GUEST COMMENTARY: POMV system vs. dividend formula: something’s got to give

Editor’s Note: This is the fifth installment of a continuing series on the Permanent Fund dividend and Alaska’s fiscal system. Discussion is increasing about changing the Permanent Fund dividend formula, which has not been used since 2015 but remains on the books. Driving this new talk is the State of Alaska’s transformation of its fiscal system in 2018 through the adoption of a percent of market value, or POMV, regime. The Legislature created the dividend formula in the 1980s, with the final change occurring in 1986. The dividend formula is based on the Permanent Fund’s earnings (or income). The statutes setting out the dividend formula provide that the pool of money from which dividends are paid consists of 50 percent of the “income available for distribution,” defined as 21 percent of the Permanent Fund’s net income for the last five fiscal years. The Legislature adopted a very different formula that constitutes a conceptual change to the state’s fiscal system in 2018. Before 2018, the only uses for the Permanent Fund’s earnings in significant amounts were to pay dividends and inflation-proof the Permanent Fund principal. The statutes bringing in POMV in 2018, on the other hand, established a new fiscal system in which for the first time the State of Alaska began the heavy use of Permanent Fund earnings to pay for conventional public services such as schools, roads, and Troopers in addition to paying for dividends. Under the POMV system, the Alaska Permanent Fund Corp. determines annually the “amount available for appropriation,” defined as 5.25 percent of the Permanent Fund’s average market value for the first five of the preceding six fiscal years. (As of July 1, 2021, that 5.25 percent goes to 5 percent.) The statutes creating POMV state that the Legislature may not appropriate from the Permanent Fund’s earnings an amount for public services that exceeds the “amount available for appropriation” in a fiscal year. The POMV statutes also provide — critically — that the 5.25 percent (and later, 5 percent) is supposed to cover the Permanent Fund’s earnings’ contribution to the conventional budget plus pay for the dividend. The dividend formula is based on earnings, while the POMV formula is based on value. The two formulas are philosophically different and inconsistent with each other. To see the incompatibility, let’s look back. When the stock market takes a dive — such as in 2008 — earnings will take a hit. When the stock market recovers, earnings will be high. The dividend has gone up and down with these financial gyrations. That’s why the dividend was $845.76 in 2005, $2,069.00 in 2008, and $1,305.00 in 2009, and would be about $3,000 this year under the statutory dividend formula. Wild swings like these, however, make it hard to run a government. If we are going to use the Permanent Fund’s earnings to fund a big part of state government—as POMV is designed to do—we need a predictable amount. The average market value of the Permanent Fund under POMV changes some each year, but those changes are not huge, leaving a relatively predictable amount to fund government annually. The POMV formula does not tell you what the dividend amount will be, triggering yearly legislative battles. Absent new revenues from taxes — whether broad-based taxes or oil tax increases — the POMV system also creates competition between spending on dividends and spending on public services. The adoption of POMV in 2018 represented a recognition that the State of Alaska had created a fiscal system in the early 1980s that no longer worked because it had relied on the state government getting a substantial amount of new oil money each year, which is no longer occurring. Along with the conflicts between the two formulas, talk of a new dividend formula stems from a recognition that it is mathematically impossible to use the dividend formula created in the 1980s without changes to the budget and/or the tax system that most Alaskans apparently do not support. That mathematical impossibility is the subject of the next installment in this series. Cliff Groh is an Anchorage lawyer and writer as well as the legislative assistant who worked the most on the bill in 1982 that created the Permanent Fund dividend we have today.

GUEST COMMENTARY: State initiative puts Alaska’s coastal communities, consumers at risk

Thirty years ago, the 1989 Exxon Valdez oil spill forever changed our relationship with Alaska’s oil production and transportation industries. Devastated by the enormity of the spill, the resulting suffering and long term consequences — many of which we still feel today — Alaskans recognized that we had to work together in order to protect ourselves and our communities. Acting as stewards, citizens worked with regulatory agencies, industry, and resource trustee agencies in good faith to develop regulations that recognized and sought to minimize the inherent risks of transporting oil across state waters. Working together, we wrote and passed Alaska’s spill prevention and response regulations which are, today, widely considered the best in the country, if not the world. That well-deserved reputation is now under threat. An effort is underway that could strip away Alaska’s oil spill safeguards, which have proven so successful for so many years. The State of Alaska has opened for review about 40 sections of regulations, and their governing statutes, that cover numerous aspects of spill prevention and response planning for crude oil terminals, tankers, oil and gas exploration and production facilities, and pipelines. In announcing the review, the commissioner of the Alaska Department of Environmental Conservation stated: “I’ve heard from many Alaskans that contingency plans are unnecessarily burdensome while lacking corresponding environmental benefits.” The goal of the state’s review is simple: to make our regulations less burdensome to industry. The message the state is sending to Alaskans is clear: the long-term health of Alaska’s coastal communities is secondary to the oil industry’s bottom line. This course of action should alarm us all. Weakening or eliminating oil spill prevention and response requirements to ease a perceived “burden” on industry effectively transfers the risks of transporting oil onto the backs of communities, fishermen, subsistence users and citizens who depend on clean coastal waters. A great many people worked hard to establish a level of protection from oil spills which was nonexistent before March 24, 1989. Clearly, we have to marshal our forces again. To say now, after 30 years, the regulations are suddenly too burdensome is frustrating and warrants a strong response. Halting this initiative requires a concerted effort from all of us. Please join Cook Inlet Regional Citizens Advisory Council in sending a forceful message that Alaskans are not interested in weakening the well-crafted oil spill protections put in place since the Exxon Valdez. Alaskans are proud of our reputation as world leaders in oil spill prevention and response. We refuse to revert to the complacency of the past. Call your legislators, talk to your community’s mayors, assembly and council members, your friends and neighbors, and ask them to oppose changes to Alaska’s oil spill oversight laws and regulations. The deadline to comment is Jan. 15, 2020. To submit comments to the Alaska Department of Environmental Conservation go to dec.alaska.gov. Michael Minger is the executive director of the Cook Inlet Regional Citizens Advisory Council. After the Exxon Valdez oil spill, Congress enacted the Oil Pollution Act of 1990 that included citizen councils for both Cook Inlet and Prince William Sound. The Cook Inlet Regional Citizens Advisory Council has been carrying out the vision of Congress for nearly 30 years in representing citizens to promote environmentally safe crude oil transportation and production in Cook Inlet.

RDC conference features positives, challenges, plus BP and Hilcorp

Conference season is in full swing in Alaska and the annual gathering of the players in the state’s biggest industries is right around the corner. The Alaska Resources Conference hosted by the Resource Development Council for Alaska is slightly later than normal this year. It will be held Nov. 20-21 at the Dena’ina Center in Anchorage. The conference will focus on Alaska’s oil and gas, mining and timber industries and the energy in those sectors is positive these days noted RDC Executive Director Marleanna Hall. Alaska Gov. Michael J. Dunleavy has committed his administration to removing impediments to development across the state and at the federal level the Trump administration has largely done the same. Under Trump, the Army Corps of Engineers in September finalized revisions to the scope of the hotly debated Waters of the U.S. Rule, changes which scale back the jurisdiction of the corps and the Environmental Protection Agency to require Clean Water Act permits for some development projects. In mid-October, U.S. Department of Agriculture Secretary Sonny Perdue announced the administration’s preference to fully exempt the Tongass National Forest from the Roadless Rule, a change long sought by timber and mining advocates in the state. Additionally, an oil and gas lease sale for the Arctic National Wildlife Refuge coastal plain is expected late this year or early next, marking the culmination of decades of effort to access the billions of barrels of oil estimated to reside there. While those are all positive developments for those sectors, Hall said she expects to hear plenty from oil industry speakers talk about their biggest upcoming challenge. “I think we’ll have a lot of messaging on why the oil tax initiative should be rejected again,” she said. The sponsors of the Fair Share Act voter-driven initiative are currently gathering the signatures and support they need to get the measure — which aims to raise the state’s collective oil production tax revenue by approximately $1 billion per year — on the ballot in 2020. Rex Rock, CEO of Arctic Slope Regional Corp., long an advocate for opening ANWR to oil exploration, will provide the keynote address Nov. 20. Hall said she is particularly intrigued to hear from National Energy Laboratory Director Brian Anderson, who is scheduled to discuss ways to burn fossil fuels cleaner in an era of climate change later that day. The last speakers of the first day, BP Alaska President Janet Weiss and Hilcorp’s Alaska head Dave Wilkins, will cover recent big news in Alaska circles, that being “the passing of the torch,” as Hall described it, of Prudhoe Bay from BP to Hilcorp next year. The second day of the conference will start with talks about two potential megaprojects in the state, the $13 billion Alberta to Alaska railway and Qilak LNG’s recently proposed $5 billion North Slope offshore LNG export terminal. It will conclude with a discussion about the Alaska Roadless Rule revision process by Forest Service officials and Southeast Conference Executive Director Robert Venables. While the conference is largely attended by industry employers, Hall said RDC always encourages students to attend as well so they can gain insight into the industries they could join after graduation. RDC offers free admission to full-time students for its public events. The student registration deadline for this year’s annual conference is Nov. 13. The agenda is at akrdc.org/conference. Elwood Brehmer can be reached at [email protected]

