama in the Alaska State Legislature is a lot like watching Scooby Doo – the outcome is painfully predictable, but there still may be a few cringes and chuckles along the way.

Monday’s flap was over the introduction and subsequent committee assignments for three bills sponsored by the Senate Finance Committee. It’s way too late for individual legislation to be introduced, with just three weeks to go, but committees can still bring new bills to the fore. That’s one of the great advantages of being in the majority, and especially of being a committee chair. The three bills, SB 207, 208 and 209 if passed would shift the public employee retirement cost burden from the states to local municipalities and entities and would axe the state’s performance scholarship program and the state’s education grants program, using those funds to help cover some of the retirement costs for a few years, allowing municipalities to ease into the new paradigm. The bills each received one committee of referral, to Finance, and that didn’t sit well with the four-person Senate Democratic minority.

The procedure is that a new bill is read into the record by the clerk and then the presiding officer assigns the bill to its committees of referral. Most, but not all, bills receive two or more committee referrals. If a bill has a very narrow focus it might receive a single committee and no Finance referral. If a bill is narrow and specifically fiscal nature it might receive only a Finance referral. In this case the Democrats felt the three bills were too broad in scope and impact to receive only a Finance referral, and that the majority was not respecting the public process simply to speed the bills along with only three weeks left in the regular session.

Each time Sen. Kevin Meyer (R-Anchorage) assigned one of the bills to only Finance, Minority Leader Sen. Berta Gardner (D-Anchorage) rose and cited rule 39-b of the Legislature’s uniform rules. Gardner spoke passionately at times, saying things like, “If a job is worth doing, it’s worth doing right,” and admonishing Meyer for sidestepping the process for the sake of expediency. Such fast tracked legislation, Gardner argued, reduces public input, and it also diminishes the thorough scrutiny major legislation requires.

Various Republican senators stood to justify the action. Sen. Charlie Huggins (R-Wasilla) spoke about the experience of his fellow Education co-chair, citing Sen. Mike Dunleavy’s experience as an educator. Dunleavy also sits on Finance, and Huggins said he was comfortable with the scholarship bill skipping Education because he trusts Dunleavy with his vote.

Sen. Pete Kelly rose to remind the body that the Legislature’s Finance Committees have expanded their roles to cover a broad range of topics, and that they’ve been thorough in doing so. Gardner countered that argument by asking Meyer why not just do away with all the other committees and simply refer everything to Finance? That way, she said, the Legislature could be done with its work in 30 days.

Each time Gardner made a motion to assign each bill to one additional committee of referral the effort was shot down in a 13-4 vote with only the four minority Democrats in favor.

 

What Does it Mean?

Strictly following the rules, Sen. John Coghill (R-North Pole) pointed out that the rule Gardner consistently referenced is actually consistent with Meyer’s committee assignments. Uniform Rule 39-b actually states:

(b) First Reading. The first reading consists of a reading aloud by the clerk or secretary of the following information: the house of origin, the bill number, the sponsor, and the title of the bill, e.g., "In the House, House Bill No. ..., by ...... and ..... ......, A bill for an Act entitled, 'An Act relating to a code of ethics for state employees.'" The bill is then referred by the presiding officer to one or more committees. The house may by a majority vote of the full membership of the house refer the bill to any other standing or special committee.

In an interview Meyer said his decision on this particular suite of bills was based on the budget implications they present.

Meyer added, “To stretch your memory a bit, SB 141 [the bill that created the Tier-4 PERS/Tier-3 TRS change] was introduced in 2005 and was referred to the Finance Committee. SB 125 [the legislation that changed PERS to a cost-sharing system and established the contribution rates of 22 percent for PERS and 12.56 percent for TRS] was introduced in 2007 and referred to Finance. SB 125 did not pass the Legislature until 2008 – so the earlier/later in session argument is a consideration, but much more so, is the implication that the bills have on the operating budget.”

Meyer described the assignment process as a damned if you do/damned if you don’t problem with no perfect solution. He said at one time or another every member of the Senate has taken issue with a bill’s referrals.

The real problem is that there are no hard and fast criteria for committee assignments, and there probably can’t be – there’s always an element of subjectivity, and, like everything else in the Legislature, there is sometimes also a political element. There is no question minority bills tend to receive more committee referrals than majority bills, and that minority bills are heard in those committees much less frequently, almost never passing into law. That was true even when the bi-partisan coalition was ruling in the Senate, and it has always been true. It is also true that as the clock runs out some majority bills get on the fast track, and there’s little the minority can do about it.

Meyer said in this case he’s disturbed by the argument that the bills won’t be properly vetted in Finance. He said the committee is extremely thorough, and that its members have a wide range of experience that will help the committee consider all aspects of the three bills. The proof, of course, will be in the pudding. If Kelly and co-chair Sen. Anna MacKinnon (R-Eagle River) invite testimony from educators on the scholarship bill and from community leaders on the retirement costs bills it will go a long way to alleviate the charge that the public process is being truncated. If the bills move out of Finance with little consideration the minority concerns will be largely vindicated.

One interesting moment occurred on the Senate floor after the committee referral flap was over. Sen. Dennis Egan (D-Juneau) rose and moved that his own PERS/TRS (retirement) bill be waived out of the Community & Regional Affairs Committee and into its next committee of referral – Finance. His bill, SB-88 has languished in C&RA for over a year. The motion failed along the same 13-4 majority/minority lines.

Sen. Bill Wielechowski (D-Anchorage), the Senate minority’s firebrand, stood and delivered a passionate speech saying Egan’s bill covers exactly the same topic the two majority PERS/TRS bills do, and that it should be moved to Finance for the sake of consistency, if nothing else.

The difference, Meyer said later, is that Egan’s bill proposes a structural change to a hybrid, defined benefit/defined contribution system. Such a structural change, Meyer said, requires more consideration than does simply changing who pays the bill under the current system. That may be true, but as mentioned before, as a minority bill SB 88 is not likely to be moved from any committees of referral in any case. Meyer could move the bill directly to the Rules Committee, where bills are scheduled to come to the floor, and there it would die a quiet death.

As to Gardner’s charge that all bills might as well be referred to Finance, Meyer said that actually might not be such a bad idea, given the state’s current fiscal situation, “to make sure that we are not creating additional costs tin the future for government.” Meyer was not suggesting that all bills get only a Finance referral, so Gardner’s rhetorical point went without a response.

Will it Change Outcomes?

Whatever happens in the Senate, the system is set up with checks and balances. The House and Senate are autonomous bodies, and it’s not unusual for them to be at odds and even in conflict. Should the three bills be moved quickly from Senate Finance and moved from the Senate floor, the process begins all over in the House. House Speaker Mike Chenault (R-Nikiski) will assign the bills to House committees. In an interview Chenault said he wasn’t familiar with the bills yet, but that he would make his assignments the same way he always does.

“If [the three bills] do come over we’ll look at them and decide what the content is, and we’ll assign them to either a committee or multiple committees, depending upon what I think they need,” Chenault said. He said if the PERS/TRS bills deal only with fiscal issues he could see a Finance-only referral, but that he wasn’t in a position to make that call yet. He also said, given his limited familiarity with the brand new bills, he might agree that the scholarship bill could benefit from an Education referral, but again, he’d have to be more familiar with the details first. In any case, the bills will have to survive the House, even if the Senate fast tracks them.

If the House makes any changes to the bills and passes them the Senate will either have to concur with the changes, or the legislation will go to joint conference committees. Should they survive that stage they would still require Gov. Bill Walker’s signature to become law. That’s a lot of hurdles to clear with three weeks to go.

The real question is, are the rules being broken? According to the letter of the uniform rule Gardner cited, the presiding officer must assign bills to one or more committees, and as Chenault pointed out a lot of bills get single-committee referrals. The question is, do these bills meet the same criteria other single-committee bills have met? The two retirement bills will have significant impact on communities and other entities, and while the killing of the scholarship and grants programs will temporarily mitigate those impacts the end of those programs will significantly impact students and education in general.

In order to demonstrate that the single-committee referrals for these three bills does not diminish the public process the Finance Committee will have to vet the bills thoroughly, and public participation will have to be honored in full. Short of that it will rest on Chenault’s shoulders to ensure the bills are completely vetted.

PUBLISHER’S NOTE: As has increasingly become the case with minority Democratic legislators, Minority Leader Gardner did not respond to several requests for comment. Grinder News has repeatedly reached out to minority Democrats, but many of them refuse to comment. It is difficult to imagine what is gained when elected officials refuse to present their views and opinions. Grinder News has been equally fair, and equally tough on all individual members of the Legislature. To their credit, Majority Republicans have been open and generous with their time, even after being hacked in an opinion or satire piece. After reading this piece, Rep. Les Gara (D-Anchorage) texted Grinder News with some frustrations, mostly over a PhotoShopped image. Grinder offered Gara the opportunity to conduct an interview and offered to publish the interview in its entirety. He declined. Grinder wants to present all views, but if minority Democrats refuse to conduct interviews we are left to use only what they put on the record.

Senator Introduces Pete-O-Nomics to Solve Budget Crisis

Government To Go On Flat-Rate System

 

Coarse Grind -- Satire and Humor

Sen. Pete Kelly’s (R-Fairbanks) dad was a flat-rate mechanic. It must be true because Kelly never misses a chance to put that odd factoid on the legislative record. “If you don’t think guns belong on university campuses,” Kelly might say, “let me remind you that my dad was a flat-rate mechanic. Think about that for a minute. No. Really. Think about it.” On another occasion Kelly might say, “Oh, so you think putting pregnancy tests in bar ladies’ rooms is weird? Well, I’ll tell you this, it’s not as weird as putting pregnancy tests in bar men’s rooms, and my dad was a flat-rate mechanic.” His dad’s method of compensation has played a central role in Kelly’s life, and in the formation of his philosophical underpinnings.

It was only a matter of time before that philosophy bore real fruit, and the current fiscal dilemma in Alaska has provided fertile soil for the senator to deliver what he is calling either the Kelly Green Plan or Pete-O-Nomics. At a thirty-thousand foot level the plan simply puts government on a flat-rate system, and also incorporates a pay-as-you go feature for certain government services. “Basically, you decide how long it should take to do a certain government job, and you set a standard hourly wage,” Kelly said. “So, let’s say a job should take two hours and the government wage is $15 per hour, that’d be ... well, you do the math, but it’s pretty darned reasonable.”

Kelly has worked out a table of government worker tasks, and has, in fact, set the government wage at $15 per hour, with step raises of fifteen cents per hour every ten years. After twenty years a dedicated government worker could be earning a full $15.30 per rated hour, as long as he or she hadn’t earned a bunch of demerits along the way. A couple of examples of flat-rate government work include:

Investigate and resolve a child abuse report: two hours, thirty minutes (or $37.50). Kelly said, “This isn’t rocket surgery. I understand that while God doesn’t want you to spare the rod, sometimes it’s a matter of the size of the rod and how many times the kid gets whacked with it. Anyway, a couple hours, tops, and let’s keep families together the way God intended.”

Fill a pothole: Five minutes (or 12 per hour, so 12 potholes gets you $15). “The idea is about averaging things out. Some potholes are really big and deep, but others are really small. It averages out, but twelve an hour is a reasonable number. Every twelve potholes you get $15 ... divided among the crew.” Kelly said this flat-rate system will discourage goldbricking, and it also will encourage competition between workers. “Competition is a good thing, and if some guy isn’t filling his share of the holes the other guys can give him a little ‘shovel party’ to encourage better productivity.”

Subdue a bad guy: Between 15 seconds and four minutes. “The point of this calculation is to discourage troopers from wasting time negotiating with bad guys. If it looks like the bad guy isn’t going to cooperate, plug ‘em or zap ‘em. If you can get them in the car within four minutes, or you coddle them and take like 10 minutes, you still get paid the flat rate. Of course, troopers don’t just nab bad guys all day, so they get two hours worth of pay for completing a shift. They also get five percent commission on every ticket they write. We have to support these brave heroes.” Government workers would also get five days unpaid vacation and health care coverage, but not for dental, vision or abortions.

With rough calculations and after paring down government departments to what Kelly calls reasonable sizes, the senator estimates he could fund government under his plan with about $450,000 per year. “That leaves a ton for dividends and stuff. Of course that doesn’t include the legislature, which would operate under the current system and is calculated separately. Just because Pops was a flat-rate mechanic doesn’t mean I want to be one.”

The pay-as-you-go feature was the brain child of Rep. Tammie Wilson (R-North Pole) who is carrying the bill in the House. Wilson has long wondered, often on the record, who the moochers are in Alaska. How much are regular, working Alaskans paying in taxes (almost zero) just so the moochers could take advantage of free snow plowing and ambulance rides and such?

“It seems to me that there’s a large group of Alaskans out there who aren’t contributing much, but who still get to use the landfill and go to the hospital and all that,” Wilson said. Her idea is to establish a user’s fee system for most government services. “Let’s say a woman mouths off to her husband and he slugs her,” Wilson said. “Now you could call your brother or your boyfriend and they’ll come over and fix his wagon pretty much for free, but most people will call the troopers. The rest of us are paying for that. So, I think a trooper call should be like $100. If someone gets arrested you can pay for the processing fees, and a daily rent charge for the cell. Trust me, DV calls will go down, and the troopers will spend more time responding to hard working people.”

Other government services on the fee schedule would include libraries, most school functions, fire suppression and legislation. “That way Alaskans could simply pay for the services they want ... and that they can actually afford.”

Governor Walker Talks About Alaska's Fiscal Situation

Half a Plan Won’t Do

Medium Grind – News and Analysis

Following is a brief interview with Alaska Governor Bill Walker regarding the state’s fiscal situation and the various options to put the state back on an even keel. The governor talked about what it will take for him to accept any plan from the Legislature, and about the importance of getting a complete plan in place now. Following the interview is some general analysis from Grinder News.

GRINDER NEWS: During your media availability regarding the spring forecast you said the state has to act now on a change to the state’s fiscal structure. When asked about how much of the administration’s proposal would need to pass to avoid a special session you seemed to say it should all pass this session to eliminate uncertainty, but that the provisions will be phased in between now and 2019. Does that mean if the Legislature narrows the gap significantly, but leaves out some provisions for the time being you’ll call legislators back to finish the job?

GOVERNOR WALKER: It is critical that the legislature pass a complete fiscal plan this year so we can move on to building economic opportunities in the future. If the legislature is not able to complete this task during their regular 90-day session, I am prepared to add more time to the clock. This does not mean each component of the plan must take effect in 2017. In fact, under the New Sustainable Alaska Plan, we would not reach a balanced budget until 2019. This would avoid significant negative impact to the economy this year while still providing economic certainty for the future.

GN: When asked about AKLNG, you said you still think the project is viable, and that if some partners back out there is still the option to go ahead with whomever remains. You also said the producers want the gas monetized, so even if they don’t go ahead themselves they’re still in favor of a project. That said, the state is clearly not in a position to continue into FEED under the current fiscal situation. How important is that to your desire to get the fiscal package passed in its entirety this year? In other words, is the need for liquid assets for the AKLNG project a key driver in the your sense of urgency for a complete fiscal plan? If the state doesn’t close the fiscal gap by the end of 2017, will AKLNG have to be shelved?

GW: I am committed to bringing Alaska’s North Slope gas to the global market. In order to do that, it is absolutely critical that we get our financial house in order and ensure a stable state economy in the future. Passing a complete fiscal plan this year will help prevent further downgrade of Alaska’s credit ratings, and make sure the state has the financial means to move this project forward.

GN: How much longer can the state go without a meaningful capital budget before causing grave harm to the economy? What is the administration’s vision for infrastructure beyond the gasline?

GW: Capital projects play an important role in building our state’s economy, improving infrastructure, and providing well-paying jobs to Alaskans. By passing a complete plan this year, we can provide the fiscal certainty necessary to further these economic opportunities in the future.

GN: Of course you can’t give a dollar amount, but how important is some significant reduction in oil and gas tax credits this year? Is there any concern that a large reduction in credits will negatively impact investment and production, or are we simply past that point anyway given the current price climate?

Along that line, are you even convinced the SB 21 model was going to produce significant new production anyway? Though prices are likely to remain low for the next 15 to 20 months, is it necessary to reexamine SB 21 sometime in the near future?

GW: While it is important to incentivize further development of Alaska’s oil and gas resources, I have a fiduciary responsibility to protect the state treasury. Currently, Alaska pays more on oil and gas tax credits than we receive in petroleum revenue. As one of the state’s largest expenditures, this is something we are obligated to examine.

Analysis:

Each of the past three Alaska revenue forecasts has been bleaker than the last, and economic reality has underperformed even those gloomy forecasts. There are no significant increases in oil production on the horizon, and prices have crashed and don’t appear likely to improve measurably for at least the next 15 months ... after that it’s anybody’s guess. State capital spending has been stripped to almost zero, and the state’s operating budget has been slashed by billions. In spite of all that what was a $3.6 billion revenue shortfall just a short time ago has now grown to a $4.1 billion shortfall. The government could be completely shut down and Alaska would still be nearly $2 billion in the hole. That’s just to set up a cheery backdrop.

The reality is Alaska can no longer rely on the three major oil producers to pay its bills. By way of royalties, corporate and property taxes and oil production taxes the majors for many years accounted for about 90 percent of Alaska’s revenue. Oil revenue will likely remain an important revenue source for the state, but market volatility combined with production declines make those revenues too unpredictable and unstable for them to be the budget foundation they have been. A change in Alaska’s fiscal model is needed, and that is the driver behind Walker’s proposed fiscal plan. In no other state do residents get their infrastructure, schools, law enforcement, utilities and other services for free. No other state pays its residents for using those services. When oil was flowing fast and earning strong profits it was a great ride for us Alaskans. We’re fast approaching a time when we’ll have to help pay for the services and capital projects that keep the economy strong and the quality of life high here.

When the governor introduced his plan he said it was written in pencil, and he has continued to say that. Some interpret that to mean significant parts of the plan could simply be erased, but that doesn’t appear to be Walker’s intent. He has never said the mechanics of his plan were untouchable or unalterable, but he seems to be clear that the end result must be maintained – a balanced state budget by 2019. The governor’s proposal achieves that by phasing in certain provisions over the next three years, but Walker seems to be clear that legislators should not plan to go home to their families and reelection campaigns until they’ve passed a plan that achieves that goal.

House minority Democrats have said any revenue approach that includes only the use of Permanent Fund earnings will not be acceptable. That means House Democrats are not likely to vote for a draw on the Constitutional Budget Reserve to balance the FY 17 budget if a more comprehensive plan isn’t adopted. It sets up a likely end-of-session battle with a few new twists. If House and Senate majority leadership decides to leave some of the governor’s tax provisions off the table and simply go to some model of Permanent Fund earnings use, the House minority will likely refuse to release CBR funds. In the Senate the four-member Democratic minority doesn’t have a dog in the fight, so Senate leadership will be able to pass a budget and get a CBR draw, just as it did last year.

One difference this year is that once legislative leadership has decided to go to the PF earnings reserve, a CBR draw is no longer an absolute requirement. Leadership could simply decide to balance the FY 17 budget with funds from the earnings reserve, leaving the minority with no trump cards to play this year. Minority members have said they’d like to limit the CBR draw anyway in order to stretch the state’s savings further. That makes sense because the CBR vote is really the only reliable way the minority can influence outcomes. In the minority’s favor is the fact that Gov. Walker appears unwilling to settle for a partial solution to the state’s fiscal dilemma this year. The Democrats have hoped for alignment with the administration since Walker was elected, but the relationship has been uneven. This year, while the governor fights for a plan that is anchored with PF earnings use, some Democrats are still seeking to enshrine the PFD in the Constitution and others have expressed discomfort about income taxes, and still others are advocating for a more aggressive approach to oil tax reform than Walker’s plan incorporates.

Given that House and Senate leadership have yet to find common ground, it sets up at least four distinct camps in the battle for a budget, and it will likely end in a prolonged process and some entertaining rhetorical flourishes.

Adding to Walker’s sense of urgency is his longtime passion to bring Alaska’s natural gas reserves to market. When the bills creating the AKLNG project passed, Legislators and the Parnell administration were bullish on the notion that Alaska had finally found the right model at just the right time to get a gasline built. But Alaskans have heard that tune before, and it has always ended in tears. A drop in fossil-based energy prices and market gluts in both oil and gas have essentially priced Alaska gas out of the market, yet again. Walker remains hopeful that the project can still be completed.

In the current gasline plan Alaska must participate, with money, along with other partners. The plan is currently in the Pre-FEED stage, meaning partners are gathering information and determining the potential cost and economic viability of the project. After that, partners will determine whether or not they want to proceed to FEED, where real money will be spent. Alaska’s problem, of course, is that the state doesn’t have a lot of money to throw at megaprojects right now, and in the current market some of the producers may well pull out. Compounding that, the state’s fiscal travails have also led to a downgrading of Alaska’s bond rating. While the state’s rating is still good, it will be downgraded further if Alaska doesn’t get its fiscal house in order. That will mean it would be more difficult for Alaska to even borrow funds to participate in the project. Walker has to realize that without stabilizing the state’s revenue stream and balancing reasonable budgets into the future the AKLNG project is teetering on the verge of becoming yet another failure in Alaska’s decades-long natural gas dream. It’s strong incentive to convince the Legislature to pass a complete fiscal package this year.

Finally, the state will have to address its capital budget problem soon. As capital funds continue to dry up, the infrastructure industry, which provides quality jobs and creates infrastructure that powers industry and the general economy ceases to be an economic engine. Significant losses in government jobs, and likely further losses in teaching jobs have already taken revenue out of the general economy. Further job losses put the state in danger of a significant recession, and an end to capital projects diminishes future economic prospects as well.

Gov. Walker has decided the time is now for Alaska to reimagine its approach to fiscal planning, and he appears to be firm in his desire for the Legislature to pass a complete fiscal plan this session. With an election pending it may be difficult to achieve that result. Whether a protracted budget battle will help or hurt those up for reelection is yet to be seen. That failing to address the state’s huge revenue shortfall will hurt the state and its general economy is unquestionable.

Spring Revenue Forecast Brings More Gloom

Alaska's Fiscal Hole Got Deeper Without Any Digging

Fine Grind -- News and Analysis

Alaska’s Department of Revenue released a gloomy spring revenue forecast today. As the Legislature has begun to wrestle with massive revenue shortfalls, the administration’s forecast says, “Not so fast. It’s worse than we thought. About $300 million worse for 2016 and about $500 million worse for FY 17.”

The department has strived to be more conservative in predicting oil prices in recent years, but oil has underperformed even those more cautious predictions. During a late morning press conference Gov. Bill Walker said the spring forecast underscores the urgency to change the state’s fiscal model. To bolster that claim Revenue Commissioner Randall Hoffbeck said the current forecast includes a new feature that presents all revenues available, including Permanent Fund excess earnings. Adding in those numbers, according to Hoffbeck, would bring state revenues available for budgeting up to $3.9 billion for FY 16 and $4.3 billion for FY 17. That’s compared to $1.3 billion and $1.2 billion respectively under the current fiscal model. It’s a 17 percent hit in 2016.

Forecasting tools have improved greatly since the days of goat entrails and pig bladders, but when it comes to oil prices the results aren’t all that much better. That’s no reflection upon the skills and intelligence of the forecasters, but rather a result of the extreme volatility of the market. More important than whether the department hits a specific price in some snapshot of time is how the commodity performs over a long period of time. That has long created a problem for budgeting in Alaska where the Constitution prohibits one legislature from binding the hands of a future legislature.

That prohibition, tied to the volatile nature of oil revenues over short periods has essentially forced legislatures to spend like mad in good times and then slash to the bone in lean times. There were some significant savings during the extreme flush years of record high prices while the overly-aggressive progressivity function of ACES was in place. That said, state spending was also at record levels during those years. Not being able to spend money on behalf of future legislatures tends to encourage current legislatures to not leave a bunch of money laying around for those future legislators to spend either.

One of the benefits of switching to a rules-based fiscal plan based largely on Permanent Fund earnings and some taxes is that the volatility will be greatly reduced, and legislatures will be able to budget more responsibly, without overspending in fat years and then being forced into severe contraction in lean years. In any case, today the future looks bleaker than it looked yesterday as long as the state continues to rely on oil revenues as its main source of budget money.

PUBLISHER’S NOTE: Grinder News was on a brief hiatus while a charming seven year old visited for his spring break. We’re back in gear now. By Wednesday we’ll have two more detailed articles on this topic, and we’re also working on a multi-story piece about how the government actually works in Alaska.

Common Core Under Fire Again

... But Alaska, Kind of Doesn’t Use Common Core

 

Medium Grind – News and Analysis

A group of seven Republican legislators has requested a hearing to review whether or not Alaska’s Department of Education and Early Development has broken the law by expending funds related to Common Core education standards.

It’s the latest salvo in the battle against Common Core in Alaska. Forty-two states have adopted the standards, and Minnesota has adopted the literacy portion, leaving Alaska and six other states as the outliers against the system of standards. Several Alaska legislators have dug in deep against the standards, but as the written hearing request suggests, at least some of their rationale result from misunderstandings about the standards. The letter reads in part that the representatives are investigating expenditures for “ ... education curriculum standards established by the Common Core Standards Initiative.” That sentence is a conflation of two things that are not directly related. The Common Core established standards, but it contains no curriculum. Curriculum remains, as it always has been, in the hands of local districts and state boards of education. While it is true that curricula are in part driven by standards, it is up to each district and state to determine what curricula to use, and how to present them.

The greater confusion often centers around what the Common Core actually is, where it came from, and how it relates to education in Alaska. The initiative is actually the brainchild, and work product, of the National Governors Association, a bipartisan coalition of state governors. In the mid ‘90s states were moving toward standardized benchmarks for education. The NGA decided to pool the efforts of several states and develop a single set of standards to avoid duplication and to maximize efficiency and talent. The broad initiative was based on studies that demonstrated both universities and employers were not satisfied with the proficiency and basic knowledge of high school graduates.

The controversy began when the Obama administration reviewed the standards and found them useful enough to make them one of several requirements to receive certain federal education funds. From that moment on far right conservatives associated the standards with President Barack Obama, and declared that the standards are an effort to establish national curricula. Again, Common Core has no curriculum feature.

When the standards were rolled out then president of Alaska’s board of education Esther Cox attended an event where she said she was made to feel uncomfortable about the federal pressure to adopt Common Core. She came home and the board decided to go with Alaska’s own standards. A group of education professionals and others was assembled to tackle the task. The group looked for some good examples of standards to use as a starting point. The best they could find was Common Core. Ultimately the state’s standards ended up looking more than 90 percent like Common Core, and in the process Alaskans wasted hundreds of hours developing the state’s “own” standards, and Alaska passed on millions of federal education dollars – we’re still not receiving those funds.

Some Alaska legislators railed against the state’s standards as simply Common Core on different letterhead, which they essentially are. A provision was added to Gov. Sean Parnell’s education omnibus bill in 2014 that forbade DEED from spending money on “ ... education curriculum standards established by the Common Core Standards Initiative ... ” It inevitably set up the current trap. If the state’s own standards are very similar to the Common Core, and to the standards used by at least 43 other states, it’s virtually impossible for DEED to expend money for curriculum without (at least seemingly) breaking the law.

So, what’s so scary about the Common Core?

Here are a few examples taken from the standards:

For Second Grade, under Reading and Literature:

Ask and answer such questions as who, what, where, when, why, and how to demonstrate understanding of key details in a text.

Recount stories, including fables and folktales from diverse cultures, and determine their central message, lesson, or moral.

Describe the overall structure of a story, including describing how the beginning introduces the story and the ending concludes the action

For Third Grade Math:

Understand division as an unknown-factor problem. For example, find 32 ÷ 8 by finding the number that makes 32 when multiplied by 8.

Solve two-step word problems using the four operations. Represent these problems using equations with a letter standing for the unknown quantity. Assess the reasonableness of answers using mental computation and estimation strategies including rounding.

These are not alien or subversive concepts. What’s different is that when the NGA decided to work together to create standards, the benchmarking process was new, but the educational material, and the point of education remained the same. Nobody is arguing that kids shouldn’t be educated, but rather people are battling over how to measure whether or not education is working – and that’s all Common Core is. Former DEED commissioner Mike Hanley said it was hard for him to imagine how to write any set of standards that would differ significantly from Common Core. How do you rewrite a standard that requires the legible writing of lower and upper case letters, for instance?

Grinder News neither defends nor criticizes Common Core per se. Every measurement approach is going to have its benefits and drawbacks, but it makes sense to measure how well students are doing. The questions that matter most here are why do these legislators want to nail DEED for breaking the law? Do they have evidence that the curricula being used cause harm? Is it because they think Common Core is a federal strategy to interfere in local school districts? Do they have the support of educators around the state to move to some other curricula, based on some other standards? What are those standards, and how do they differ from Common Core?

In the end it seems like yet another political distraction from the monumental task at hand to close the state’s $3.8 billion fiscal gap. Useful or not, the hearing should prove to be entertaining.

The Legislators who signed the request are:

Rep. Tammie Wilson (R-North Pole), Rep. Lynn Gattis (R-Wasilla), Rep. Lance Pruitt (R-Anchorage), Rep. Cathy Tilton (R-Wasilla), Rep. Shelley Hughes (R-Palmer), Rep. Gabrielle LeDoux (R-Anchorage) and Rep. Jim Colver (R-Palmer).

Senator Pete Kelly (R-Fairbanks) has said all session he knows government is too big because the Legislature lopped off $400 million and "nothing happened." There are 600 fewer public servants this year, and nearly every department has said services and operations are curtailed. In the proposed FY 17 budget services to seniors, disabled Alaskans and children will be further diminished. We hope he doesn't apply the same philosophy to sipping strychnine. 

Senate Passes Proposed Budget

Now the Real Battle Begins

Medium Grind – News and Analysis

The Alaska State Senate passed its version of the FY 17 operating budget back to the House on Monday. The Senate proposal adds back $25 million to the University budget, but comes in about $63 million below the House’s proposal. That is somewhat deceiving though because $100 million of the Senate’s cuts come in the form of an unallocated reduction that is likely unconstitutional.