On AG advice, Elections Division rejects recall petition

The Alaska Division of Elections on Nov. 4 declined to certify a petition to recall Gov. Michael J. Dunleavy from office, citing a legal opinion by the state attorney general. Proponents say they will challenge the rejection in court. The opinion, issued Nov. 4 by Alaska Attorney General Kevin Clarkson, says petitioners gathered enough signatures, paid the appropriate fees and did the “technical” work correctly, but that the four allegations against the governor “fail to meet any of the listed grounds for recall — neglect of duty, incompetence, or lack of fitness.” “The recall application failed to make these showings. The grounds of incompetence and lack of fitness, as a matter of law, were not applicable here,” Clarkson said in a written statement. Recall campaign manager Claire Pywell said backers intend to file an appeal Nov. 5 in Anchorage Superior Court. “Without question, the recall application submitted to the Division of Elections meets the standard under Alaska law,” said recall attorney and former attorney general Jahna Lindemuth in a written statement. “This rejection is without basis, and we will now turn to the courts for a remedy. We do so with confidence that we will receive fair treatment and we will prevail.” Dunleavy is on a trade mission to Japan this week, but deputy communications director Jeff Turner provided a statement by email. “Today’s opinion by the attorney general appears to be well reasoned. As I have always said, the allegations by the recall group are not legitimate reasons to overturn the outcome of the statewide election held barely a year ago,” the governor said. Recall supporters gathered more than 49,000 signatures in little over a month because of discontent with the governor’s decision to veto more than $400 million from the state operating budget. About half those vetoes were subsequently reversed. Even with 23 signature pages rejected for a technical error, recall backers had more than the 28,501 signatures needed to submit the petition to the Alaska Division of Elections for consideration. If the recall petition is upheld in court, backers would need to collect 71,252 verified signatures to trigger a special election. If the governor is recalled in that election, Lt. Gov. Kevin Meyer would become governor. Recall supporters listed four reasons for removing Dunleavy: • He failed to appoint a judge under the schedule required by state law; • He used state money and resources to make “partisan statements about political opponents and supporters”; • He committed a mistake with a budget veto; • And he violated the state constitution’s separation of powers with specific line-item budget vetoes. The legal opinion issued addresses each of those four allegations in turn. It attributes the budget veto mistake to a “scrivener’s error,” not an action by the governor, and says the Alaska Constitution permits the governor to delete “sums of money in any appropriation bill at his discretion.” On the allegation that the governor used state money and resources for partisan ends, the legal opinion says the recall petition doesn’t make a strong enough case. “Without more facts, it is impossible to determine whether the advertisements or mailers were intended for partisan purposes and whether the language was partisan,” the opinion states. Under the rules governing recall petitions, a recall statement cannot exceed 200 words. On the first reason for the recall, that the governor failed to appoint a judge to a vacancy within 45 days as required by law, the opinion says that because the position was still filled at the time of the replacement, with a departure still pending, it didn’t qualify as a vacancy. In addition, “because the forty-five day timeframe is merely procedural rather than substantive, the mere failure to comply with it does not amount to neglect of duty,” the opinion states. A footnote says the 45-day timeline is “considered more of a guideline than a mandate” and compares it to the often-ignored state law limiting sessions of the Alaska Legislature to 90 days. “Legislators cannot be subject to a recall application for the mere failure to adjourn in ninety days, just as the governor cannot be subject to a recall application for the failure to meet the forty-five day timeline for appointment of a judge, especially where no judicial seat was left vacant,” the opinion asserts. Maria Bahr, an assistant attorney general with the Alaska Department of Law, said she did not know who worked on the opinion, but it was provided to the attorney general. Division of Elections director Gail Fenumiai said she received the legal opinion Nov. 4 and had two draft decisions ready to go, depending upon the advice of the Department of Law. When the attorney general advised rejecting the petition, she followed suit. “I base all of my decisions using the advice of the Department of Law,” she said. Asked whether she had ever acted against that advice, she said no. In 1992, the only other time the Alaska Division of Elections has considered a recall petition against a sitting governor, the Department of Law hired independent counsel to avoid the appearance of a conflict of interest. In that case, Division of Elections director Charlot Thickstun approved a recall petition against then-Gov. Wally Hickel and Lt. Gov. Jack Coghill despite the advice of independent legal counsel Hal Brown, a former state attorney general. Thickstun said at the time that it was “patently inappropriate” to have the attorney general, “who is appointed by and serves at the pleasure of the governor,” appoint the independent counsel. After Thickstun approved the recall, the state sued itself: Attorney General Charlie Cole sought to have Thickstun’s decision overturned by the court system. “You cannot run a democratic government with the director of elections … setting off on a one-way frolic of her own,” he said at the time. Cole dropped the issue after others filed suit. Five cases were levied against the Division of Elections before a judge in Fairbanks ruled in 1993 that Thickstun was partially correct and the recall could continue. By then, backers had abandoned their cause, and both Hickel and Coghill finished their terms of office.

China promises no forced tech transfers, access to finance

BEIJING (AP) — China on Oct. 29 promised more improvements in conditions for foreign companies including an end to officials pressing them to hand over technology — a key irritant in its tariff war with Washington. The announcement adds to a drumbeat of market-opening promises by the communist government, which is trying to make China’s cooling, state-dominated economy more productive. Beijing also will ease restrictions on foreign competitors in some newly opened finance businesses, the Commerce Ministry said. Complaints about Beijing’s technology ambitions helped to spark its tariff war with President Donald Trump. Trade negotiators are working out details of an Oct. 11 agreement under which President Donald Trump delayed a planned tariff hike on Chinese imports. Trump said Beijing agreed to buy more American farm goods in exchange, though China has yet to confirm details of its commitment. Business groups welcomed the agreement as a possible step to breaking a deadlock in the 15-month-old conflict, though the two sides have yet to report progress on their core disputes over Beijing’s trade surplus and technology policies. Those include complaints from Washington, Europe and other trading partners that Chinese development plans are based in part on stealing or pressuring companies to hand over technology. Authorities will be banned from “explicitly or implicitly” pressuring companies to give up technology, said a ministry official, Ye Wei. That pledge, if carried out, builds on a law enacted in March that prohibits use of “administrative tools” to force companies to give up industrial secrets. Business groups said that might leave officials free to use other leverage. “Administrative organs may not implicitly or explicitly force the transfer of technology by foreign investors or foreign-invested enterprises,” Ye said. That still leaves open the question of foreign companies that are required to work through joint ventures with Chinese partners. For such ventures to function, the foreign partner often must hand over technology or teach a potential competitor how to develop its own. China is trying to appeal to foreign companies, some of which have postponed or shifted investments to other countries out of concern about the impact of U.S. and Chinese tariff hikes. A ministry statement also promised to “eliminate all restrictions on the scope of business” of foreign banks, securities companies and fund managers. It pledged to “remove the requirement on total assets” for establishing a foreign-owned bank.”We will move faster to open finance industries,” said a deputy commerce minister, Wang Shouwen. Wang gave no details, but business groups say high requirements for capital might keep foreign investors out of Chinese financial industries. They say restrictions on licensing and operations also might discourage potential competitors. Beijing has issued a series of market-opening promises over the past two years including abolishing limits on foreign ownership of companies in auto manufacturing, securities, banking, insurance and futures trading. Full foreign ownership of futures traders will be allowed as of Jan. 1, followed by mutual fund companies on April 1 and securities firms on Dec. 1. Until now, foreign investors have been limited to owning 51 percent of such businesses.