For budgeting basic details see Grinder News’ “Budget Basics for the Rest of Us.” An unallocated cut is not directed to anything specific, but it’s rather a dollar amount that the governor or his commissioners must take wherever they can. It’s a tactic Sen. Pete Kelly (R-Fairbanks) said he likes in an interview earlier this year, but it also is likely an unconstitutional delegation of Legislative powers to the Administration. A legal opinion requested by Dennis Egan (D-Juneau) says the court would likely strike down the unallocated cut if it remains in the budget.

Kelly has described this large unallocated cut as a placeholder for actual cuts that could take place as negotiations over the proposed budget continue. It begs the question though. Republican legislators have said all year that cuts could and should be made. Budget subcommittees and both Finance committees scoured through department budgets, but apparently they failed to uncover specifically where those cuts could be made. Apparently they hope the administration will have more luck.

Now that the Senate has passed its version of the budget the House will surely fail to concur with the changes. The next step is a conference committee consisting of members of each body to hash out some negotiated version that can pass in both bodies. While the Legislature has reached this point sooner than normal, finalizing a budget is still likely to take until the end of session ... or beyond. They may come up with a budget, but they’re still far from paying for it. Now both the House and Senate will have to debate over and decide which revenue measures they will adopt, if any, to balance the books. There is still plenty in savings to cover this year’s budget, should legislators fail to agree on any revenue measures, but the governor is not likely to accept that result. They’ll have to come up with something or he’ll almost certainly send them back to work.

It’s not absolutely necessary, but it’s likely part of this year’s budget process will require a draw on the State’s Constitutional Budget Reserve account. That requires a three-quarters vote in each house, and that means at least three House Democrats will have to vote yes. The Democrats have fought to restore many of the cuts made by the majorities, and it’s likely some of those cuts will need to be addressed to get a CBR draw passed.

Whatever the final budget looks like, the large unallocated cuts will likely have to be removed or specified. While Legislative proponents of the tactic say it affords more flexibility to the administration, it’s really a near literal passing of the buck. Legislators would get credit for making a large budget reduction, and the administration would suffer the consequences for the ensuing reduced services. It’s also a little ironic that majority members are pondering taking their separation of powers suit (for Medicaid expansion) against the administration to the Supreme Court while at the same time trying to delegate some of their power, and responsibility, to the governor. Majority members like to call cuts “tough decisions,” but those decisions are a lot easier when you can pin the tail on the governor.

In any case the expenditures side of the ledger will slow down now as legislators take up the revenue side with the various measures being compared and altered. The majorities don’t seem to have much appetite for an income tax, and the minorities don’t seem interested in a revenue approach that only uses Permanent Fund earnings. The Permanent Fund earnings proposals are really the largest source of revenue. Other sources will need to be tapped in order to close the entire $3.8 billion fiscal gap, but more than half will need to come from some version of PF use. Minority Democrats have offered an oil tax reform bill and their own version of a tax-credit-reduction bill, and some of them say those should be part of any comprehensive fiscal plan. The oil tax bill does little or nothing at current prices, and it’s likely some form of oil and gas tax credit reduction will pass this session. The budget debate has been intense, but the revenue debate is really where the rubber will hit the road this session. Prepare for squalls.

Doogan: Calling It As He Sees It

Legislators to Sacrifice Lounge Muffins for Common Good

Medium Grind -- Opinion

Alaska has always been a place of booms and busts. The Russian fur trade, the gold rush, World War II, and the Cold War brought in many more people to take advantage of each economic boom. When the reason for the boom waned or disappeared, many people left. But some stayed.

The discovery of oil at Prudhoe Bay was more like an economic nuclear blast than a boom. The population of Alaska tripled. While the pipeline was being built, there was a card game behind every door, a hooker on every corner and a topless joint just down the street.

But even when those raucous days petered out, the state – and the city – continued to grow, enticed by hope and oil production. Mini-busts and mini-booms happened, but for many people life was like the hobo’s dream in the Big Rock Candy Mountains where “There's a lake of stew and ginger ale too\And you can paddle all around it in a big canoe…”

Ah, but as they say, what goes up must come down. In this case, three things are draining the ginger ale lake: Oil production continues to decline, our legislature and governor continue to give away around $2.5 billion dollars to various oil companies and the value of a barrel of oil is so low it looks like a submarine.

All of this means the state budget is $3.5 billion out of whack. Before we go to the sad responses to this, let's see what $3.5 billion is. First, it is 3,500 millions. Second, check your wallet. If you happen to have a $100 bill, it would be one of 35,000,000. More than you could carry in your hip pocket or purse. But for our purposes, it is half of the budget for next year. It is more than a budget gap, It is a budget canyon.

What is state lawmakers’ response to this, at least so far? The House has moved money this way and that, up and down the yearly calendars, and is even talking about cutting out an entrée in the legislative lounge. The Senate hasn't done anything yet except say that it’s budget will be smaller, and that the House should plan to say good-by to Portuguese sausage at breakfast as a cost saving measure. And, of course, all of this will change when each side picks three people to get together and hammer out the real budget.

Then they'll reach into some bag of money to pay the $3 billion deficit, and go off to get re-elected before the voters can figure out what’s going on.

Oh yeah, don't forget Gov. Bill Walker. He's got a plan. It's a package of cuts and increases in taxes that would need that same old $3 billion to balance the budget.

So the scorecard is this: Our boys – and girls – in Juneau won't take back about $2.5 billion that we are giving to the oil companies for no discernible benefit. Instead, they are talking about doing this, that and the other, all of which leaves them – surprise! – $3 billion short.

Of course, next year (that is to say after the election) they will discover that the earnings of the permanent fund will fill that gap nicely.

If you used to read my newspaper column long, long ago, you'll remember what a cheerful, Pollyanna-esque fellow I was. But all of this dodging and wheedling and smoke screening seems to be making me just a tiny bit cynical. How about you?

Alaska House of Reps Passes a Kidney Stone

... er, Operating Budget

Medium Grind -- Opinion

Early this morning the Alaska State House of Representatives passed its first version of the FY17 operating budget. Now the Senate will take a swing. It was the usual three-act play with all the requisite scenes and the predictable ending. Still, we junkies stayed transfixed until the end, or at least almost the end. I cashed in my chips at around 3:30 a.m.

Majority caucus leadership had promised to bring the budget in below Governor Bill Walker’s proposed budget. They delivered. The House and Senate had already reduced the governor’s budget significantly by pulling out all of his proposed changes to the state’s revenue picture. Those changes are being considered in separate pieces of legislation. Some will likely pass and some will fail. The budget will change a bit as a result, but what will really change is how much closer Alaska is to a balanced budget. If Walker gets his entire wish list, we’ll be pretty close, with just a little more work to do over the next few years. If he gets little we’ll come up way short, requiring significant draws on the state’s savings. But that’s a different play, with some different actors and potentially an ending that would make The Bard squeamish.

For now it’s enough to look at what the House did. I know Sen. Pete Kelly (R-Fairbanks) gets agida when bloggers draw conclusions from things legislators say and do – it’s early and things change – but we’ve got to keep ourselves busy. The budget will change, but we can draw some conclusions about how the currents are forming up. Well, it’s more of an undertow than a current, but ...

As is required by unwritten rule, the majority caucus (bi-partisan, but largely led by Republicans) took a blunt ax to Walker’s budget. It’s what passes for surgical cutting in some circles, and since they used three chain saws and a fistful of dynamite last year, the argument is at least tenable in a relative sort of way ... well, maybe nineable. The double secret rules also require the Democratic minority, well, they’re sort of bi-partisan too because Rep. Dan Ortiz (I-Ketchikan) compared the major parties and decided neither sounded much like a party to him. So, the Alaska Free and Independent-slash-Democratic Coalition For a Better Alaska and Brighter Future, according to the double-secret rules offered multiple amendments in an attempt to sew a few limbs back on the body to the tune of about $113 million. Each amendment failed pretty much along caucus lines, with Rep Lora Reinbold (R-caucus of one) joining the AFI/DCFBABF on a few of the amendments and Rep. Jonathan Kreiss-Tomkins (D-Sitka) jumping ship on one amendment.

That outcome is inevitable because the majority caucuses are binding – meaning members are bound to vote for the budget – not doing so last year is what garnered Reinbold caucus-of-one status. The binding nature of the majority generates some rhetorical heat from time to time, but it’s hard to imagine how the Legislature could ever pass a budget without it. The downside is that on budget matters a few legislators are much more powerful than the rest. The upside is we get a budget. Neither comedy nor government is pretty.

It seems to me the problem with this year’s budget is that extraordinary times require extraordinary leadership, and you just can’t find that in the double-secret rule book. It’s not as if we haven’t been here before. Ever since the first barrel of crude came belching out the southern end of the Trans-Alaska Pipeline Alaskans have sat at one end of an economic teeter-totter, often gently gliding up and down with oil revenues providing a deceptive counterbalance. But now and again big oil steps off, and Alaskans come crashing down on their backsides with surprised looks on our faces. That’s what happens when you hitch your wagon to a horse with three trick knees.

What was wrong last night, and early this morning, wasn’t that Republicans tried to reduce the operating budget and Democrats tried to pump it back up, that’s what they’re supposed to do. The problem this year is that when Alaska has slammed down on its backside for the umpteenth time the ensuing revenue shortfall forces legislators to act out those familiar scenes while the theater burns down around them. Majority members, both Republican and Democrat stand and say, “We know all these programs we’re cutting are important and that people are going to suffer, but we just can’t afford to be everything to all people anymore. That doesn’t mean we’re immoral.” Minority members stand and say, “This is a moral document and it reflects our values, and it’s wrong to try to balance the budget on the backs of the most vulnerable.” They’re both right in their way, but, hey, they all asked for it.

Legislators like to use the analogy of family finances when they talk about the budget. Most Democrats say when you lose half your income you don’t stop feeding your kids; Most Republicans say when you lose half your income you tighten your belt and wait for better times. But whichever side you’re on, Alaska hasn’t budgeted like a family for decades. Alaska budgets like a pathological gambler. When he’s on a hot streak he eats surf and turf every day, buys a nice new suit, and he rings the bell at the bar – everybody’s best friend. But when the cards go cold he scrounges for his meals, hocks his diamond tiepin and comes bugging his friends for a stake. The working stiff’s kids eat well enough every day; the gambler’s kids eat like royal whelps half the time and go hungry the rest. It’s no way to run a circus.

We’ve got to get off this teeter-totter. We’re not broke. In fact, most other states wish they had our troubles. Some Alaskan legislators on both sides haven’t figured out that paying the bills with an unpredictable revenue source guarantees an unstable government, and an unstable government, no matter what economic model you like, is a recipe for a shaky economy. Others have figured it out, but they don’t like talking about it. The majority will tell you they’re making tough, painful choices with the budget, but they leave out the words, “This is gonna hurt you more than me.” The minority will tell you, “We love you and we simply can’t cut these critical services,” but they forget to say, “but we have no plan for raising the needed revenues.”

The majority model fails because you can’t base a stable budget on fluctuating revenues, and oil will always be a source of fluctuating revenues. The minority is wrong because you can’t pay for things with money you’re not willing to spend. The real hard work is in figuring out what kind of government Alaskans really need – not what kind of government some people tell you they want. Confirmation bias is a powerful force in the Legislature, and it too often provides rationalization for bad policy. The real tough choice is the choice to stand in front of Alaskans and say, “Hey. Big oil can’t pay the bills anymore, so we’re going to have to do it the old fashioned way. We’re going to have to pay for our own government, and, like it or not, we need a government.” The good news is Alaska has a ton more money than other states, so we can pay for most of that government by simply paying each Alaskan a bit less to live here. That’s a tough choice because people don’t want to hear it ... but they have to hear it.

So, they did it backwards, and if they stick to this model it will put Alaska’s general economy at risk. During these tough times the opportunity is there to determine what kind of government is really needed, and then to determine the wisest and least-painful way to pay for it.

It’s going to require some use of Permanent Fund earnings, and it’s going to require some kind of broad-bases taxes. Rep. Paul Seaton (R-Homer) has introduced a bill that would tie the Permanent Fund Dividend to an income tax. It’s one of the cleanest ways to switch the dividend to a needs-based program while not short changing higher-income Alaskans. Nearly half of Alaskans don’t pay federal income taxes. Most states base their income tax on a percentage of federal taxes, so five percent of zero is ... zero. Alaskans who don’t pay federal income tax would keep their entire dividend. If you do pay federal taxes your dividend would be applied toward them. If you owe $500 in state taxes and your dividend is $1,000, you keep $500 of it and the rest pays your income tax. There are novel and creative ways to maintain a stable and effective government, and a stable and effective government fosters a strong economy. The tools are available. Who has the courage and skills to pick them up and build a better Alaska?

Democrats Tackle Alaska’s Fiscal Gap ...

Or: Memoirs of an Invisible Plan

 

Medium Grind – Analysis and Opinion

On Feb. 23 the House minority caucus, self-styled as the Alaska Independent Democratic Coalition, held a press availability. When the Q&A session began the AP’s Becky Bohrer initiated a scene that has played out a thousand times in Democratic press events. She said there are several proposals out there for use of the Permanent Fund and then asked the Dems if they have a fiscal plan.

It happens every session, usually more than once. Capitol reporters have built up calluses to the inevitable non-reply reply, but reporters are an eternally optimistic and dogged lot. Like the pain of child birth, eventually the sadness of dejection wears off and some intrepid reporter decides, “What the hay. I might as well chuck that old dart into the blackness and see if I hit something this time.” Only the sound of unrequited hope skittering along the floor comes back.

“Right now,” said Minority Leader Chris Tuck (D-Anchorage) “we need to have those dialogues taking place. We have a lot of bills in committees right now. What we’re asking,” he continued “is as we look at the budget, we do more looking at the revenue so we can have a complete package going forward.”

Tuck went on to praise the governor’s courageous plan that says we’re all in this together with oil taxes, mining taxes, sin taxes, gasoline taxes, potentially an income tax and different ways of “doing the Permanent Fund.”

Rep. David Guttenberg (D-Fairbanks) said there are still bubbles moving in the air and, “My concern is the impact on Alaskans as much as how the revenues move, where the dividends are, and when we start talking about cutting people’s dividends, we’re impacting different Alaskans differently.

Yeah, but what’s YOUR plan?

Rep. Les Gara (D-Anchorage) took a crack at it. “I’m hoping the Legislature will listen,” he said. “We shouldn’t make our decisions based on polling, but we should listen to our constituents. The one thing the constituents favor the most is logical, that we shouldn’t have the oil fields that produce zero percent production tax, that we should fix that as part of a plan; that getting no oil taxes for oil fields after 2002 and all future fields is a pathway to poverty for the state.” Gara had opened the press availability by talking about his new oil tax reform bill.

Gara said he can’t support a Permanent Fund only plan, but he didn’t say what plan he could support.

The pursuit continued. Another reporter asked the Democrats if they can’t support the level of cuts proposed by the majorities, and they can’t settle on a Permanent Fund proposal what is the biggest part of their fiscal solution.

Gara said we’re beyond cutting fluff, and now we’re cutting to the bone. He repeated his oft-repeated call for everyone to “get out of their ideological boxes” and work together to create a broad fiscal plan. Tuck said there’s no silver bullet. He acknowledged the need to look at revenues, but that people should step back and look at everything and not “compartmentalize” things. Guttenberg said there’s been no economic analysis so nobody knows how bad the cuts will hurt.

... no plan

Why Does it Matter?

Our government is explicitly designed to disperse and limit power. Separation between the three branches of government is supposed to keep one branch from running the table, and a free press is supposed to keep an eye on all of them. It doesn’t always work like that, and lately money gets stuck between the gears all too often, but it’s a pretty good idea. In the Legislature we have two separate bodies, and within those bodies are minority and majority caucuses – well, these days there’s one minority caucus in the House, the Senate has no such luck. The minority has several important roles to play. When Ethan Berkowitz was House minority leader he called it “minorting.”

A minority serves a powerful public service by offering an alternative viewpoint or alternative options. Simple opposition is not an alternative. It’s why when a Democrat stands at the podium and says, “We would never do that!” a reporter is compelled to ask, “So, what WOULD you do?” That reporter is not trying to put politicians on the spot. She’s just trying to get them to do their jobs.

The other night the House Finance Committee took amendments to its current version of the FY 17 budget. Three minority Democrats sit on the committee, Gara, Guttenberg and Rep. Scott Kawasaki of Fairbanks. They offered 27 amendments that, combined, would return about $102.5 million back to into the budget. One amendment included a bunch of negative numbers, but most of it is money previously set aside for specific purposes and most of that will be swept back into the general fund if it’s not used anyway – they are not actual budget cuts. Most of the attempted add backs were funds for programs that help abused children, physically-challenged adults and the elderly.

As each of those amendments predictably failed, one of the unfortunate realities of being in the minority, the three Democrats spoke passionately about the moral implications of making cuts that reduce the quality of people’s lives, rather than cuts to inefficiencies and real fat in the budget. Gara, who has long been a genuine and stalwart champion for children’s issues, spoke intelligently and passionately to each issue. He does his homework, and when it comes to children’s issues or helping people with real challenges no one can question his sincerity or bona fides. It’s always powerful to listen to Gara speak to those subjects, and it’s clear he’s making at least some of the Republicans in the room squirm in their seats.

Whether the majority caucuses, which are bi-partisan, by the way, are correct to make those cuts to services or not is a separate question. The problem here is that the minority members only address one side of the ledger, one of the political advantages to being in the minority. It’s too easy to cast moral aspersions when you’re not willing to step up to the plate and present funding for your moral imperatives.

Before you can argue that $100 million in cuts to programs is too much, you have to address the $3.6 billion revenue shortfall facing the state. Democrats are terrified to do so. They believe history has shown when a Democrat uses the word “tax” or suggests any use of the Permanent Fund other than writing checks to Alaskans, voters will show them the door. Talk of Permanent Fund use probably did contribute to the Republican takeover of the Legislature, but so did redistricting and a concealed carry initiative on the ballot. In any case if you’re legislating from fear of losing your seat you’re almost certainly not serving the voters anyway.

In a recent interview Rep. Sam Kito III of Juneau said, “If the legislature eliminated the dividend and used the money for government services I can guarantee 90 percent of legislators would not be reelected. It’s that much a part of the fabric of the state of Alaska.” Whether or not that’s true is immaterial. The seats in the Legislature and the Governor’s mansion don’t belong to incumbents; they belong to Alaskans. Gara said legislators shouldn’t make law according to polls, but that they should listen to their constituents. That’s true, but it’s problematic. Along with the checks and balances our government is also based on another powerful principle – that a constitutional republic is the best form of government because it prevents the mob from running roughshod over the Constitution. That’s why the job of representing other people is hard sometimes. Sometimes, like when the people are paying zero for their own government, collecting checks from that government and the government is $3.6 billion in the hole, you have to tell constituents things they’d rather not hear. It’s an inconvenient but necessary part of the job.

Kito wasn’t wrong, and he had the courage to lay out what he thinks would be one roadmap to passing a good budget this year. For Kito it would first require minimizing the damage to people’s lives and to the economy done by excessive cuts. It would also mean limiting the draw from the Constitutional Budget Reserve to no more than $1 billion – because he believes the Legislature should extend its savings as far as possible. It would also mean some kind of income tax, but also a guarantee of a PFD at a level of at least $1,000, and it would involve some use of the Permanent Fund’s excess earnings. Kito also favors reducing the amount the state pays oil and gas companies in tax credits. He wasn’t much more specific than the caucus, and he wouldn’t say if any or all of those things are must-haves, but at least he acknowledged that they’re all probably necessary.

Kito’s approach is thoughtful and reasoned, but he was quick to point out he doesn’t speak for the minority caucus, and of course, nobody really can. While some House Democrats are willing to admit some use of Permanent Fund earnings is needed, none of them will publicly speak to how it should be done, and as a group they simply can’t come together on anything substantive. In the meantime, in the Senate, Sen. Bill Wielechowski (D-Anchorage) is getting hearings for his SJR 1, an attempt to put on the ballot a measure to enshrine the PFD in the constitution. Gara says he’s not drawing lines in the sand, but also says a Permanent Fund only plan is not enough – though he hesitates to articulate what would be enough. Gara sponsored a similar resolution in the House.

Kito made the point that if the minorities start taking cards off the table they’ll kill the negotiations. However, if they don’t at least start talking about which cards they like or don’t like, there’s no negotiation at all, and the public is robbed of a potential alternative view of the situation. Nobody is asking the minorities to take cards off the table or to draw hard lines in the sand. It would be enough if they’d just step onto the beach and put together a hand they think would serve Alaskans best.

Whether you’re in the majority or the minority the people who elected you sent you to Juneau to lead. Leadership cannot simply be about saying “no” while offering no alternative. Leadership certainly can’t be about playing it safe in hopes of not alienating voters. In the minority it has to be about demonstrating how you would lead, given the opportunity. It has to be about minorting. Berkowitz also used to like to say, “If we’re a rock they’ll break around us.” It wasn’t because Berkowitz wasn’t open to negotiation or compromise; he was. It was because he understood that successful negotiation and compromise are won with a strong and coherent voice. He know that he couldn’t measure success if he hadn’t clearly stated his goals, and the path he preferred to achieve them. 

Good Journalism: Don’t Know What It Is

Or: Let’s Talk about Me

 

Medium Grind – Analysis and Opinion

 

A recent dustup between a few Alaska news sources could provide Alaskans an opportunity to consider some important questions, like what the heck is “good journalism?” and “Is there really something called journalistic ethics?” The answers to those questions are very important if we’re going to have something like a high-functioning democracy. If we are to elect people to properly represent us, and if we are to adequately assess their performance, a vibrant and responsible press is necessary. So ...

The Dustup

The war of wordsmiths began Feb. 29 when KTVA aired a story with the headline, “Wasilla lawmaker: Fixed-income seniors should consider leaving Alaska.” A shocking statement, to be sure. It induced an eruption of comments from the public and a harsh rebuke to Rep. Lynn Gattis (R-Wasilla) from legislative minority members. It also inspired me to write this satire piece. The Anchorage Dispatch News jumped into the fray with an article on the subject, and a link to the Grinder News piece. The Mat-Su Valley Frontiersman reacted with an editorial declaring that Gattis had gotten a raw deal at the hands of partisan reporters and/or editors. The Frontiersman piece admonished us other reporters for twisting people’s words to skew the narrative in a political way, thus, apparently, perpetuating the stereotype of a liberal media. Strong words. So, who’s right, and who’s doing “good journalism?”

If you click on the KTVA link above you’ll find that the station has now posted the full Gattis interview with the story. It’s the right thing to do – let readers and viewers decide for themselves. If you watch the interview it’s easy to see how you might come down on either side of the question of what Gattis actually meant. Early in the interview she actually says she’s not suggesting seniors should move away. Later in the interview she says Alaska presents some challenges for old people and there are other places that are less expensive to live. It’s expensive and treacherous to live in Alaska when you have a thin wallet and brittle hips – I’m paraphrasing, of course. But, she does say there are other places that are cheaper and safer for old people on fixed incomes. So, in fairness, Gattis did not say, “Old people need to go.” But the context of the discussion was related to the recent removal of senior benefits from the draft budget. The reason many seniors may no longer be able to afford life in Alaska is through no fault of their own if that cut remains in the budget. Gattis does suggest that seniors may have better luck elsewhere. That’s the part that makes it seem cold. It’s that the legislature might deprioritize senior benefits and force longtime Alaskans to have to rearrange their own priorities, potentially leaving their state, families and friends behind.

The Frontiersman editorial accused KTVA of taking Gattis’ comments out of context. It’s not a strong argument. The headline says a lawmaker said “ ... seniors should consider leaving Alaska,” and that’s true, Gattis did suggest that if you can’t afford to live here there are cheaper places elsewhere. Nothing wrong with that math, of course.

My own satire piece was intended to reveal the absurdity of the entire budget debate in the legislature this year. The amounts of money people are talking about in cuts are tiny compared to the state’s revenue shortfall. So if we’ve come to the place where we’re throwing teaspoons of coins into the Grand Canyon it seems truly absurd that we’d consider putting fixed-income seniors in the position to even have to consider leaving Alaska. If they all leave we’ll still be just as far in the hole as we are now. The piece was not an attack on Gattis, but rather on a public process that seems to have lost all perspective. In the interest of giving credit where it is due, on March 1 while walking home from supper I bumped into Gattis and her chief of staff on the street. They both smiled and walked over. We talked pleasantly for about 10 minutes and had a good laugh about the piece. She was a good sport.

So, What Makes Good Journalism?

There was much irony in the Frontiersman editorial. It’s main point was to shame other news sources for irresponsible, politically-driven hackery. Here’s the paragraph about Grinder News, and the following two paragraphs. The original editorial didn’t include a link to Grinder News, but after an exchange of friendly e-mails Frontiersman added the link. Thanks!

 

Frank Ameduri, a former journalist and ex-Frontiersman editor who went on to a career as a Democratic party operative and blogger, ran a satirical piece on his blog that portrayed Gattis telling children to join their “grandparent refugee” relatives and leave the state, too. The blog’s take on the situation wouldn’t normally merit mention, if not for the fact that Alaska Dispatch News picked up on it and — without naming Ameduri — cited his blog’s anonymous satire in its article about the controversy.

We in the media are frequently criticized for having a left-leaning or “liberal” bias, something many of us find offensive. That’s because most of us work hard to report accurately and without bias in order to give our readers and viewers a clear, unfiltered account of what’s happening in the world around us.

When people’s words are twisted by the media and used to skew the narrative in a political way, it besmirches the reputation of those of us in the majority who believe the facts are more important than an agenda. That’s upsetting, because it goes against the principles of fairness we try to uphold and weakens an already teetering Fourth Estate.

In an editorial nearly shouting for journalistic accuracy and ethics one would expect at least a minimum of homework to be done. I have never been a Democratic Party operative or blogger. Never worked for the Democratic Party. I’m not a registered Democrat, and I have some strong beefs with both major political parties. I have worked for Democratic legislators, first for the House and Senate Dems starting back in ’06, and then for the House Dems from ’07 to, I think ’10. I also worked as staff to Rep. Mike Doogan for two sessions, and then after running the Alaska Budget Report for a few years I worked briefly for the Senate Dems, ending in an infamous flameout.

The Party and the Dem legislators are not the same thing, and I’ve never collected a paycheck from any political party – never intend to. I don’t like party politics much. Grinder News is the first blog I’ve ever run, and it’s a sole proprietorship business and is not affiliated with anyone but me. It’s certainly not a Democratic Party or “left wing” publication. I am progressive in most of my own beliefs, and when I identify something as “opinion” my beliefs are on full display. But, I’ve also done journalism for some time, and even got some college learnin’ on the subject. My first gig was back in 1982 at a funky little weekly in northern New Mexico. I was sports editor, staff photographer and circulation manager ... we had a smallish staff. It was a great education.

The second error is in suggesting my satire was “anonymous.” My name appears boldly in the flag at the top of the page; my writing is so darned funny I wouldn’t want anyone else to claim credit for it. In truth, I’m no friend to anonymous journalism of any kind. This profession is the only one specifically mentioned in the US Constitution. The First Amendment bestows great power upon anyone who claims to be a member of the press. I’ve always believed that with that power comes great responsibility, and the least exercise of that responsibility requires standing behind your words. So. Not anonymous. I’m Frank Ameduri. Always have been.

As for reporting without bias, I say poppycock, but more on that in just a moment. As for twisting people’s words, again, I plead innocent. My piece was satire. I didn’t twist anybody’s words. I completely fabricated them. That’s kind of what satire is about. You can look it up.

Back when I wore three hats and two-and-a-half shirts at The Los Alamos Chronicle, the news was different, and I think better in a lot of ways. Admittedly, the Chronicle was not a paragon of journalistic excellence, but I mean journalism in general. There is a circular current that drives a news business. Where that current originates is critically important to the quality of the news. In those days the flow started in the newsroom, passed to the readers and ended in the newspaper’s advertising department. The idea was that we weren’t just selling blank space to advertisers. The blank space had value because we generated integrity and credibility by producing accurate news and relevant commentary. Back then advertising reps were not allowed in the newsroom, and if one wandered in the editor would chase them out with shouts and derision. There was no such thing as “advertorials” and reporters were never asked to write copy for anything associated with an ad. These days the current is mixed, but largely comes from the advertising department, and the corporate model for news is driven by the bottom line.

During my own time at Frontiersman, and management was different at that time, the lines between news and advertising were somewhat blurred, and the newsroom was viewed as a cost, rather than as the entire point for the business. We operated under story quotas, short staffing and other challenges in order to keep costs down. That model diminishes the ability to produce a high volume of quality news, and it’s a common problem in newsrooms all over the country these days. Low wages also make it difficult to keep seasoned reporters on staff.

I was once asked to publish a fluff article as an appeasement to a state legislator with bruised feelings, partly because campaign ads were a big part of our revenue. I was also asked to publicly apologize to the Wasilla mayor about an accurate story she didn’t like (it wasn’t Palin). She’d threatened to pull the city’s legal ads, a significant and steady source of income for many local papers. That’s what happens when profits drive news decisions, and that’s the most dangerous kind of bias of all. Rep. Mike Hawker (R-Anchorage) has a bill that would provide a free online place for legal ads. I don’t know what Hawker’s motivations are for the bill, but I strongly support it as a way to diminish local government influence over small papers. I would also point out that several years ago I was confronted with a similar situation with a city official threatening to pull legal ads. My publisher called me in and asked if the story was accurate. I said it was. He called the official and asked him to spell his name. The official asked why. My publisher said, “Because when we write the article saying you tried to influence our news coverage with money I want to make sure we spell your name correctly.” Times have changed, at least as many papers.

On the subject of bias, journalists like to say they have none. There’s a name for someone who has no principles, values or opinions – it’s sociopath. Sane people live their lives according to a set of guiding principles, some basic philosophy and probably some strong opinions about certain things. Having those things doesn’t mean you can’t be a good journalist. As long as you don’t omit important facts and data as a function of your biases, and as long as you keep your opinions firmly under the heading of “Opinion” you’re just a professional doing his/her job. The trick isn’t in being apolitical or amoral, it’s in being honest and professional.