Permanent Fund returns 1.24% in Q1

Fluctuating stock markets led the $65 billion Permanent Fund to return 1.24 percent during the first quarter of the 2020 state fiscal year, according to results published Friday by the Alaska Permanent Fund Corp. The fund finished the quarter Sept. 30 with a market value of $64.1 billion and had an unaudited value of $65.6 billion as of Oct. 31, according to the APFC. Broken down, the $64.1 billion included $47.9 billion in principal portion of the fund and $16.2 billion in the Earnings Reserve Account, which holds the portion of the fund that is available for spending by the Legislature. However, the Earnings Reserve total includes more than $7.7 billion that is already committed to the state’s General Fund for dividends and government services plus a $4.6 billion transfer to the corpus of the fund to protect the real value of the principal against inflation for years to come. APFC Chief Investment Officer Marcus Frampton noted in a formal statement that domestic stock returns were middling during the quarter while global stocks generally declined slightly. Stocks make up about 40 percent of the fund’s overall portfolio. The Dow Jones Industrial average lost 0.54 percent during the quarter, while the S&P 500 gained 1.7 percent. “Beneath the surface and belying the positive domestic quarterly returns was significant volatility and evolving investor views on topics ranging from international trade relations, (the) U.S. political landscape, and global central bank interest rate policy,” Frampton said, adding that the fund’s growing private equity investments help insulate it from short-term disruptions in stock performance. “In the context of turbulent markets and a constantly changing landscape, I am pleased with this performance and believe that the portfolio is well-positioned to outperform going forward.” The 1.24 percent gain beat the corporation’s passive return benchmark of 0.81 percent but fell below the APFC Board of Trustees strategic return objective of 1.46 percent for the quarter. It translated into statutory net income of approximately $1 billion into the Earnings Reserve Account, according to the APFC. The State of Alaska will draw about $2.9 billion from the fund during the 2020 fiscal year for dividends and services based on the annual 5.25 percent of market value, or POMV, draw approved by the Legislature in 2018. APFC adviser firm Callan and Associates projects the fund will achieve an average annual return of 7 percent over the next 10 years, which is in line with its historical performance. As for other segments of the fund’s portfolio, $15.9 billion of fixed income investments generated a 2.51 percent quarterly return; the $9 billion of private equity netted 4.22 percent; and $3.9 billion in real estate holdings lost 0.62 percent. Elwood Brehmer can be reached at [email protected]

In the throes of air travel

Air travel is a key component of my job description. Literally. The description reads, “Expected to travel between 30% and 50% of time.” Given how much experience I’ve had, you think I would be better at it. Wrong. It’s a production to get me on an airplane, all of the extensive accommodations of Alaska Airlines aside. My appearance becomes the physical manifestation of my discomfort. I don my airplane pajamas (aka clothes that are at least three sizes too big). On go my eyeglasses, away goes the flat iron, in goes my night guard. And make-up? Don’t make me laugh. I then adopt my Very Special Air Travel Expression. It’s the sort of expression a corpse would have, if the person who once formed that corpse had died in an eternal state of exasperation. The light leaves my eyes, my jaw goes slack. I only alter this deadpan look to glare at all of my neighbors over the top of my glasses. Once at the airport, I typically throw my weight around. Not that I have the necessary money, power, or status to intimidate people. Rather, I literally swing my shoulder bags from side to side, yanking my suitcases through the air. Any aggressive movement will do. I want strangers to approach on penalty of death. All of this contributes to a distinctly nasty persona. When people see me hurtling through airports, they figure they know why I’m alone. If life were a movie plot, travelers would not be like me. Rather, attractive bubbly strangers would be seated next to each other on airplanes with alarming frequency. They would both be single and looking for love. They would bond instantaneously over shared heartbreaks/divorces/widowhoods/insert romantic tragedy here. In all my years of air travel, I have never seen this happen. Instead, men and women get drunk at airport bars and throw themselves at unwilling strangers. Take my recent late-night Alaska Airlines flight from Seattle. I was across the aisle from a young woman, who, like me, was wearing her airplane best. Dressed in a sweatshirt and pajama bottoms, her purple hair was in a topknot on her head. She was wearing scarlet-rimmed eyeglasses, and her acne was showing. Nevertheless, she was being pursued by a young sloper she’d just met in the bar. With the aid of some liquid courage, he adopted all the confidence of Thor, Son of Odon, and was shouting about how he wanted to sit next to her on our mutual flight. This plan did not excite her. She walked on to the plane, sat down, threw up into her airsick bag, and flagged down a predictably gracious Alaska Airlines flight attendant. “Um, there’s this guy. Like, he …” She trailed off as she tried to bring the flight attendant into focus. “I, like, met him in the bar. And now he’s, like, trying to sit next to me?” The flight attendant looked at her pityingly. “I’ll make sure that doesn’t happen.” “Okay, ‘cause, like, I don’t want to sit next to him. He’s, like. Back. There.” She jutted her thumb over her shoulder, gesturing to the offending sloper, now sitting in his assigned seat. The flight attendant followed her thumb. “You know what? He’s asleep. I think you’re okay.” The three of us turned around and, sure enough, the man was down for the count, his face mashed up against the window. It’s not just men pursuing uninterested women on airplanes. Women also proactively live out their Hollywood “meet cute” fantasies. On a flight from Anchorage to Chicago, I spied on a middle-age woman sitting next to a similarly unprepossessing middle-aged man. Before my eyes, the woman became hopelessly infatuated with him, for no reason I could portend. She tried every feminine wile at her disposal to attract his attention. She giggled at him, whispered to him, and petted his arm continuously for the first thirty-five minutes of the flight. That’s when he couldn’t take it anymore. He stood up, told the flight attendant he was moving to another section, and forbade the woman from following him. If I were the woman, I would have taken the hint. However, I will never be she; I’m too busy throwing my luggage around. Rather than accept they would not share a future together beyond the constraints of this six-hour flight, the woman grabbed her bags, and made after him. The flight attendant body blocked her like every great bouncer would, and the woman was forcibly returned to her seat, waving madly at the man to come back. That’s why I don’t bother primping before flights; I’ve seen too many failed attempts by travelers to meet The One. But then came the day I found myself sitting next to an acceptably cute blonde bearded guy on a flight to Los Angeles. Alarm signals went off in my brain: “Don’t be weird! Don’t be weird!” Naturally, the minute I brought my own weirdness to my attention, I immediately began acting bizarre; I tucked my plastic water cup into the hook holding up my tray table. The cute guy next to me looked over at my water cup, now dangling helplessly from the seat in front of me, and frowned. “I’ve never seen anyone do that before.” I considered explaining that I wanted to place my cup out of my way, such that I could continue typing on my laptop. I couldn’t waste a moment’s time, after all, in plotting my takedown of the ultimate universe. And gosh, by the way, didn’t he want to accompany me on said takedown as my sidekick? Instead, I coughed and grunted back, “Whatever works.” My seatmate shrugged, and went back to texting other, better, girls on his phone. Alaska Airlines should really cast me in a commercial. I am, clearly, the young upwardly mobile model of 21st century womanhood to whom they desperately wish to appeal. Sarah Brown is a road warrior and connoisseur of the Alaska Airlines Economy class free snacks. She can be reached at [email protected], and on Twitter @mesarahjb. "Close" is a British term for alley or cul-de-sac.

GUEST COMMENTARY: 'That's the point.' AOC willing to destroy Alaska under Green New Deal

Alexandria Ocasio-Cortez, the 29-year old freshman Congresswoman from New York City, sure knows a lot about a lot…or at least she comes across that way on Twitter. The background: Real Clear News reporter Peter Wegmann had spoken with Alaska Gov. Mike Dunleavy about the wide-reaching effects of a potential Green New Deal on Alaska and its economy. In a series of Tweets, he passed along that the governor had stated “it would impact our civilization as we know it”, before elaborating with “Oil would disappear. Gas would disappear. Coal would disappear. Alaska’s population would plummet.” AOC, always one to defend her pseudo-Socialist manifesto Congressional “masterpiece” fired back a Tweet, stating “Yeah that’s kind of the point” to the first part of Wegmann’s series. Six little words that show where AOC — and the rest of the extremists who share her viewpoints — get it wrong. The salient points in Wegmann’s Tweets are in the second half. Alaska’s economy is made up almost entirely of responsible resource extraction. Nearly 10,000 Alaskan households directly count on paychecks from the oil and gas industries. According to the Alaska Oil and Gas Association, producers — and the support industries backing them — directly and indirectly support over one-third of Alaska’s private-sector jobs. The philanthropic community in Alaska is driven by those same producers and support sectors. If AOC and her following have their way, Alaska’s economy would plummet, and its population would be forced to out-migrate, just the way Dunleavy feared. Not only that, but those staying would be forced to spend over $100,000 per household in the first year of implementing only the energy policies in the Green New Deal, and nearly $70,000 per household per year in perpetuity. I’m guessing AOC has never set foot in Alaska. She’s never seen its beauty except in magazines and on the Internet. She’s never observed first-hand the way Alaska balances environmental stewardship with responsible resource development. She’s never looked into the eyes of the men and women who have dedicated their lives to the energy and resource development sectors in the Great Land. Dunleavy invited her to in a follow-up Tweet. Here’s hoping she takes him up on it — although her disdain for combustible engines make it unlikely she’ll ever get here by train, plane, automobile or cruise ship. That’s a shame, because her know-it-all Tweet did a disservice to Alaska and its citizens. Rick Whitbeck is the Alaska State Director for Power the Future. An Alaskan for more than 35 years, he enjoys our state’s balance between stringent environmental stewardship and the ability to have a thriving resource development-driven economic base. Contact him at [email protected]