So, here’s what good journalism is. Good journalism is news stories that present factual information without bias and without intentional omissions. Good journalism is analysis that makes sense of the facts and data in those hard news stories – by its very nature analysis will have some biases, because economists can’t agree about math, educators can’t agree about schools, and sports writers can’t agree about LeBron. Good journalism is powerful and pointed opinion that gets the blood pumping. Good journalism is pointed satire that provokes thought, discussion and debate. Good journalism can’t be found in one place, and it’s a dialogue between reporters and their audiences. Good journalism is dependent upon readers, listeners and viewers using multiple sources for information and applying some brain power to sort through the information. If you only seek out news that confirms your own biases you’re going to be uninformed or misinformed, and that applies across the entire sociopolitical spectrum. Being informed is not a passive process; you have to work at it constantly – we’re just here to help.

So, who was “right” in the flap recounted above? Well, we all were, at least in some ways. It’s a great example of how to use multiple sources to help form your own opinion about what happened and what it means to you. I can’t tell you what to think about Lynn Gattis, the Legislature or old people. My satire was one part of the public discourse. The most important part of that discourse is what Alaskans think about cutting senior benefits, irrespective of what Lynn Gattis, KTVA, the ADN, Grinder or The Frontiersman think. The story isn’t that Lynn Gattis doesn’t like old people; she probably does like them, in fairness, she’s going to be one soon – so am I. The story is that some of Alaska’s seniors will have to make life-altering choices if that program is cut, and Alaskans have to decide whether or not we think that’s OK. Read on Constant Reader, and be sure you get your news from as many places as you can; that’s what makes it good.

Dunleavy Takes Aim at Unplanned Abortions

Senator Moves to Thwart Abortionists’ School Marketing Scheme

Coarse Grind – Humor and Satire

Publisher’s Note: Dear legislators. Please note the “grind” of this article. As a service to you Grinder will provide some useful information. Satire: the use of humor, irony, exaggeration, or ridicule to expose and criticize people's stupidity, silliness or vices, particularly in the context of contemporary politics and other topical issues. When filtered through a thick ego or inflated sense of self importance satire can sometimes appear to be “real.” Earlier this session two separate Democratic legislators said, “I had to read it several times before realizing it was a joke" in reference to the second half of this article. In response to this piece someone warned me that “it could come back on you.” In the interest of credit where it is due, Rep. Gattis bumped into me on the street after the latter piece published. Not a hard bump, it wouldn’t have been a flagrant 2. Actually we had a good laugh about the piece. As a guide, if someone writes something about you dripping with satire, and if you believe you might have actually done the things in the article, it’s time to reexamine your strategy and organization. It kind of takes some of the fun out of the comedy jokes if I have to type a smiley face or write “Just kidding” after each one, but just this once, WARNING! Satire Ahead ... 

Warrior for Parental Rights

Senator Mike Dunleavy (R-Wasilla) is the prime sponsor of two bills in the Legislature this year that, should they pass, may greatly reduce unintended abortions, provide parents a line-item veto on all curriculum and establish appropriate punishments for people who try to turn students into sex fiends. SB 89 establishes the rules, and SB 191 sets up the mechanism for punishment.

“Parents are the ultimate experts on what their children need to know, and how they should learn it,” Dunleavy said. “I represent various parts of the Mat-Su, and lots of people in my district are old fashioned. They prefer to teach their kids about sex in their own personal ways. Many of my constituents are kind of hands-on, rather than book learning kinds of people, and they know their children much more intimately than any teacher or abortionist could ... or at least should.” But the bill doesn’t only make parents sex experts, but it also gives them expertise in virtually every subject taught in schools, allowing them to review the curriculum and materials and to exempt their children from any subject that doesn’t meet their expert standards.

“Our boy Gern is fragile, and frankly, kind of a clumsy oaf,” said parent Ardith Schmetzer. “A lot of the stuff they do in PE requires pretty much Olympic-caliber physical acumen. After the volleyball section Gern had trouble walking for almost three days, and he insisted on wearing two-piece bathing suits, which made his father uncomfortable. During flag football someone pulled his pants down. They do that in the cafeteria too, so why sanction it as a so-called ‘sport?’”

Thelma Bluck, a high school sophomore, would like to opt out of her basic science course on account of misinformation. “Mr. Grimes says gravity is a law,” Bluck said, “but I looked it up and it’s just a theory. There’s something called the law of gravitation, but not gravity, and it’s really confusing, so I’m not even sure that’s even real. But anyhow, have you ever seen a plane? I flew in a big, heavy metal one to the Creation Museum in Kentucky so, helOOOOO! Something holds some things down but not others. I think they should teach both sides of the controversy. If gravity was a law then birds would be snakes.”

Rep. Tammie Wilson (North Pole) likes the idea of the parental line-item veto. “As I said earlier this session, some mathematicians might believe in inflation, but me and my friends don’t. I think business and economic students should be able to opt out of the fantasy and propaganda portions of those courses. Also, parents should be able to review their children’s test grades. If the teacher’s answer doesn’t match the parents’ biases, we should be able to remove that question from the test. Why should our children fail a test just because they don’t agree with facts?”

“Look,” Dunleavy said. “Public school, by definition, is for everybody, so each parent should be able to determine which reality is taught to their children. It’s not up to public schools to determine winners and losers in terms of facts and such. Their job is to teach children whatever their parents want them to believe.”

Planned Parenthood and the Orgy Culture

The second part of Dunleavy’s bill prohibits abortion providers from presenting information about sex, STDs, contraception or “other dirty things” in public schools. It says schools and districts can’t contract with abortionists.

“Planned Parenthood and others have been contracted to present sex ed information in our schools,” Dunleavy said. “It’s basically a marketing strategy to drum up more abortion business for them. Because many abortions are not planned, business has been waning, so they need more pregnancies, and teaching kids to have sex is the easiest way to do that. I’ve heard sex is more addicting than cigarettes and candied salmon.” Dunleavy was unable to explain how abortion is a profit industry, but suggested, “There may be a black market for feti.”

Dunleavy pointed to a study conducted by the reputable Center For Family Ignorance that presents evidence that more than 94 percent of children under the age of 19 do not know about sex unless Planned Parenthood, or a priest tells them about it. The study affirms, “Most of these children spend their spare time reading the Bible, watching Kirk Cameron films or doing chores until Planned Parenthood shows up in their classrooms with porno. After that the girls refuse to participate in purity ceremonies with their dads, and kid culture is defined by orgies and group abortion rituals. Once people realize sex is fun and can be done without STDs and unplanned abortions they start wanting to do it more.”

An unnamed representative of Planned Parenthood said the organization has to use porn magazines as classroom materials because, “The Texas school board pretty much decides what goes in textbooks these days. Those textbooks attribute scoliosis and male-pattern baldness to premarital sex, and nearsightedness and something they call ‘Shriveled Arm Syndrome’ to masturbation. At least Penthouse is biologically correct.” The claim appears to have some merit. Current science textbooks also depict early humans (who are usually blond with sculpted, hairless bodies) riding dinosaurs to church. Another science entry shows early humans openly mocking monkeys for their obvious inability to evolve into people.

 

Just Desserts

Dunleavy said just making a law preventing qualified adults from teaching students about things like safe sex probably won’t stop the problem by itself. “The market for unintended abortions is great,” Dunleavy said. “And the urge to recruit young people into the supply line is very powerful. Just telling abortionists to stop teaching kids about condoms and other anti-religion technologies will not stop them. There has to be a punishment element in the law. It’s the only thing sex fiends understand, though admittedly, some of them enjoy punishment. No law is perfect.”

Dunleavy’s bill starts out light on first offenders, requiring them to spend a week in public stocks. For subsequent offenses things get a little more serious.

“I think we should let the Bible be our guide,” Dunleavy said. “The Old Testament says anyone teaching kids about birth control or how to self satisfy should be publicly castrated, stoned to death and then dragged behind a camel for two days. I have to check with the bishop, but I think in Alaska we can substitute moose for camel.

"In the New Testament," Dunleavy said, it's not as specific, but Jesus seems to suggest that only parents, to include adoptive and step parents, should teach children about sex, by example if the kid is a slow learner. If someone else steps in the parents should pray for what's called resurrected virginity, and also for the offender to be transformed into either a loaf or a fish, whichever seems most appropriate, though during Lent fish is recommended. Again, it's not explicit, but sometimes you have to read between the lines."


Gattis Doubles Down

Rep Says Slacker Kids Should Join Grandparent Refugees

Coarse Grind – Satire and Humor

A day after telling Alaskan seniors to take their money grubbing ways to warmer, less slippery climes Rep. Lynn Gattis (R – you guessed it, Wasilla) doubled down by telling Alaska’s children to “get tough or get lost.” On Leap Day Gattis told Alaska’s fixed-income seniors to go jump in a lake – someplace else. While some said Gattis may have gone too far the Wasilla legislator said overnight she realized she probably hadn’t gone far enough.

“I mean it’s true that we can’t keep subsidizing these geezers who really aren’t contributing much anymore, but most of them aren’t going to be around much longer anyhow, so shipping them off to California or Oregon or someplace is a short-term fix,” Gattis said. “The real drag on the economy is the kids, and they’re going to be around a long time. Seems like there’s more of them every day.”

Gattis said she’s contemplating a work-for-school program or simply sending the “weaker” kids to more liberal states where she says they’ll likely be happier anyway.

“The tough kids, the real Alaskan kids, can stay,” Gattis said, “but they’ll have to earn their keep. With all these operating budget cuts, there’s plenty of need. Kids could be put to work removing snow, fixing potholes, fighting forest fires and like that. In exchange they could attend night school ... heck, some of them could even teach other kids, there’s going to be a need for teachers soon, too.”

Gattis said the US is falling behind in child labor, and that’s going to cost us in the long run. “Many of Myanmar’s kids serve in the military, preserving their way of life,” Gattis said. She pointed out that Myanmar’s economy has turned around recently, and that the country is enjoying 8.5 percent GDP growth. “China is using more and more child laborers too,” Gattis said, “and you don’t need me to tell you they’re kicking our butts.”

Some of Gattis’ colleagues aren’t sure if her plans for seniors and children are really best for Alaska, though. Rep. Lance Pruitt (R-Anchorage) said, “I really, really want my Grams and Pop-Pop to stay here in Alaska, but I also don’t want to have to start cutting them personal checks just because we had to kill senior benefits. I hope we can find a compromise, like maybe the old people can pick up trash or make hats or something. Some of them are still pretty good with their hands. As for the kids,” Pruitt said, “They do seem to want an awful lot for not much in return.”

Gattis said American kids have gone soft. “Used to be kids earned their keep. We’ve all seen those adorable pictures of their smudgy little faces coming out of the mines, or with their nimble little hands working sewing machines. Now they just want to sit at their desks turning into fat know-it-alls,” she said. “First it started at like five years old. Not only did they want to loiter in government-built schools all day, but then they also started needing rides; like walking is too hard. Heck, I’ve seen packs of them them run around a soccer field for hours, so it’s not like their legs can’t handle a little walking. Then they wanted to eat. Next thing you know our education budget is bigger than everything except the dividend program, and the kids are all hopped up on science. Now the toddlers want in on the government action,” Gattis lamented. “Pre-K. What even IS that? When I was a kid pre-K meant learning not to poop your pants and how to say please and thank you.”

Gattis said at this point she’d prefer it if the kids would just follow their grandparents to someplace like California or Portland where they could “deliver granola balls to cripples or learn to make owl dolls from pinecones or something.” However she said she’d be willing to give both the elderly and the very young an opportunity to remain in the Great Land. “It’s called the bootstrap program,” Gattis said. “The state will provide you, at a reasonable cost, one set of bootstraps. If after a month you haven’t figured out how to pull yourself up by them, get on the boat. You don’t see baby moose complaining,” Gattis said, “and they have to eat wood.”

The Draft Budget is Out

Pay No Attention to the Funds Behind the Curtain

 

Medium Grind – News and Analysis

Today the House Finance Committee released its draft revision of Governor Bill Walker’s FY 2017 state operating budget. At first blush the FY 17 House Finance draft reduces the governor’s Unrestricted non-formula appropriations by about $245.6 million and reduces formula UGF by about $173.4 million, for what appears to be, in numbers and language-related reductions about $418 million less than Walker proposal, or about a 9.3 percent reduction.

Numbers are funny things, though, and when it comes to large scale budgeting, they can be downright silly – see Grinder News “Budget Basics for the Rest of Us” Feb. 15. Aside from the different kinds of money and the standard complications inherent in the system explained in that article, there is another lens that refracts the numbers and may lead to some confusion. That lens is simply time.

The Legislature is currently working on the FY 17 budget, and if it were isolated we’d have a much easier time understanding what they’re doing. The problem, or the reality for perhaps a better term, is that we’re still living inside the FY 16 budget, and that means it’s a living budget. As long as it’s still FY ’16, the budget that was drafted last year is merely an approximation. There are supplemental budgets still out there that will change it, and there are some supplemental changes that haven’t even been requested yet. The way some of those supplements will be handled will have an impact on the FY ’17 budget, meaning the two budgets are linked in some ways ... and FY ’17 will also be linked to FY ’18 in the same way. It’s a fluid process that is hard to pin down sometimes. Our own personal budgets are kind of that way, too. Financial decisions we make this year will affect our taxes next year. The more money we have, and the more diversified it is, the more difficult it becomes to separate one year from the next.

That’s important when observing the state budget for many reasons, but one of the most important is that it can greatly impact what we think are budget reductions. The number above is true. It’s also ... not true. Here are a couple of reasons why. Grinder News hasn’t had an opportunity to “mark up” the entire budget bill yet, so these are just some quick first impressions.

One of the ways the years can be connected is through the process of fund capitalization. The state has several funds that are semi dedicated, despite the constitutional prohibition against dedicated funds (another time). These funds can be used as sources to fund certain government operations and programs ... next year or this year. So, part of the FY ’17 draft budget includes some fund transfers in 2016. If you make the mistake of thinking the 2016 budget is history, and you can put it in the books, you’d have a false impression of the state’s fiscal situation.

This year the draft budget proposes to transfer $80 million from the General Fund (that pays for government) into the higher education fund – a supplemental appropriation. Then as part of the FY ’17 proposed budget they use that money to pay for part of the state’s retirement obligation. It’s a way to change undesignated funds into designated funds. It means those funds that could be spent for anything in 2016, will be designated for retirement in the FY ’17 budget. Et Voilá. Fiscal refraction. It’s not exactly money laundering, but if you’re trying to keep your general spending down, but you really want to put some GF money toward a dedicated appropriation, this is one way to “clean up” the process.

Another switch happens in the Public Education Fund between the years, with a $435 million supplemental appropriation this year and an FY ’17 deposit reduction of $145 million. In this case, FY ‘16’s budget gets bigger, and FY ‘17’s budget looks smaller. It’s not that the money isn’t being spent, it’s simply a matter of when it shows up on the books. It’s not unusual for an administration or a legislature to use fund transfers in this way, but because most people assume the FY ’16 budget is locked down, the effects are often missed.