OPINION: The education of Bryce Edgmon

Alaska Chamber President Kati Capozzi’s phone started blowing up as Speaker of the House Bryce Edgmon delivered his closing remarks on Oct. 29 at the organization’s annual Fall Forum in Girdwood. Edgmon took part in an hour-long preview of the 2020 legislative session alongside Senate President Cathy Giessel and Gov. Michael J. Dunleavy’s Chief of Staff Ben Stevens that was alternately awkward, encouraging and surreal. Awkward was moderator Willis Lyford starting the panel by playing a clip from the climax of “The Perfect Storm” when the Andrea Gail flips and wrecks killing everyone on board; encouraging was all agreeing a serious look at a spending cap is forthcoming and the legislative leaders praising Stevens for opening lines of communication to the governor; surreal was Giessel calling her newly cultivated relationships with Democrats Edgmon and Senate Minority Leader Tom Begich her best achievements of the session. All in all it was an enlightening look behind the curtain of a dysfunctional, drawn-out session in the first year of the Dunleavy administration marked by massive failures to communicate and political combat unlike anything ever seen in Alaska history. But what set Capozzi’s phone buzzing was Edgmon’s attack on the Chamber’s response to Dunleavy’s initial budget released Feb. 13 that attempted to close the $1.2 billion budget deficit with huge spending cuts and local tax transfers to the state while paying out an estimated $3,000 Permanent Fund dividend according to the statutory formula. “I don’t know if it was too long afterwards that I had members of your organization in my office, you know, sort of championing all these budget cuts,” Edgmon said. “And I said, 'Well, do you have a clue what this budget even contains?’ And I said give me some details. What about the $500 million in transferred to local governments? The doing away of raw fish tax revenues $28 million? Something that would be a third of Unalaska’s annual budget and big chunk of what Petersburg gets and so forth; 41 percent cut to the university; 23 percent cut to K-12. Do you support that? “‘Oh yeah, our organization, we support that.’ Well, I’ll tell you this and I don’t mean this in any sort of a derogatory way, but my ask of you as an organization would be please carefully evaluate those priorities coming forward.” It is uncertain which members Edgmon was referring to. The Chamber conducts an annual Legislative Fly-In to Juneau and more than 80 members made the trek this year, but that event was Jan. 30-31, or two weeks before Dunleavy’s budget rolled out. The day the budget was released, the Chamber did issue a statement with the following headline: “Alaska Chamber agrees that it’s time for Alaska to live within its means.” The opening paragraph read as follows: “The Alaska Chamber applauds Governor Dunleavy for proposing a spending plan that matches current revenues. This action will surely prompt necessary and critical conversations that must occur across Alaska in order to achieve a durable and sustainable fiscal plan.” Next was a quote from former Chamber Vice President Albert Fogle, who was briefly with the group: “For many years, the Chamber has advocated that state government reduce its spending to sustainable levels. The Chamber also supports a meaningful spending cap on operating budget expenditures. Achieving a durable and sustainable fiscal plan that includes a spending cap will strengthen our economy and help Alaskan families by reducing uncertainty and promoting private sector investment. We encourage the Alaska Legislature, local communities, organizations, and all Alaskans to get involved and work together to solve the fiscal challenges plaguing our state.” Nothing in the headline, opening paragraph or Fogle’s quote supports any particular budget cut or comes close to approaching the way Edgmon characterized the Chamber’s position. The release goes on to note the Chamber’s long-standing legislative priority of a sustainable fiscal plan and a cap on operating expenditures that goes back for decades. (Full disclosure: I was also a guest of the Chamber at the forum and moderated a panel discussion that morning between economists Ed King and Mouhcine Guettabi.) Nevertheless, the hysteria over Dunleavy’s budget and the apparent inability of many to read past the word “applaud” in the opening paragraph made damage control the first order of business for Capozzi, who was hired as the Chamber president six weeks later in March and spent the next few months explaining the group’s position to its members, the media and the Legislature. Apparently that nuance never got back to Edgmon. “You know, I talked to some of your members who said ‘we had no idea our organization took that position,’” he went on. “But you did.” It got worse. “My ask of you as an organization, not only to you know, respectfully be more informed and sort of collectively in tune to what I think the public at large wants, but my ask would be that you do what you can to help us pivot because we need help,” he said. As you may imagine, Edgmon admonishing more than 100 of the most engaged and educated stakeholders in Alaska to “be more informed” while simultaneously distorting their collective position did not go over well. Immediately after the panel stepped down, Capozzi returned to the podium and firmly corrected Edgmon for stating “misinformation” about the Chamber’s position and told him that she and its members are always available to communicate with him if he needs further clarification. The Chamber’s legislative priorities are voted on every fall at the forum, and a sustainable fiscal plan as the top goal dates back years. Just consider the group’s press release in 2015 after former Gov. Bill Walker hosted a fiscal summit in Fairbanks that included a host of his proposals to cut spending, raise industry taxes, institute a personal income tax and cap the PFD. Here’s the headline: “Business community applauds Governor’s focus on fiscal sustainability, calls for solutions that reduce spending, keep the economy moving.” There’s that word “applauds” again. Here’s the opening paragraph: “Members of the Alaska business community today thanked Governor Bill Walker for taking initial steps toward putting the state on solid financial footing by asking Alaskans to take a hard look at government spending, as well as potential revenue enhancements.” Why, it’s almost as if the Chamber will encourage, thank, or even “applaud” any governor who is willing to put forth a plan that aligns with its own long-held priority of sustainable spending even when that plan includes tax increases. Edgmon should have known that already, but hopefully he does now. Andrew Jensen can be reached at [email protected]

Alaska Miners Association celebrates 80 years

Mining is one of Alaska’s oldest industries and the Alaska Miners Association exemplifies that. The trade group was founded before World War II and is celebrating its 80th anniversary during its annual convention in Anchorage at the Dena’ina Convention Center Nov. 3-9. Mining continues to be a major industry in Alaska; it employs roughly 13,000 people at small placer and prospecting camps to world-scale mines across the state, according to the Alaska Department of Labor. But even the enduring association doesn’t match the history of mining in Alaska. Commercial mining and Alaska’s “gold rush” years started more than a century before when Russian engineers discovered gold near the Kuskokwim River in 1832, according to the group. The Kuskokwim River valley long supported placer gold operations and today is home to the Donlin Creek gold prospect. With a resource of approximately 33 million ounces, the Donlin mine will be one of the largest open-pit gold operations in the world when it is developed. As for the convention, state Department of Environmental Conservation Commissioner Jason Brune, a former Anglo American representative, will be the keynote speaker Nov. 6, and he will give an update on the mining-related issues the department has dealt with in the first year of Gov. Michael J. Dunleavy’s administration. Dunleavy’s first public appearance after being elected last year was at the Miners convention, where he emphatically declared Alaska would be “open for business” with him as governor. Department of Natural Resources Commissioner Corri Feige will provide the keynote address Nov. 7, sharing her vision for mining in the state and BLM Alaska officials will discuss new priorities regarding mining on federal lands in the state on Nov. 8, according to materials provided by the association. As is customary, the convention will also feature numerous discussions regarding mining policy in Alaska as well as updates on the plethora of large prospects — from copper and gold to graphite and rare earth elements — across the state. Representatives from several of Alaska’s large producing mines will also discuss what their companies have learned in developing metal prospects in the state’s sensitive environment and harsh climate in presentations Nov. 7. Evening activities will start with a history night and inductions into the Alaska Mining Hall of Fame and the convention will conclude with the Alaska Miners Association’s annual awards banquet.

FISH FACTOR: Otter impacts still frustrating Southeast divers, crabbers

They are certainly cute but the voracious appetites of sea otters continue to cause horrendous damage to some of Southeast Alaska’s most lucrative fisheries. How best to curtail those impacts will be the focus of a day-long stakeholders meeting set for November 6 in Juneau. “All of the people who have anything to do with the otters hopefully will all be in the same room at the same time,” said Phil Doherty, co-director of the Southeast Alaska Regional Dive Fisheries Association based in Ketchikan. A 2011 report by the McDowell Group showed that otter predation on sea cucumbers, clams, urchins, crabs and other shellfish cost the Southeast economy nearly $30 million over 15 years. And their population has skyrocketed since then. Four hundred otters were reintroduced to Southeast by the Alaska Department of Fish and Game from Amchitka Island in the 1960s after nearly being wiped out by fur traders at the turn of that century. The otters, which rose to nearly 26,000 in the latest assessment updated in 2014, are under federal protection and managed by the U.S. Fish and Wildlife Service. The animals can grow up to 100 pounds and typically eat the equivalent of a quarter of their weight each day. Last year, at the urging of 20 Southeast towns, organizations and Native groups, the Alaska Senate passed a resolution asking for the state to take over otter management and to provide for more protections. “If the population continues to go unchecked, predation from sea otters inevitably threatens the future of dive and crab fisheries, jeopardizing hundreds of jobs and tens of millions of dollars in economic activity,” Sen. Bert Stedman, R-Sitka, wrote in a statement. One suggested solution has been to allow increased hunting by Native Alaskans, the only people allowed to do so, and lowering the Native blood “eligibility” to one-quarter of a percent. But Doherty said at a growth rate estimated at between 12 and 14 percent a year, hunting can’t keep up with the population. Another problem is restrictions on what Natives are allowed do with the otters they hunt. “The Marine Mammal Protection Act clearly states what Alaskan coastal Natives can do with sea otters,” Doherty explained. “They have to produce a finished product that is in the tradition of Native art and how they’ve used them over the years. They cannot harvest sea otters and sell just the pelt on the open market.” Patrick Lemons, Alaska chief of marine mammal management for the U.S. Fish and Wildlife Service said last year that the Marine Mammal Protection Act limits the agency’s response and they cannot intervene to protect commercial fisheries until a species is at “optimum sustainable population.” The agency recently put the Southeast region’s otter carrying capacity at 77,000, Doherty said. “Until we’re at that carrying capacity, they will manage the sea otters in a very conservative mode. And once we get to 77,000 otters, we can kiss some of these industries goodbye, and it is not just the dive fisheries. The Dungeness crab fishery here in Southeast is being severely impacted and otters eat king and Tanner crab, so there’s going to be impacts on all of the shellfish fisheries.” While the upcoming meeting will provide a valuable exchange, Doherty is not optimistic about the outcomes. “Because the otters are so protected within the Marine Mammal Protection Act, I don’t think anything is going to change the tide of the sea otter population here in Southeast Alaska,” he said. The day long Nov. 6 otter meeting will take place at the Andrew P. Kashevaroff Building in Juneau. It is free and open to the public. Pebble hearing in DC Threats posed to the Bristol Bay watershed by the proposed Pebble mine took center stage in Washington, D.C., at an Oct. 23 hearing of the House Transportation and Infrastructure Committee. Opponents are hopeful the hearing might help put the brakes on the Pebble permitting process. “If Pebble is developed, there is no doubt it will forever change who I am, who my people are, where I come from. And it will rob our children’s children of their right to continue being Native people as we have for thousands of years in Bristol Bay,” said Alannah Hurley, executive director of United Tribes of Bristol Bay. Alaska Public Radio’s Liz Ruskin was at the hearing and reported that Pebble Partnership CEO Tom Collier, the only witness to support the mine, “tilted back in his chair and looked at the ceiling as Hurley spoke.” Alaska Congressman Don Young, who has not taken a position on the mine, criticized the witnesses for “not being scientists.” In a video of the hearing, Young said: “You’re not listening to the science. You are saying a lot of what ifs. Can and cannots. Should we or shouldn’t we. And this committee has a responsibility to review those that are directly involved. Not those that may be affected about it. It’s about science.” Committee Chairman Peter DeFazio, D-Ore., an outspoken Pebble critic, questioned the permitting process. He had especially harsh words about the way in which the U.S. Army Corps of Engineers is assessing the project, which many have criticized as being rushed and sloppy. “What I first want is a proper review and a proper comment period, and I don’t believe the Corps is doing either of those things,” he said at the hearing. “And I’m going to push them very hard to push back, even if Donald Trump is pushing on the other side.” DeFazio was referring to a pull back of special protections the EPA had proposed on the Bristol Bay watershed in 2014. The proposed restrictions were abruptly withdrawn this year on July 30 after Trump had a brief meeting with Gov. Michael J. Dunleavy. That EPA pullback has prompted three lawsuits against the EPA by nearly 20 diverse groups. Last week’s hearing is “typically the first step before an investigation on the permitting process is launched,” said Molly Dischner, communications director for United Tribes of Bristol Bay. The Pebble Partnership has spent more than $2 million on federal lobbying so far this year according to public disclosure forms, Liz Ruskin reported. A final environmental impact statement on the project is expected in January. Fish game changer Just as farmed salmon grown in sea cages toppled markets for wild fish a few decades ago, land-based farming is set to change the game again over the next decade. It will come in the form of recirculating aquaculture systems, or RAS, and will cause even more disruption to world markets. That is the conclusion of Rabobank, a Netherlands-based leader in food and agriculture financing that is among the 30 largest groups in the world. A Rabobank report this month identified more than 50 RAS proposed projects around the world with an estimated output to equal 25 percent of current salmon production by the year 2030. That totals roughly 550 million pounds of fish; in comparison, Alaska’s 2018 salmon catch produced 605 million pounds of salmon. The report said most of the land-based farms are planned in Norway, but proposed production volumes are highest in the U.S. where six farms are planned. In the U.S. Maine is taking the lead where Portland-based company Whole Oceans has received two leases alongside and underneath the Penobscot River. It plans to break ground on a $180 million RAS facility next year and begin output of 11 million pounds of Atlantic salmon annually. The report said RAS could disrupt traditional ocean-based fish farming over the next 10 years adding “it’s not a question of if, but of how much.” Blue opportunity The Alaska Ocean Cluster, an arm of the Bering Sea Fishermen’s Association, is seeking a manager for its Blue Pipeline Incubator, or BPI, in Seward. “This is a blended position made possible through a partnership between the Ocean Cluster, the City of Seward, the Seward Chamber of Commerce and the Small Business Development Center,” said Casey Rangel, program manager. The BPI Manager will oversee all operations of the incubator and will act as the liaison to Seward’s ocean-based industries. Requirements include a bachelor’s degree in business administration or a related field. Salary is $65,000 to $75,000+ commensurate with experience. Applications will be accepted until the position is filled. Learn more at www.alaskaoceancluster.com/about/employment. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

GUEST COMMENTARY: Passing the baton for a competitive Alaska

I’ve learned that getting old is much like a mature oilfield. There comes a time to pass the reins in order to remain competitive and productive, a time for the younger and more energetic to take the lead. That’s how we keep our businesses — and our oilfields — competitive and productive. Here at Lynden, young, smart, hardworking people continue to replace us old warhorses. The same happened in Cook Inlet, and now it’s spreading across the North Slope. These transitions are natural, appropriate and good for Alaskans. The time has come for BP to sell its aging Alaska assets, just like Chevron, Shell and Marathon did in Cook Inlet. Prudhoe Bay is in decline and as it enters its twilight years, it needs a different kind of operator, one that can bring innovation to old problems, one that can reduce costs and operate more efficiently. It also needs a tax and regulatory environment that is stable and competitive. We all know that BP has worked hard to slow the severe decline at Prudhoe Bay. For two years after Senate Bill 21 passed, production actually increased. But BP was struggling to bring investment dollars to Alaska with Prudhoe Bay competing against projects in more than 78 countries across the globe. I have worked with BP in Alaska for nearly 50 years and admire their accomplishments, their generous support of our charities, their employment of so many outstanding Alaskans and Alaska contractors and their positive economic impact on our state. That said, BP understands that mature, high-cost oilfields require nimble operators. We should be thankful that they turned to a company like Hilcorp. Hilcorp is a proven entity that not only turned Cook Inlet around, it is working miracles at North Star and Milne Point. It knows how to make older, declining fields productive again, and it has not hesitated to make the investment needed to breathe new life into these aging assets. As Alaska grapples with recession and budget constraints, it is critical that we do everything possible to keep our resource industries competitive, that we attract new investment and grow our oil production. That’s the best way to provide good jobs, to pay for our government services, including schools and roads, and to support our charities and our Permanent Fund. That’s why it is important that we support companies like Hilcorp, which is willing to invest the billions of dollars it takes to acquire old fields and make them productive again. That’s their job. Our role is to ensure our state is competitive in the global marketplace and stop threatening the industry with increased taxes and unstable tax policies. Increased production is essential to maintaining a healthy economy. Transition from retiring Alaskans to the next generation of employees and from the large oil companies to smaller, more aggressive and nimble companies is not only a natural progression, it is healthy for Alaska. Jim Jansen is the Chairman of the Lynden Companies and a Co-Chair of the KEEP Alaska Competitive Coalition.