Another potential point of confusion for the FY ’17 budget process is that the governor’s proposed budget included a lot of money that is contingent on legislation separate from the budget. All of Walker’s proposed changes to taxes, credits and the re-plumbing of the Permanent Fund are separate bills. As each of those bills is passed (assuming any are), it will impact the FY ’17 budget. So the current House Finance draft is merely a base budget that will likely change, maybe dramatically, before the session is over. House Finance is taking public testimony on the budget this week in the evenings, but that testimony will only be on this base budget. As public testimony is taken on the governor’s bills it will be important for Alaskans to remember that each of those decisions is also a budget decision.

Bills From the Wild Side

On Packin’ Heat and Volunteer Guinea Pigs

Coarse Grind – Humor and Opinion

Publisher’s note: This is the first in a recurring series examining some of the lesser-known, and perhaps odder personal bills in the Legislature. Part of being a legislator is introducing personal legislation, and some of that legislation can be serious and important. Some of it can be benign (if silly), such as the establishment of Marmot Day, and some of it can be downright strange. Since the statutory move to a 90-day session, and particularly in a year when legislators might be expected to be distracted by a $3.5 billion revenue shortfall, readers might be interested to see some of the other legislation in the Capitol.

GPA: Gun Packing Academicians

One of the non-revenue bills actually getting some action this session is Sen. Pistol Pete Kelly’s SB 174, or the Gunfight at the Cornerstone Plaza Act. The bill is a response to the University Board of Regents’ decision to ban concealed carry on its campuses. The bill suggests that the concealed carry prohibition denies Second Amendment rights to law-abiding young adults who are just peacefully seeking knowledge, cheep booze and adventurous dating. There’s a philosophy that says a heavily-armed society will promote peace, safety and finally give the bad guys what’s coming to them.

The bill recently moved out of the Senate Education Committee, chaired by Sen. Charlie Huggins (R-Wasilla) who was sitting in for Sen. Mike Dunleavy (R-Wasilla) who was traveling. Huggins opened the hearing with the housekeeping announcement that he had a knife in his pocket. Some gallery sitters were visibly disappointed, probably having thought all this time Huggins was just always happy to see them. Huggins later pointed out that, as a former soldier and a guy who shoots a lot, it makes him angry that he can’t pack a peacemaker onto commercial airliners. It’s a fair point. Why can’t the TSA just frisk the bad guys getting on planes? Why should we well-intentioned freedom lovers suffer for the actions of a few hundred thousand, or so, bad actors? Surely if all good airline passengers were equipped with leg irons we could all swill our expensive cocktails in a halo of comfort, knowing that if the guy in 14-D mouths off again he’ll be treated to a well-earned sudden cabin decompression.

But this bill is about our public campuses of higher learning, not the namby pamby whims of the NSA. Supporters of the bill take a couple tacks. First, the board of regents has no business depriving students, or anyone else, of their Second Amendment right to bear arms, and second that everybody would be safer if students, or whomever, could shoot bad guys in their stupid faces. The first point is interesting coming from people legislating behind the powerful safety of a plaque on the Capitol building prohibiting weapons and firearms – whoops, Sen. Huggins! Of course, the sign also prohibits loitering and soliciting, so it’s a fair guess most legislators and lobbyists simply haven’t seen it yet.

So, what would a fully-armed university campus look like anyway? Well, according to the campus police chief that testified, since most of the gunslingers would be untrained, it would look pretty scary to campus cops. But that's their problem, right? Besides they're missing the upside that once the student body is fully armed, the students could do a lot of the cops' shooting for them, leaving them more time to buckle down on parking scofflaws and on Greeks streaking through the Wood Center. One has to wonder, though, if the shiznit starts going down on campus, and everybody drops their books and pulls out their heaters, how will the good guys know who the bad guys are? I mean, once everybody is swinging a pearl-handled persuader around the best policy is probably just to shoot first and let the dean sort 'em out later. That's why I'd offer the following amendment to SB 174. While the board of regents should keep their big, fat noses out of students' holsters and waistbands, they could make themselves useful with dress code enhancements. My amendment would require any bad guys entering university property to wear a Hot Dog on a Stick uniform. The uniforms are distinctive and make good targets. I an all-out firefight students and professors would easily be able to identify infiltrators and fry their cheese.

The Rights of Impatients

This one deals with sensitive and personal issues, so I’ll try to keep my tongue out of my cheek. Sen. Bill Wielechowski is carrying SB 113, a bill that falls under the rubric of other “Right to Try” legislation that has passed in 24 other states and that is being heard in several others. The stated purpose of these laws is to allow terminally-ill patients to circumvent the Food and Drug Administration and request access to experimental drugs. Normally, drugs must be approved before patients (through their physicians) can use them. Under current law a physician can ask the FDA for a waiver, and the vast majority of them are granted.

These laws present several problems, and in the states where they have passed there is no evidence to suggest any physician has made use of them. While it seems reasonable to allow a dying patient to try an experimental drug, the ramifications could be broad. By bypassing the FDA the onus would be placed on the drug developers, and they are understandably reluctant to put their drugs into use outside of clinical trials. One reason is the obvious liability risk, but another challenge is that experimental drugs are not produced in large amounts – because they’re not intended for use outside of the lab. The laws also require the patient/doctor to first convince the drug company to provide the drug at cost, a remarkably difficult thing to do. In addition, if the patient experiences serious side effects from a drug that is not yet ready for prime time, it could make it much more difficult for the company to ever receive FDA approval.

These laws present several problems, and in the states where they have passed there is no evidence to suggest any physician has made use of them. While it seems reasonable to allow a dying patient to try an experimental drug, the ramifications could be broad. By bypassing the FDA the onus would be placed on the drug developers, and they are understandably reluctant to put their drugs into use outside of clinical trials. One reason is the obvious liability risk, but another challenge is that experimental drugs are not produced in large amounts – because they’re not intended for use outside of the lab.

The laws also require the patient/doctor to first convince the drug company to provide the drug at cost, a remarkably difficult thing to do. In addition, if the patient experiences serious side effects from a drug that is not yet ready for prime time, it could make it much more difficult for the company to ever receive FDA approval. These laws also cannot force health insurers to cover the experimental drugs, and most of the laws do not make provisions for coverage.

In short, the FDA already grants waivers for the vast majority of terminal patients, and there is no evidence that Right to Try laws have actually benefitted anyone. The drugs, because of their very nature as experimental, could cause serious complications to a patient’s condition, or create serious new problems for patients.

Can Papa Oil Save Us Again?

Did Oil Taxes Cause the Problem? Can They Fix it?

Medium Grind – News and Analysis

Last week Rep. Les Gara (D-Anchorage) received a response to a list of questions he’d sent Tax Division Director Ken Alper back in January. Gara issued a press release Thursday with his interpretation of Alper’s response; Monday Gara’s HB 326 was introduced. The bill is an oil tax revision that Gara describes as an attempt to contribute to a more balanced and fair fiscal plan.

In the release Gara described Alper’s response as an “analysis,” and the document spurred some angst in the Capitol for at least a few minutes. It was mentioned at Thursday’s House majority press availability. House Speaker Mike Chenault (R- Nikiski) lamented that the Department of Revenue was somehow able to provide analysis to minority member Gara, but that the department had been slow rolling responses to majority questions from committee members this session. In fairness to Alper and Gara, the letter in question was sent Jan. 16, and the questions relate to the current oil tax structure. The questions majority members are asking this session relate mostly to Governor Bill Walker’s budget and fiscal proposals that are new in the Legislature this year. It’s also probably fair to describe Alper’s response as answers to some questions, rather than an analysis. That said, the new bill spins yet another twist into this year’s fiscal debate, albeit the most familiar twist of all.

The point of introducing an oil tax bill at this late juncture, Gara said, is to ensure everything is on the table during the budget and fiscal debates dominating this legislative session.

“If you’re going to ask people in the state to give up a big portion of their dividend, which is what some people are doing,” Gara said, “we have to put everything else on the table too, so we can talk about it. So things can be balanced.” It’s the talk of dividend reductions, along with further operating budget cuts, that weigh most heavily on Gara’s mind.

 

How Much Wood Does This Woodchuck Chuck?

So, in terms of getting more economic logs on the fire that keeps government services steaming along, how does Gara’s bill stack up? As with any oil tax ... it depends. Net profits taxes are impacted by myriad moving parts and spinning gears. But whether it’s net- or gross-based, all oil taxes are most dramatically impacted by price and production. You don’t need Grinder News to tell you price and production aren’t exactly enjoying their halcyon days right now. Under any of the state’s three previous oil tax regimes, or under Gara’s proposal, we’d still be right here in the hole we’re in.

At current prices Gara’s bill earns about zero more dollars over the current tax structure or over Governor Bill Walker’s modest proposal to raise the minimum tax to 5 percent, instead of the current 4 percent. As a point of reference, the current tax structure has a base tax of 35 percent, but when oil prices fall below about $70 per barrel the minimum tax rate kicks in. Raising the minimum tax means the state earns a bit more at lower prices. Gara’s plan would raise the minimum, but it would also make it progressive, so that as oil prices increase, the tax rate follows them, from 5 percent at the bottom of the scale to 10 percent just before the crossover point where the base profits tax kicks in. More on the structure later, but at current oil prices (around $30/bbl) that wouldn’t move the needle at all, and even at something like $70/bbl it would raise about $300 million additional. The Department of Revenue’s 2016 forecast is $56/bbl, and oil is currently around $30/bbl and has dipped as low as $26/bbl in 2016.

Another provision of Gara’s bill is to make the base profits tax somewhat progressive again, as it was under ACES. Gov. Sean Parnell’s SB 21 established a flat base tax rate of 35 percent. Gara’s bill would range between 20 percent and 35 percent, depending upon the price of oil, but there is a more significant difference. Current law sets the base rate at 35 percent, but that is a nominal number – basically a starting point that is never actually paid by the producers. First they take their qualified deductions, which are basically transportation costs and qualified capital expenses. That reduces the amount of taxable earnings – effectively reducing their tax rate. The rate after deductions is the effective rate. Under current law for everything defined as “new oil” companies can also take advantage of something called the Gross Value Reduction, which basically reduces their taxable amount by 20 percent. It means, for instance, that at between $90 and $100 per barrel instead of paying 35 percent tax a producer only pays about 19 percent. Gara’s bill would do away with the GVR after four years.

One other important change Gara’s bill makes is something Walker is also seeking to do. Right now the state offers a net operating loss credit to companies that do not make a profit in Alaska for a given year. The intent was to help out explorers and small producers who were spending money to find oil and to begin bringing it into production, but that were not yet earning money in Alaska. The assumption was the three majors were not likely to lose money in Alaska. There is evidence this year that at least one of the majors is, in fact, losing money here. If they take the NOL credit it could cost the state real money. It’s a serious problem that needs to be resolved this session.

The challenge is you can’t have a net-based tax without deductions. Even if Gara’s high-end rate is 35 percent, companies will have to be allowed to deduct for transportation costs and qualified capital expenditures. One of the advantages of a gross-based tax is that it basically takes three things into account: How much oil comes out the end of the line; how much is that oil worth; how much of a cut does the state get?

Any net-based structure, no matter how smart you are, is going to be more complex, and it’s going to rely on a fair amount of subjectivity. What is a qualified capital expense? What is actually “new oil” vs. faster production of the old oil? Which credits incentivize wise capital investment and more production? The list is almost endless, and every answer changes the way the tax works – and every administration is likely to answer at least some of the questions differently.

 

Can Oil Save Us Again?

Gara said he wants to put everything on the table, including the notion that the producers shouldn’t get away with what he says is paying zero taxes. One of his arguments is that under the current system oil would have to nearly triple in price before the state started making any real money. Under his own bill oil would have to more than double in price before measurable revenues are earned, and at the forecast price of $56 per barrel, which may be less when the new forecast is released, his bill does little more than the governor’s proposal relative to the $3.6 billion fiscal gap. For those first four years while Gara’s bill maintains the GVR calculation it doesn’t even perform significantly better at higher prices.

All that aside, it’s not Gara’s fault, any more than it’s the fault of Parnell’s SB 21, or really the fault of the major producers. Oil prices are low, and production in Alaska continues to decline. The primary stated goal of SB 21 was to encourage capital investment to generate more production. It would presumably do that by creating a more attractive tax climate in relation to other provinces. Whether or not that philosophy was legitimate is no longer relevant in the current economic climate. At these prices the last thing Alaskans should want is increased production – why dump a finite resource into a poor market? Fortunately, that’s the last thing producers are likely to want to do, too. The point is there simply isn’t a tax structure that can make oil save us in this market.

Where Gara is likely right is that changes to SB 21 are needed, and that oil is not likely to be $30/bbl forever. The GVR might have been a reasonable idea at one time, but it was only initially intended to apply to explorers and small producers who would bring legitimately new oil into the mix. The major producers balked at that notion, claiming most of the “new oil” would come from existing fields. They won and got in on the GVR action. That leaves the Department of Natural Resources the difficult task of figuring out which oil would have been produced anyway, and which oil is actually the result of the GVR. No matter how you slice that, Alaska is likely giving a huge tax break on oil that should be taxed fully.

The problem is, while Alaska’s oil tax structure needs some changes, most of them won’t do anything to contribute to the current revenue shortfall trouble. The governor has legislation to reduce oil and gas tax credits, and that’s where the money’s at in the short term. Updating the decades-old credit structure in Cook Inlet alone could produce hundreds of millions in revenue for the state. Changing the tax structure, which traditionally takes a long time and generates intense battles, won’t produce any meaningful results until, and unless, oil rebounds to somewhere above $75/bbl again, and that’s not likely in the near future.

The Myths That Wouldn’t Die

Finally, HB 326 is more evidence that legislators across the gamut seem to be struggling to accept the new paradigm. Gara said the Legislature has always set oil taxes for the current world, and that he wants to address the future, but he couldn’t say what he thought the average price of oil might be over the next five years. That’s not surprising, nobody’s ever gotten that right. It was really high in 2009, he said, and now it’s really low. It’ll be high and low in the future, too.

“If oil is $1 a barrel it’s not going to be the primary source of revenue,” Gara said. “If oil goes back to 2009 prices and we get back to over $120, $130 a barrel, which isn’t going to happen in the near term, but if that happens again we should be able to generate surpluses and put money into savings and put money into schools and money into the university, which has been cut to shreds, and put money into job training.”

And that’s one myth. It’s the idea that basing Alaska’s fiscal structure on the volatile oil market will always balance out and benefit us in the end. Gara said he’s open to other ideas, and that he wants all legislators to get outside of their ideological boxes, but his statement above is unclear. If oil is not going to be Alaska’s primary source of revenue at low prices, then what is? It’s the question Democrats have always been hesitant to answer, likely because whether we like it or not, some restructuring of the Permanent Fund to stabilize the fiscal boat is really the biggest piece of the solution. It’s hard to know how many of the minority Democrats are in that place. Minority Leader Chris Tuck, (D-Anchorage) still does not reply to requests for an interview, so it’s hard to gauge where the caucus stands on the big picture. Tuck and Gara appeared together at the House minority press availability this morning. Gara talked about his bill; Tuck talked about the need for revenues across the board. Both talked about the futility of massive cuts. In an interview Gara said cuts along the lines of Governor Walker's proposal are reasonable. When asked what their plan would be neither of them, nor Guttenberg nor Rep. Scott Kawasaki (D-Fairbanks) could offer specifics.