GUEST COMMENTARY: What are the options regarding Permanent Fund dividends?

Editor’s note: This is the fourth installment of a continuing series on the Permanent Fund dividend and Alaska’s fiscal system. Two broad options—and several sub-options—exist for the Permanent Fund dividend. Let’s show the array of possibilities before setting out some pros and cons. (Note that neither the appearance nor the location of an item on this list implies endorsement of that idea.) First, the State of Alaska could eliminate dividends. Such elimination could occur (a) with no other action; (b) through a “full cash-out,” which would involve the distribution to Alaskans of the entire Permanent Fund principal and/or the Permanent Fund Earnings Reserve while ending dividends; or (c) through a “partial cash-out,” which would distribute to Alaskans part of the principal and/or the Earnings Reserve while ending dividends. Second, we could maintain dividends. Maintaining dividends could happen by (a) means-testing the dividend so that lower-income residents receive higher payments than higher-income Alaskans; (b) following the statutory formula for setting the annual dividend created in the 1980s; (c) keeping in place the current statutory formula, but ignoring it (as has occurred since 2015); (d) amending the statutory formula (presumably to follow it); or (e) amending the Constitution to include a dividend formula, either the existing one or a new one. Now for some pros and cons. Arguments for and against various versions of eliminating dividends Wiping out dividends would save $1 billion or more per year. Your support or opposition for abolishing dividends outright probably depends both on your view of the rationales for dividends and your sense of what the alternatives are. Alaskans of all stripes would agree that such a straight-up elimination appears politically difficult. Cashing out the whole Permanent Fund principal would pay more than $70,000 to each Alaskan. It requires a constitutional amendment — which the Legislature would have to put on the ballot for voter approval — so it would take a while. Given that the budget relies heavily on the spending of Permanent Fund earnings, dissolving the Permanent Fund principal would put a giant hole in the budget. It would also leave no savings from the one-time oil wealth. Cashing out the entire Permanent Fund Earnings Reserve would pay more than $17,000 per Alaskan and could occur much faster, because by law the Legislature could do that at any time (assuming either no veto by the governor or a veto that was overridden). Wiping out the Earnings Reserve would accelerate the State of Alaska’s fiscal reckoning. Partial cash-outs of either the Permanent Fund principal or the Permanent Fund Earnings Reserve face the same pros and cons as full cash-outs, but to a lesser degree. Arguments for and against maintaining various versions of dividends That’s enough for now on options for dividend elimination; let’s consider pros and cons of various versions of keeping it. Converting dividends to a means-tested program would be legal and would save money if the payments of higher-income Alaskans were cut while lower-income residents remained the same as they would be under the current statutory formula. Means-testing dividends would also fly in the face of the philosophical arguments for dividends and probably weaken political support for dividends. Following the current statutory dividend formula would continue to make dividends the State of Alaska’s largest outlay. In the absence of other changes such as deeper budget cuts than many Alaskans seem to want and/or substantial revenues from taxes (either from the levying of broad-based taxes—perhaps income or sales—or from an increase in oil taxes), following the statutory dividend formula appears to create a big and continuing fiscal gap that will come to bite Alaskans. Leaving the statutory dividend formula in place while failing to follow it seems to be a recipe for arguments in the Legislature about the level of the dividend that eat up the session each year. Putting the statutory dividend formula in the Constitution would be both hard and raise the same questions of fiscal sustainability that following the current statutory formula does. Putting the dividend in the Constitution, however, would mean that the dividend would have to be paid under the formula regardless of the prevailing fiscal circumstances. The last two options to discuss involve a new dividend formula that ideally would be both fair and fiscally sustainable. If the new dividend formula is in the statutes, legally the Legislature could ignore it. Politically, however, adopting a new statutory formula after a full debate might make that formula stick. This list’s remaining option would be to put a new dividend formula in the Constitution. Again, constitutional amendments take time and substantial effort. The framers of the Alaska Constitution made the document hostile to dedications and fixed formulas out of a desire to give the Legislature maximum leeway to address the state’s issues and problems as they arose. Supporters of “constitutionalizing” the dividend argue, however, that the experience of the last four years shows that leaving the Legislature the freedom to decide the dividend every year breeds political dysfunction, as that single decision seems to exhaust — or even exceed — the bandwidth available to lawmakers. If there is a new dividend formula, what should it be? Cliff Groh is an Anchorage lawyer and writer as well as the legislative assistant who worked the most on the bill in 1982 that created the Permanent Fund dividend we have today.

Alaska hire preference in limbo after AG drops defense

Editor's note: This story has been updated with a statement from Associated General Contractors of Alaska Executive Director Alicia Siira. Alaska’s local hire requirements are a touchy subject these days. On one hand, they are a means to ensure the residents of a state with historically high unemployment aren’t passed over when often large, nationwide construction firms are looking for help. At the same time, though, several iterations of Alaska hire laws have been struck down as unconstitutional, which appears to have led Attorney General Kevin Clarkson to conclude the current in-state hire mandates for many public projects are illegal, too. Clarkson issued a formal legal opinion Oct. 3 contending the state’s Alaska hire statute violates portions of both the U.S. and Alaska constitutions. In the 11-page opinion written for Gov. Michael J. Dunleavy, Clarkson wrote that laws intended to economically benefit Alaska residents at the expense of nonresidents violates the Privileges and Immunities Clause of the U.S. Constitution. Similarly, provisions in the current law could at times put Alaskans from one region of the state ahead of others when being considered for certain work, meaning it violates the Alaska Constitution’s Equal Rights, Opportunities, and Protection Clause, according to Clarkson. Clarkson’s interpretation of the Alaska hire law was published as the state Department of Labor and Workforce Development was being sued by SECON, a Juneau-based general contractor firm that works extensively on government-funded Southeast road projects as well as Ricky Kirby, a seasonal SECON paving equipment operator from Yakima, Wash. The Labor Department implements the Alaska hire law. SECON is a subsidiary of Colaska Inc., which is part of the larger Colas USA group of construction companies. While the law was being challenged, the case had not been adjudicated and state Superior Court Judge Peter Ramgren had not indicated how he might rule on the complaint, according to court records. Filed in July, the lawsuit alleges the state’s residential hiring preference violates the Privileges and Immunities and Commerce clauses of the U.S. Constitution and the Equal Protection Clause of the Alaska Constitution. SECON was fined by the Labor Department and paid $3,678 in July 2017 for violating the Alaska hire law while working on a public water system project; the company was additionally fined 17 separate times from Feb. 15 to May 20 for not meeting resident hire thresholds on a host of projects it worked on earlier this year, according to the complaint. The 2019 fines totaled $158,670. The complaint asserts that SECON is a union contractor managed by Alaskans and has an 85 percent resident workforce but is periodically forced to hire Outside laborers such as Kirby to work on its projects in the state. As it stands, state law requires that staffing for state or locally funded public works projects be conducted with a 90 percent Alaska resident hire requirement by trade when a given project is in a region of the state deemed to be a Zone of Underemployment by the Labor Department commissioner. A region of the state can be considered a Zone of Underemployment if the unemployment rate for the area averaged 10 percent more than the national unemployment rate over the prior 12-month period. The entirety of Alaska can also be deemed a Zone of Underemployment if the criteria are met statewide. Labor Commissioner Tamika Ledbetter found all of Alaska to be a Zone of Underemployment in the most recent employment preference determination issued by the department June 13. The determination was effective through June 30, 2021, for 21 trades — boilermakers to culinary workers to carpenters and tugboat workers — until Clarkson’s opinion. The subsistence lifestyle and lack of economic opportunities prevalent in rural Alaska and the state’s highly seasonal industries have historically combined to give the state a significantly higher unemployment rate than the rest of the country. The resident hire preference was suspended in 2013 under former Gov. Sean Parnell when the Lower 48 was continuing to recover from the Great Recession that largely missed Alaska. It was reinstated statewide in June 2015 by Gov. Bill Walker’s administration after the national unemployment rate had fallen below Alaska’s, which at the time was mostly holding steady. According to the most recent data available from the Labor Department, nonresidents made up 20.9 percent of the Alaska workforce in 2017. Kirby’s and SECON’s attorney Michael Geraghty wrote in the complaint that the state cannot justify upholding the Alaska hire law because there is no good reason for treating nonresidents differently than Alaskans. Discriminating against nonresidents won’t improve the employment situation of residents because workers from Outside “are not the ‘peculiar source of the evil at which the statute is aimed,’” Geraghty wrote, citing a 1978 U.S. Supreme Court ruling that struck down a prior Alaska hire law focused at oil industry employment based on the Privileges and Immunities Clause. “The residency law, thus, unlawfully discriminates against out-of-state individuals like Kirby who have the requisite skill, knowledge, and experience to work on publicly funded projects in Alaska, but for the residency law,” the complaint further contends. Geraghty was attorney general for Alaska from 2012-14 under former Gov. Sean Parnell. Kirby, according to the complaint, can make more money working on Alaska projects for roughly half the year than he can working in his home state of Washington for the same amount of time. Kirby is a member of the International Union of Operating Engineers, Local 302, which covers Alaska, Washington and Idaho. Local 302 Juneau district representative Corey Baxter said in an interview that union contractors such as SECON call him when they need workers for projects in the area. Baxter subsequently calls Local 302 union halls in Anchorage and Fairbanks if there are not enough Southeast workers to fill projects. However, he said it can be a challenge to get workers to temporarily relocate, particularly in summer when work is plentiful. “We can’t force somebody to come down to help,” Baxter said. He added that union officials always try to hire in state when they can, but sometimes they have to go Outside to meet the labor demand. SECON’s complaint lays out a similar scenario. The state does have a detailed process by which companies can have the local hire requirement waived on a case-by-case basis; it includes advertising the positions that need to be filled statewide for at least three days, according to an informational paper published by the Labor Department. The Associated General Contractors of Alaska, a trade group that represents numerous contractors subject to Alaska hire requirements, issued the following statement from Executive Director Alicia Siira. "In the construction industry, few people believe in local and Alaska hire more than we do," she said. "This determination will not open the floodgates to Outside contractors coming to Alaska. It costs more for a contractor to import labor from the Lower 48 than it does to hire local. The public projects that the Alaska hire law applies to have a prevailing wage requirement — workers are paid at published rates. These requirements also include paying $100 per day to workers whose domicile is more than a specific number of miles away from the job. There are not margins on construction projects to allow contractors to hire Outside labor unless it's absolutely necessary because workers are not available. And why would they? The excellent training Alaskans recieve in the construction trades results in some of the best trained workers in the country, and our industry wants to make sure they stay in Alaska." Clarkson wrote in his opinion that just because the Alaska hire law is based on good intentions, that doesn’t mean it passes legal muster. “Despite its popularity among some Alaskans, Alaska hire has not fared well in the courts,” also referencing the 1978 Supreme Court ruling and other rulings by the Alaska Supreme Court against broader Alaska hire laws that have since been repealed. “The U.S. Supreme Court has long held that the Privileges and Immunities Clause ‘plainly and unmistakably secures and protects the right of a citizen of one state to pass into any other state of the union for the purpose of engaging in lawful commerce, trade, or business without molestation,’” Clarkson wrote, citing the same U.S. Supreme Court precedent as Geraghty. Department of Law spokeswoman Cori Mills wrote via email Oct. 29 that the state was close to finalizing a settlement with SECON. But some legislators are not keen on the attorney general not defending the laws they’ve passed. House State Affairs Committee co-chair Rep. Zack Fields, D-Anchorage, called Clarkson’s opinion “politically charged” in a statement issued shortly after it was published. He acknowledged that courts have struck down local hire mandates for privately funded projects, but noted that, except for Dunleavy, both Democrat and Republican gubernatorial administrations since 1986 have implemented Alaska hire laws. Senate President Cathy Giessel, R-Anchorage, sent a letter to Clarkson Oct. 22 in which she wrote that his opinion “caused consternation” to her and many of her constituents. The State of Alaska has long tried to find a balance between being unjustifiably parochial and supporting employment for Alaskans, according to Giessel. She wrote that Alaska hire laws have been “tested and refined through the judicial process” but the current version has not been thrown out in court. Giessel stressed that as attorney general, Clarkson has a constitutional duty to enforce and defend the laws of the state, including Alaska hire. “Your ad hoc determination that the laws of our land, which remain untested in the courts, are unconstitutional is a diversion into the lawmaking field that is rightfully the purview of this branch of government (the Legislature). I respectfully urge you to cease a law creation process that appears to be done by executive fiat,” she wrote. “I also respectfully urge you to modify or revoke your Oct. 3 opinion in recognition of the constitutional obligation of the executive branch to faithfully execute the laws of this state enacted by the Legislature.” Clarkson responded to the Senate President Oct. 29, writing in a four-page letter that he and Dunleavy share her desire to see Alaskans working on projects in the state, but stressed that he took an oath of office to defend the state and federal constitutions. "Nowhere in law is the attorney general charged with a duty to defend every statute, however plainly unconstutitional it may be," Clarkson wrote, contending Alaska Supreme Court precedent gives the attorney general the discretion to handle the state's legal matters as he or she deems appropriate. At this point it’s unclear if Dunleavy, who has long stressed a need for state officials to follow the laws of the state — most often regarding the Permanent Fund dividend — will seek to repeal Alaska hire in the upcoming session. A spokesman for Dunleavy did not respond to questions in time for this story. Elwood Brehmer can be reached at [email protected]

Marijuana board wrangles with unincorporated area licenses

As more cannabis entrepreneurs seek to open businesses all over Alaska, the Marijuana Control Board is dealing with the question of how to provide adequate process for unincorporated areas. So far, the majority of cannabis businesses are in the urban areas of Anchorage, Wasilla/Palmer, Fairbanks or Juneau. There is a smattering in smaller urban areas like Kenai/Soldotna, Homer, Bethel, Ketchikan, Kodiak and North Pole. But the board has granted a few licenses to businesses in communities that are small, unincorporated and aren’t even represented by a borough government. When applicants are looking at establishing a retail, cultivation or manufacturing facility for cannabis products, there is an extensive publishing process involving running public notices in newspapers or radio stations and providing notice to a local government, which could voice objection to a license and provide a platform for the public to testify about it. In the case of unincorporated and rural communities, there is no local government, and there may or may not be a publication of general circulation to publish a notice in. One aspiring business in Tok has explored these problems throughout the application process. 907 Promos, a holding company, bought land in Tok with the intention of opening a retail shop called “Tokin Up,” but has run into snags that have held it up since February. Because Tok does not have a local government, the owners had to obtain signatures from a majority of the residents within a five-mile radius of the proposed location for a petition to the Marijuana Control Board. Tok is a spread-out community, and the most recent complete census was done nearly 10 years ago, in 2010. Initially, the applicants used data from the Alaska Department of Commerce and Community Development, but that proved to be less than precise. Determining exactly how many people lived within the five-mile radius involved drawing a digital fence on Google Maps and dropping a pin on every single rooftop, according to a letter from Lance Christian Wells, the legal firm representing 907 Promos. “They printed off each grid section to provide a ‘current map’ of Tok,” wrote legal assistant Jessika Smith in a letter to the board. “Applicants drove up and down every street and driveway identified from the ground, satellite, or sky, knocking on doors to gain support and collect signatures.” Smith wrote that the Alcohol and Marijuana Control Office, or AMCO, had told them this process had worked in other small communities, but when they presented the map they developed as a household count, it was denied. They switched to using a mathematical model, basing a population estimate on the number of households, but it came up much higher than the census count. When they disregarded outbuildings and abandoned residences, it came up far smaller. So the applicants and AMCO approached the state demographer for help. The Alaska Department of Labor’s demographer, Eric Sandberg, estimated that there were approximately 869 people older than 21 in the area. The applicants also ran into snags with public notice, because Tok doesn’t have its own newspaper, Smith wrote. Radio stations either didn’t offer advertising or wouldn’t advertise for a cannabis facility because of their federal funding. “Seemingly out of options, licensees were able to gain approval from AMCO to provide public notice through unconventional means — by mailing public notice to each and every PO Box in Tok once a week for three weeks,” Smith wrote. “Residents do not use home addresses for mailing or have mailboxes within their community, so this should have covered everyone living in or around Tok.” Throughout the process, residents of Tok who opposed the opening of a retail facility submitted public comment to the board, with comments dating back to April. The applicants managed to gather 617 signatures as of September, with 579 needed, said AMCO Director Erika McConnell during the Marijuana Control Board’s Oct. 22 meeting. However, only 490 of those people were vetted as living within the radius and being older than 21, she said. Johnathan Guest, one of the applicants with 907 Promos, told the board they felt confident in the community support as long as the board decided on a number of signatures they needed. “We absolutely feel we can meet the standard if you allow us to add signatures after the vetted number,” he said. Board member Loren Jones said it seemed unlikely the board would run into this situation again — Tok is a fairly large community for an unincorporated one without a local government. Most unincorporated communities in the unorganized borough tend to be very small, like Naukati Bay in Southeast, where the board previously granted a limited cultivation license. Naukati Bay has a population of about 113. The board voted to postpone the decision on the petition until its November meeting, until AMCO could verify more of the signatories’ addresses. The topic of how to provide adequate voice to neighbors of cannabis establishments in unincorporated areas has come up before at the board. In 2017, Talkeetna’s first retail cannabis shop opened on its Main Street, with approval from the Matanuska-Susitna Borough. Some residents of Talkeetna, which is unincorporated, voiced opposition to it, but the borough’s code allowed it. Marijuana Control Board chairman Mark Springer said during the board’s discussion on legislative priorities that in addition to recognizing tribal governments as local governments for the purpose of protesting cannabis licenses, the state could consider nonprofit community associations — essentially, community organizations recognized by the state that represent the interests of unincorporated communities, receive state and federal grants, provide services or enter into contracts or agreements. “If we had that in Tok, we would not be having this issue right now,” he said. Other legislative priorities for the board include evaluating the current cannabis tax structure for possible reform, transporting between license types, indemnification for minors assisting in investigations, prohibiting personal solvent-based manufacturing, clarifying the personal plant cultivation limit, setting possession and transportation limits for concentrates and edibles and requiring a majority of the board to adopt regulations. Elizabeth Earl can be reached at [email protected]