The other myth is spoken from the other side of the aisle. Some majority Republicans still recite the epic tale of the giant government that ate Alaska. Sen. Pete Kelly (R-Fairbanks) and Rep. Tammie Wilson (R-North Pole) are the leading voices in the chorus. They’re not willing to talk about revenue measures until the colossus of red tape is cut down to the right size – whatever that might be. The problem is there’s almost nothing left to cut. There are a few efficiencies to be found here and a redundancy or two to be sliced there, but it’s peanuts for a state budget hungry for steak and potatoes. They point to the fact that Education and Health and Social Services still have lots of money in their budgets, but that doesn’t necessarily mean it’s wasted money. In fact, most of it is formula driven and would require statutory changes to reduce it – I don’t see any such bills in the mill. As evidence that cuts can be made Kelly continues to point out that the Legislature cut megabucks from state operations last year and “nothing happened.” Earlier in the week he pointed out that only 37 state workers were laid off. That’s technically true, but it’s a mischaracterization of the facts. There are 600 fewer state workers today than there would have been without those budget cuts. To the credit of the various departments and agencies they were able to avoid more layoffs by encouraging some people to retire and by not filling positions vacated by many others. This year they’ve asked many state workers to take unpaid furloughs to reduce costs in yet another effort to avoid layoffs. Reductions in the workforce, whether from government or from the private sector, ripple through the economy, so it could be argued that something has happened, but we just haven’t all felt the brunt of it yet.

So, while Democrats argue for oil tax reform and against cuts and Republicans argue against oil tax and for cuts, the real problem continues to hang over the Legislature like an anvil. Alaska’s problem, contrary to popular opinion, is not loose spending. The real problem is that the state has gone too long trying to balance its books on a volatile and declining commodity. If the Democrats are right and oil rebounds in some exciting new way, it will be a temporary party, like it always is, but with declining production the parties will soon become shadows of their former selves, and the cleanup will get harder and harder. If the small-government Republicans are right we’ll soon live in a utopia where the government no longer tells you how many salmon you can catch – and no longer provides law enforcement, education or roads maintenance ... or dividend checks.

There are some truly moderate and pragmatic people in the Capitol. As much as they’d prefer not to, they’ve come to grips with the notion that it’s going to take a broad-based approach to fill the budget gap, and that just about ever sector of the state is going to feel some of the pain. How many of them there are and whether or not they can prevent another train wreck at the end of this session is yet to be seen.

Be Careful What You Ask For

Are Alaskans Trying to Talk Their Way Out of Services ... and a Dividend?

 

Coarse Grind – Opinion and Analysis

 

In the first few rounds of public testimony in the Alaska State Legislature this year a common theme has emerged from voices all around the state. “Don’t tax me and don’t touch my dividend until you stop this wacky government spending spree.” That message is received by legislators in a variety of ways, but there are three main reactions, depending upon the legislator’s understanding of what the current $3.6 billion revenue shortfall means.

The “Government is too big” crowd seems to perceive the current shortfall and public outcry against revenue-based solutions as confirmation of their years-long mantra that “government growth is unsustainable,” and also as an opportunity to finally rein things in. This group includes fiscal hawks like Sen. Mike Dunleavy (R-Wasilla), Sen. Bill Stoltze (R-Eagle River) Sen. Charlie Huggins (R-Wasilla) Sen. Pete Kelly (R-Fairbanks), Rep. Tammie Wilson (R-North Pole) and Rep. Lora Reinbold (R-Eagle River).

The “Dividend is sacrosanct” crowd hears the voices from Alaska as a sort of popular uprising against a government that can’t solve its own problems. The most determined voice in this group is Sen. Bill Wielechowski (D-Anchorage), but he is joined by others including Stoltze. Democrats long ago staked out ground as protectors of the Dividend, but under the current fiscal storm they are finding it increasingly difficult to reconcile that position with their equally strong calls for education and public health funding.

The “We’ve got to do something” crowd, easily the largest group, is caught between popular opinion and the harsh reality that sometimes voters don’t always see the big picture. For this largest group the current fiscal situation presents the greatest political challenge. To steer the state toward a sustainable economic future they will have to do the very things the public has urged them not to do. Legislators will tell you, and they have some evidence to back it up, mere mention of the Permanent Fund or taxes is akin to getting fitted for a tar and feather jumpsuit.

So, what if the people get what they want? Legislators like to use the analogy of home budgeting when talking about state government. “In your household budget you wouldn’t spend money you don’t have!” they might say – because only the criminally insane have mortgages, car payments or credit cards. In the case of the current revenue shortfall I’ve heard legislators say, “If your household income was suddenly cut in half you’d make serious cutbacks in your budget!” For the record, my advice is if your household income is reduced by half ... look for a J-O-B. I can imagine the scene around the dinner table. “Kids. Daddy lost his job, so things are going to be a little different around here. We’re going down to one meal a day, but it’ll be a good meal – meat once a week! We’ve had to let the health insurance go, so try not to fall from anything higher than an ottoman. Sucking it up when your sick feels bad in the moment, but it builds character, trust me, you’ll be better for it. Instead of soccer, baseball and dance we’re going with more cost-effective activities. Mom picked up some lawn darts at a garage sale. One of ‘em is missing, but that just means the red team will have to try harder, it’s good training for the harsh real world. Instead of that vacation we had planned, we’ve decided to do something super cool this year – we’re tenting out in the backyard ... until we lose the house. After that we’ll be tenting out in grandma’s backyard, but don’t tell her until Mom and I have had a chance to chat with her. I know a lot of that sounds hard, but there’s some very good news that’ll help you weather the storm. We’re going to continue to pay your PF ... er, allowance, until the money completely runs out. Then we’ll have another family council to figure out what to do.”

The beliefs that Alaskans can continue to not pay our own way, that our government is bloated beyond all comprehension and that government’s most important role is to cut each of us an annual check for our share of the pie are, in fact, myths, and they do not align well with what was once a truth about Alaskans – that Alaskans are a hardy lot; people who are tough enough and resourceful enough to solve problems other Americans can’t even imagine, and that because we are few in a vast landscape we necessarily come together in our communities to pool our resources and efforts to ensure everyone comes out OK. In the early ‘80s things changed in Alaska, and Alaskans changed as a result. When oil revenue is sufficient to pay all the bills; when you are released from paying state taxes, and when the government starts cutting you a check, just for being here, it’s easy to forget that you have any responsibility to your community. But isolation is not the same thing as independence, and it’s fair to ask people who would rather cut than pay for government to specify where the government is doing more than it should, or where the inefficiencies are.

The chart below has made the Capitol rounds in various forms this session. This version illustrates a few things Alaskans should understand as the debate continues.

Click on image to open separately.

This version of a graph provided by the Legislative Finance Division shows how many operating dollars each agency receives. This one shows undesignated general funds only, which are primarily what the legislature looks at when altering the operating budget. Even if you add designated funds the first eye-opening revelation is that you could completely cut every department from the University of Alaska down to the Department of Environmental Conservation and not add a shovel full of dirt to the $3.6 billion economic hole. But, those who prefer cuts will say, Look at all that money in the Department of Health and Social Services, statewide operations and the Department of Education and Early Development.

That’s where the second eye opener comes in. This graph breaks the UGF operating dollars out by fund type (see the key in the upper right). The Legislature is not limited in touching non-formula and capital dollars, represented in teal and yellow. The Legislature could also made changes to the orange PFD segment and could make changes in debt service, but only by refinancing it, effectively reducing the annual payments, but stretching out the terms, ultimately costing the state more in the long run.

The most important segments on the graph are in dark blue, representing formula-based funds. Those formulas are written in statute, and cannot be changed without legislation. In the DEED column the formula is the Base Student Allocation. In the DHSS column it is mostly Medicaid formula funds. The Legislature is working on Medicaid reform measures this year, but under current law those formula dollars are essentially untouchable. Also of note is that the DEED budget consists almost completely of formula funds. The department itself has a tiny operations budget, and by personnel it is smaller than every other department, other than Administration. The function of DEED is primarily to serve as a pass-through for BSA dollars to flow from the state to local districts, where the schools are under local control. It means that when Alaskans call for cuts to DEED and DHSS they should realize they are asking for real reductions to local schools and to health care access. When they ask for further cuts to other departments they are talking about tiny amounts of money relative to the revenue shortfall.

It’s also important to note that government operations, adjusted for population and inflation, are about the same today as they were in 1986, and they are significantly reduced over the past two years. Capital spending has been reduced to effectively zero – the state only spends capital dollars that are matched with federal funds. It’s not much.

So, what about the notion that government should keep its hands off the PFD? First, it’s important to point out that the Permanent Fund and the PFD are not the same thing, and were not created at the same time. The initial concept of the Fund was born of an understanding that oil reserves don’t last forever, but investment earnings can last at least a lot longer. By building an investment fund with part of the oil revenues the state created an investment-based resource to maintain government services and operations long after the oil taps out. The idea of the dividend came a short time later, based on the idea that Alaska’s natural resources are constitutionally held in common and that Alaskans should benefit directly from those collectively-held resources.

I’m not writing here to either praise or damn the PFD, but I’ll point out that the idea that the Permanent Fund should fund government when resources no longer can, combined with the idea that the fund should spin off large amounts of revenue to cut individual checks for Alaskans has set up a natural fiscal conflict between Alaskans and our own government. Adding fuel to the conflict is the fact that, since the income tax was removed in 1980, Alaskans have been content to let oil revenues pay for essentially all of our government operations and services. Our constitution says our resource wealth should be managed for the maximum benefit of Alaskans, but it doesn’t define what that means. Is it of maximum benefit to pool our economic resources to operate schools, law enforcement, roads and infrastructure, parks, etc., or is it to our maximum benefit for a family of four to get $4,000 per year (or more) to manage as it will? It’s a legitimate debate, but when oil revenues are not enough to provide basic services I wonder if Alaskans will Pick, Click, Give enough to keep the schools open, the snow plows running and the Troopers on the road. Whether we’ve collectively realized it yet or not, that’s the dilemma we currently face.

There’s more. Alaska has about $14 billion in total savings available to fill the gap. The gap, give or take, is about $3.6 billion ... per year ... if oil averages $56 per barrel. You don’t need to do long division to see the savings run out in about four years. Oh, and oil is more like $30/bbl now. About half the savings are in the Permanent Fund Earnings Reserve. That’s where our dividends are paid from. That means no more than five years from now even if the calculation says you’re entitled to a $2,000 dividend there won’t be any money to pay it. That money will have been spent to keep our schools open, our roads plowed and our Troopers on the job. Not getting a dividend will be the good news. The other news will be that, very likely, the combination of oil revenues and Permanent Fund earnings will not be enough to maintain all the services most Alaskans consider critical. That will mean no more revenue sharing and reduced state money for local schools – property values will likely diminish, but property taxes will have to increase so local governments can provide at least some of the services the state no longer can.

Fortunately, most legislators realize doing nothing is not an option. They are concerned they will pay a hefty political price for keeping the state solvent and keeping the lights on in our local schools, but they seem reluctantly willing to do it. Those legislators who continue to tell us we don’t have to pay our own way, or that the Permanent Fund is something other than what it is, will score political points in a rhetoric-rich environment, but that rhetoric is a perilous gamble that somehow declining production and prices will once again rebound, they always have in the past, and we’ll all continue to enjoy a government free of charge – you’re very welcome, comrade. That gamble has always paid off in the past, but sooner or later the production decline will tip the equation against us, at any price and under any tax regime.

I'm not a gambling guy. We sold our house in Juneau a few months ago when we moved to Anchorage. I don't intend to buy another one until Alaska has a healthy and sustainable economy ... or until that first $300,000 PFD rolls in.

PUBLISHER'S NOTE: Special thanks to Alaskan humorist and artist Chuck Legge for providing the cartoon above. The check's in the mail, Chuck. No. Really.

Budget Basics for the Rest of Us

A General Overview of Alaska’s Budget Process

 

Medium Grind – News and Analysis

As the House steps up its budget game in the next few weeks it might be useful for Grinder News readers to have a some background on key terms and a basic guide to how the process generally works. Hopefully this article will provide some useful information to make the budget process a little more accessible.

SOME BASIC TERMS AND CONCEPTS

 

Kinds of Money

One thing that makes budgeting tricky is that there are different kinds of money. The Legislature doesn’t just get a pot of money to make it rain wherever it wants. When you think about it, we regular folk suffer from the same problem. Some of your money goes to help fund the federal government – to make sure you don’t forget, the government conveniently takes its cut before you get your check. But once you get the check, some of the money is already spent for things like car payments, mortgage or rent, utilities etc. What’s left over is your discretionary income – you can choose to scrimp a little on groceries and get that latte on the way to work. You could ride your bike to work and use that gas money for a pedicure. It’s usually not a lot of money, but it’s all up to you! Alaska’s state government budget is a little like that, too. Here are the main kinds of money:

Restricted Revenue

Restricted revenue is money that goes to the state budget, but over which the Legislature has limited or no control. It’s like the part of your paycheck that’s already spent on bills. It falls into the three main categories below:

Federal Funds: Alaska receives about $3 billion in federal funds. When the state was earning huge revenues from the combination of high oil prices and the progressivity feature of the ACES oil tax regime that amount accounted for about a third of the state’s revenue (not counting investment revenue – Permanent Fund earnings). In 2015 federal receipts were closer to half of the state’s revenue; for 2016 federal receipts are expected to represent about 60 percent of the state’s non-investment revenue. Some federal funds are considered “matching,” meaning it requires some fiscal contribution from the state – though usually not on a one-to-one basis (the feds generally kick in more than the state). Federal funds are normally designated to specific purposes; the Legislature has little or no discretion over use of federal funds.

Designated General Fund: Though the Alaska State Constitution prohibits the formation of designated funds, the Legislature has created some statutorily-designated funds, and the earnings of those funds can only be used for specified purposes, like the Railbelt Energy Fund or the Power Cost Equalization Fund. Some restricted funds also come from specific taxes or fees that can only be used for specified purposes, like Department of Motor Vehicle fees.

Other Funds: The last category of DGF is “Other Funds;” pretty much what it sounds like. It’s a relatively small amount of revenue that comes from outside sources but generally must be used for specific purposes.

Unrestricted Revenue (along with unrestricted savings)

Unrestricted revenue, and savings, is basically the government’s discretionary income. It’s a combination of general fund earnings (mostly from oil) and savings that can be spent for any public purposes the Legislature chooses. Unrestricted revenue has traditionally come from several sources, but has predominantly come from oil revenues. Unrestricted revenues are the primary focus of the Legislature during the budget process, and they are the subject when legislators talk about the deficit. In fact Alaska can’t constitutionally have a deficit (spending borrowed money), but rather runs into revenue shortfalls. The governor and Legislature must balance the budget, so when revenues and savings fall below the cost of government it’s time to turn off some lights and park the snow plows.

Unrestricted savings include the Permanent Fund Earnings Reserve, which can be used by a simple majority vote for any government purpose. The other main savings account is the Constitutional Budget Reserve, which can be used for any government purpose but requires a three-quarters vote in each legislative body, in most circumstances. If the total amount of available funds is less than the previous year’s budget, CBR funds can be drawn with a simple majority vote. That includes revenue, the Earnings Reserve the CBR and the Statutory Budget Reserve – which is currently dry as a bone. Right now revenue is more than $3.6 billion below the previous budget, but there is still about $7 billion in the ERA. The three-quarters CBR rule will be in effect. However, should the majorities choose they could use the ERA to balance the books this year with just a simple majority vote. It’s an unpopular political move, but it remains one possible solution to the deadlock that seized the Legislature last year.

Short of a gift from a rich uncle, those are the sources of money available for appropriation.

HOW IT’S SPENT

The intended relationship between the legislative and administrative branches is critical to understanding how the budget process is supposed to work. The branches of government are intentionally separated by a distribution of powers and functions. For the purposes of running the government, in the most general sense, the Legislature is tasked with funding the operation of government and the Administration is tasked with managing those funds to operate the government and achieve its stated goals and missions. The governor’s departments and agencies prepare their budgets to that end, and the administration synthesizes that into an overall budget proposal for the Legislature to consider. After examining the performance of each department and agency the Legislature can exercise some discretion over the governor’s proposal and change the budget to express its own vision for how the state should operate. Once the Legislature has battled to an agreement it submits the revised budget back to the governor who can remove items, but not add new items, and can either approve or reject the Legislature’s revisions to his budget. When it comes to revising the budget, the Legislature must work within certain limitations. As mentioned above, the Administration and the Legislature are mostly working with the UGF portion of available funds. The DGF, by definition, are already accounted for and effectively spent.

Appropriations vs. Allocations

The Administration submits its budget broken down by department. Each department breaks its needs down according to specific functions, and those categories are called appropriations. An appropriation must meet five requirements – purpose, funding source, amount, location and timeframe. In many cases the general category of an appropriation can be broken down into sub categories, called allocations. For instance in the Department of Education and Early Development budget one appropriation is called “K-12 Support.” Under that appropriation are three allocations: Boarding Home Grants, Youth in Detention and Special Schools. The sum of the three allocations add up to the total appropriation.

What’s important about that is a department may move money around between allocations, but not between appropriations.  Another appropriation under DEED is “Education Support Services.” If the Legislature reduces funding for K-12 support, the Department may not shift money from Education Support Services to K-12 support to make up the difference. It can only shift money between the three K-12 support allocations to try to manage the shortage.

Some departments use multiple appropriations and allocations. Others have fewer. At the far end of the spectrum is the University, with one appropriation and no allocations, thus enjoying complete discretion over the allocation of those funds. Having multiple appropriations and allocations gives the Legislature somewhat more control over how a department spends its money, and, to some degree over the department’s priorities. The Legislature can reduce or eliminate an entire appropriation forcing a department to reorganize its priorities by shifting money between allocations. Those are called unallocated reductions. The Legislature could also choose to dig down deeper and reduce or cut an allocation amount – an allocated reduction. The Legislature can even create an allocation within a larger appropriation.

There are different schools of thought regarding allocated vs. unallocated cuts. It’s important to note that though the Legislature can reduce or eliminate an allocation line, such a move serves more as a record of legislative intent, rather than as a binding commitment. The department could still shift money between allocation lines to continue a program or service it deems critical. Some legislators say they prefer unallocated cuts to give flexibility to departments in terms of how the money is spent. That can present a problem for the Administration in extremely lean times such as the state finds itself in now. When departments have already been deeply cut, each additional cut, allocated or not, is programmatic – it requires the reduction of elimination of a program or service. In that sense, hitting a department with an unallocated cut can be seen as a signal that the Legislature is shifting the blame for reduced services to the departments. It can be a no-win for a department and the Administration. No matter where the department chooses to cut, some constituency will suffer the consequences. The Legislature could simply say, “We wouldn’t have cut that.” But something had to be cut. Some constituency was going to be injured. When programs are inevitably on the chopping block allocated cuts are a demonstration that the Legislature has actually made the tough choices.

THE PROCESS

Once the governor has submitted his proposed budget to the Legislature it is funneled through a series of steps before the Legislature has a revised product to send back. The operating budget is submitted to both bodies, but in order to maintain some semblance of order the House produces the first revision and sends it to the Senate where it is further revised and then sent back for a concurrence vote. The House rarely concurs with the Senate’s changes, so the budget is then sent to a conference committee consisting of members from both bodies, where it is hammered into a document both chambers can agree upon.

Subcommittees

Because the budget is broken down by department, the House and Senate form a Finance subcommittee for each department. The subcommittees meet to scrutinize the separate departments in detail and then to prepare recommendations to send to the full Finance Committee of each body. The subcommittees generally only consider unrestricted general funds for their recommended changes, and they do not scrutinize the language sections of the budget.

Departmental examinations generally begin with a budget overview presented by administration representatives from the appropriate department. Subcommittees focus on the numbers sections of department budgets – the language sections are analyzed in full Finance Committee. With the fiscal challenges facing the state this year subcommittees began the process earlier than usual, and appear to be digging much deeper into the minutiae of each department budget. While most legislators agree that some cuts are still needed, finding places to make those cuts has become increasingly difficult. Even those who strongly favor operations cuts admit that for most departments those cuts will be necessarily small.

Once each subcommittee has arrived at its recommendations they submit their work to the Finance co-chairs for consideration of the Finance Committee. A Subcommittee report normally includes: 

Once the subcommittees’ substitute bill is submitted to Finance public testimony is taken on the budget, followed by Finance member amendments. Majority and minority members may submit amendments, but minority amendments rarely pass. This year it is less likely that amendments to add money to the budget will pass at all. The final budget is then brought to the floor for passage.

Again, the House typically sends its version of the operating budget to the Senate. The Senate subcommittees may choose to work from and revise the House’s version, or they may simply replace it with their own. Once the full process above has been completed in the Senate the budget is returned to the House for concurrence. Typically the House fails to concur with the Senate changes, and asks the Senate to rescind its actions. Again, typically, the Senate refuses to rescind, and the budget is sent to a joint conference committee where a compromise is hammered out. Finally, the Legislature has a document and transmits it to the governor. The governor has 20 days to review the budget and either reject it, or to exercise his line-item veto power (or not) and then accept the budget.

COMPLICATIONS

If that’s not convoluted enough, there are further complications. By now most Alaskans are familiar with the Constitutional Budget Reserve. It is one of a few savings accounts that can be used to help balance the budget when revenues fall short. There is also the Statutory Budget Reserve, but it’s empty, and the Permanent Fund Earnings Reserve. The CBR can be used to close the fiscal gap, but is subject to rules that, in most years, require a three-quarters vote in each legislative body.

That is not a problem in the Senate where the majority caucus now has 16 members in a 20-member body. Because the majority caucuses are “binding,” meaning members are required to vote as a bloc on procedural matters (namely the budget), once the Senate majority agrees upon a budget it’s a done deal on the floor. In the House, however, the minority has 13 members, enough to block a CBR draw. This is a powerful negotiating tool for the minority, enabling it to negotiate some of its priorities back into the budget.

Last session’s budget logjam snagged on that very issue. The House minority caucus established a list of priorities and stood firm on most of them until a compromise could be reached. In the end some minority priorities had to be jettisoned, and most of what remained were in the form of one-time budget changes. Still, the CBR rule forces the majorities to negotiate with minority caucuses.

A further complication is that no caucus, even a binding one, is a monolith. Last year Rep. Lora Reinbold (R-Eagle River) voted against her own majority leadership on the House floor – choosing to not support the budget. Reinbold felt the cuts didn’t go deep enough. It bought her an invitation to caucus alone. It was a reminder that while, in the end, majority caucuses vote as a bloc on budgets, the behind-the-scenes budget discussions can be contentious. In the House, where the CBR vote is an issue, Speaker Mike Chenault (R-Nikiski) has members that range the entire conservative side of the political spectrum. In order to pass a balanced budget, Chenault must wrangle up 30 votes in the House, and even getting his own 27-person caucus to agree can be a challenge.

Further complicating things is the fact that, technically, even the House majority doesn’t need the three-quarters vote to balance the budget this year. There is no three-quarters-vote requirement to use any or all funds from the Permanent Fund Earnings Reserve. If negotiations with the minority bog down, the majority could agree to break a gridlock by simply appropriating money from the ERA. While Chenault has said there are “lots of options available,” he also said he would be extremely hesitant to bypass the CBR vote, and said he’s confident a compromise can be reached with the minority.

Finally, this year’s budget process is unusual in that Governor Bill Walker has proposed significant changes to Alaska’s cash flow model. He has proposed some new taxes, use of Permanent Fund earnings and a restructuring of the dividend process. All of those changes are reflected in his proposed budget, but they require statutory changes to become reality. That means the statutory battle and budget battle, though inextricably linked, are being fought separately. Much of the numbers portion of the FY2017 operating budget will depend upon what happens to several bills moving through the legislature this year.

If that doesn’t sound like fun, I don’t know what does.

During the budget process legislators have access to myriad resources from a variety of sources. The public also has access to those resources. Here are a few.

The Alaska Legislative Budget Handbook (Swiss Army Knife Guide to Budgets): This document, produced by the Legislative Finance Division, is the best place to start when trying to understand the process.

Revenue Sources Book: Produced by the Department of Revenue Tax Division, the sources book identifies where the money comes from, and how much there is.

Legislative Finance Division: You could spend many exciting nights exploring the documents at this site. Start out under “Publications” and expand from there. Once you’ve read the Swiss Army Knife many of the reports available here will be helpful and will help make sense of the budget.

Office of Management and Budget: Another bounty of resources. Check out the "Budget Reports" section for detailed reports on the FY2017 and previous budgets. There is another wealth of department-specific information under the "Performance" tab.

On the Loss of Max Gruenberg

Rep. Max Gruenberg gets a laugh from Sen. Bill Wielechowski.

Rep. Max Gruenberg gets a laugh from Sen. Bill Wielechowski.

Alaska loses big-hearted statesman

 

Medium Grind – Opinion

I am deeply saddened this morning to receive the news of Rep. Max Gruenberg’s passing. Max Gruenberg was a rare breed in the Alaska State Legislature, a true statesman with a heart of gold. I worked as the press guy for the House Democrats from 2005 to ’10 and had the distinct pleasure of getting to know Max as a legislator and friend. My heart goes out to his wife Kayla and their family, and also to his staffers. It was impossible to work for Max and not be part of the family.

We often heap praise upon public figures when they pass, but it’s no exaggeration or false praise to call Max a statesman. He was what I would call a good government legislator. During his first stint in the Legislature Max was part of a Democratic majority; he served as majority leader. When you’re in the majority it’s no great trick to pass legislation. But during his entire second legislative stretch, from 2003 until today, he was in the minority. I’d venture to say more of his legislation passed than any other minority member during that time, but not under his name. Max realized it was unlikely to pass substantive legislation as a minority member, but he didn’t let that stop him. When he thought he was on to something important he and his staff would do the leg work, doing the research, rounding up outside support and getting a bill drafted. Then, instead of futilely submitting hearing requests that would not likely bear fruit, he’d shop the bill around to his friends in the majority. Often, he’d find someone willing to take on prime sponsor status, giving the bill a much greater chance of passing.

As his press person I would sometimes ask Max to at least file the bill under his name first, so he’d get credit for the idea. If it was something he thought was truly important he’d resist, not wanting to burden the bill with political baggage. That’s a true good government legislator, and it’s a great example of how placing the public good ahead of personal glory can deliver for the public good.

Max also represented what has to one of the most diverse districts in the country. He was respected and beloved by his constituents of all stripes, and he knew that his district was not defined by physical boundaries, but rather by the people who lived in the neighborhoods in his community. I know a lot of people who have affectionately known him as Uncle Max, and we was a gentle and stalwart uncle.

Max had his loveable quirks, too. He has long been one of the real characters of the Legislature, and the characters are always our favorites. He was legendary for his attention to detail, seeking out the minutiae in bills and legislation, sometimes to the exasperation of his colleagues, but sometimes uncovering tiny details that amounted to huge flaws in bills, saving legislators from some embarrassment and saving Alaskans from unintended consequences. When then Rep. Lesil McGuire was chair of the House Judiciary committee she and Max had a warm, if not sometimes awkward, relationship. Max, with his keen legal microscope, could turn a 30 minute hearing into a marathon of legalese. He once offered an amendment to a bill – it may be the most complex amendment ever offered in the Alaska State Legislature. It was divided into several parts, each with subsections. Some subsections related back to other sections of the amendment. He’d broken it up that way because he was afraid it wouldn’t pass without a detailed explanation. The committee must have debated that amendment for 30 minutes, breaking several times for consultation with Legislative Legal and staffers, looping in and out of the various sections and subsections. Finally, one committee member suggested they just combine the sections into one single thing and just pass it. How bad could it be? It was pure Gruenberg, and he’d carried the day.

I remember another time when Max asked me to draft a press release about a bill he was about to introduce. It was complicated. I asked him to have his staff send me some bullet points or a summary so I could be sure to cover his priorities and intent. He’d decided he didn’t want to go that route, so he pressed me to just write it. I went to Max’s office to reach some kind of understanding. After some time he seemed to agree that I shouldn’t write the release cold. He said, “I’ll work on something myself for you to work from.” Then he reached behind his desk and pulled out one of the quintessential Max icons. Max had a dictation machine straight out of Perry Mason. I think it’s guts were mostly vacuum tubes, rubber belts and cloth-insulated wires. He turned it on with a hum and the smell of ozone. He held out the microphone to me and said, “So, if you WERE writing the press release, what would you put in the lede?” It was impossible not to laugh ... and not to concede defeat.

“OK, Max. I’ll put together a draft and send it to you.”

“Thank you.”

Max was also always interested in people personally. One time he asked me how my son was doing. Gianni was probably three at the time. I told Max about how, after we’d read a book several times, Gianni liked to just make up new stories based on the pictures. Max laughed and talked about the importance of imagination. He said he had a few sock puppets he’d made for his own kids – the main one being named, “Mr. Stinky,” if memory serves. With his trademark cherubic smile he reminisced about some of Mr. Stinky’s great performances, and how Stinky had even branched out to entertain at different schools around Anchorage. Over this past summer I reminded Max about that story and he offered to find Mr. Stinky and introduce him to Gianni. Sadly we never got to witness what must have been a charming show.

I also remember the time, during “Introduction of Guests” on the House floor Max opened an introduction describing the subject as an important person in his life; someone with a big heart and a great sense of humor. Normally, legislators direct the Floor’s attention to one of the galleries at the back of the hall to honor the introduced guest. But Max directed everyone’s attention to a door at the front of the hall that leads to the fire escape. When a page opened the door there stood Max’s wife Kayla Epstein, holding their beloved little dog, Pugly. There was laughter and approving pounding of desks.

Yeah, Max Gruenberg was a warm-hearted character and a genuine statesman, and Alaska has suffered a great loss today as Max and Pugly are finally reunited. We will miss you, Max. Thank you for your tireless service, your boundless wisdom and your genuine kindness.