Stocks set another record. The champagne’s still corked.

NEW YORK (AP) — U.S. stocks are back at a record. Don’t feel excited? Neither does Wall Street. After a shaky few months, the stock market has pushed through worries about President Donald Trump’s trade wars, weakening corporate profits and the slowing global economy to set another all-time high. The S&P 500 closed Oct. 28 at 3,039.42, eclipsing the previous record set on July 26. The resurgence belies how much caution still runs through markets, however. The strongest performers in recent months have been companies that pay big dividends and are more likely to hold up during downturns. Investors, meanwhile, remain hesitant to plow their money into stocks. “We’ve slowly crept up to these all-time highs, but there’s still a lot of uncertainty,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. “We’re open to the idea that there could be a reacceleration in global economic growth, but we haven’t seen confirmation yet.” Some glimmers of increased optimism have shone through the past couple of days, such as improved performance for smaller companies and tech stocks, but plenty of apprehension is still apparent in the catalysts for the S&P 500’s return to a record high: Defense has been the best offense Of the 11 sectors that make up the S&P 500, the ones seen as the stodgiest have been the best recently. Since July 26, utilities have jumped 6.3 percent. Profits for these kinds of companies are generally steadier than for the rest of the market, but also slower growing. That’s why they don’t typically do better than the overall market when times are good. But their relatively high dividends look more alluring now that the Federal Reserve has cut interest rates twice since August, in hopes of protecting the economy. The only other sector in the S&P 500 to rise more than 1.4 percent is another high-dividend sector, real estate, which is up 5.6 percent. Stocks that rise with a strong economy are scuffling If investors were feeling gung ho, they’d likely be piling into areas of the market closely tied to the strength of the economy, which are known as “cyclical” stocks. They are not. Energy stocks have been the worst performers in the S&P 500 since July 26, down 5 percent, for example. And tech stocks lagged the S&P 500 from late July until last week, after surging ahead of the rest of the market in the early part of this year. The struggles tie into all the uncertainty that still exists about how much trade wars will hurt the economy, said Willie Delwiche, investment strategist at Baird. That would hurt cyclical stocks more than defensive stocks. Low interest rates drive the market as much as anything else In addition to utilities and real-estate investment trusts, homebuilders have been among the market’s best performers recently. Lennar, PulteGroup and D.R. Horton are all up more than 16 percent in the last three months as lower mortgage rates have drummed up more business for them. The average 30-year fixed mortgage has a rate of 3.75 percent, down from 4.51 percent at the start of the year, according to Freddie Mac. Euphoria is still lacking Investors are still cautious, and they’re not chasing after the rising stock market. In four of the seven weeks through Oct. 16, they pulled more money out of U.S. stock funds and ETFs than they put in, according to the latest estimates from the Investment Company Institute. Before that, investors yanked a net $101 billion through the year’s first eight months and instead poured money into the safety of bond funds. To a contrarian, this is actually an encouraging sign. It means stocks could push even higher if investors do decide to get more aggressive with their portfolios. Recent performance suggests they might need a confidence-booster, such as a U.S.-China trade deal. “We’re not seeing an excessive amount of optimism out there,” said John Hancock Investment Management’s Roland. “That’s one reason the market could still have some legs here. We’re open to that, but we’re just waiting for some confirmation that the backdrop can support earnings growth going forward.” AP Business Writer Alex Veiga contributed.

US deficit hits nearly $1 trillion. When will it matter?

WASHINGTON (AP) — The Trump administration reported a river of red ink Oct. 25. The federal deficit for the 2019 budget year surged 26 percent from 2018 to $984.4 billion — its highest point in seven years. The gap is widely expected to top $1 trillion in the current budget year and likely remain there for the next decade. The year-over-year widening in the deficit reflected such factors as revenue lost from the 2017 Trump tax cut and a budget deal that added billions in spending for military and domestic programs. Forecasts by the Trump administration and the Congressional Budget Office project that the deficit will top $1 trillion in the 2020 budget year, which began Oct. 1. And the CBO estimates that the deficit will stay above $1 trillion over the next decade. Those projections stand in contrast to President Donald Trump’s campaign promises that even with revenue lost initially from his tax cuts, he could eliminate the budget deficit with cuts in spending and increased growth generated by the tax cuts. Here are some questions and answers about the current state of the government’s finances. What happened? The deficit has been rising every year for the past four years. It’s a stretch of widening deficits not seen since the early 1980s, when the deficit exploded with President Ronald Reagan’s big tax cut. For 2019, revenues grew 4 percent. But spending jumped at twice that rate, reflecting a deal that Trump reached with Congress in early 2018 to boost spending. Why doesn’t Washington do something about it? Fiscal hawks have long warned of the economic dangers of running big government deficits. Yet the apocalypse they fear never seems to happen, and the government just keeps on spending. There have been numerous attempts by presidents after Reagan to control spending. President George H.W. Bush actually agreed to a tax increase to control deficits when he was in office, breaking his “Read my lips” pledge not to raise taxes. And a standoff between President Bill Clinton and House Speaker Newt Gingrich did produce a rare string of four years of budget surpluses from 1998 through 2001. In fact, the budget picture was so bright when George W. Bush took office in 2001 that the Congressional Budget Office projected that the government would run surpluses of $5.6 trillion over the next decade. That didn’t happen. The economy slid into a mild recession, Bush pushed through a big tax cut and the war on terrorism sent military spending surging. Then the 2008 financial crisis erupted and triggered a devastating recession. The downturn produced the economy’s first round of trillion-dollar deficits under President Barack Obama and is expected to do so again under Trump. Should we worry? As far as most of us can tell, the huge deficits don’t seem to threaten the economy or elevate the interest rates we pay on credit cards, mortgages and car loans. And in fact, the huge deficits are coinciding with a period of ultra-low rates rather than the surging borrowing costs that economists had warned would likely occur if government deficits got this high. There is even a new school of economic theory known as the “modern monetary theory.” It argues that such major economies as the United States and Japan don’t need to worry about running deficits because their central banks can print as much money as they need. Yet this remains a distinctly minority view among economists. Most still believe that while the huge deficits are not an immediate threat, at some point they will become a big problem. They will crowd out borrowing by consumers and businesses and elevate interest rates to levels that ignite a recession. What’s more, the interest payments on the deficits become part of a mounting government debt that must be repaid and could depress economic growth in coming years. In fact, even with low rates this year, the government’s interest payments on the debt were one of the fastest growing items in the budget, rising nearly 16 percent to $375.6 billion. Haven’t economists been making these warning for decades? Federal Reserve Chairman Jerome Powell says the day of reckoning is still coming but isn’t here yet. Most analysts think any real solution will involve a combination of higher taxes and cost savings in the government’s huge benefit programs of Social Security and Medicare. Any sign that Washington may take the politically painful steps to cut the deficit? In short, no. There has been a major change since the first round of trillion-dollar deficits prompted the Tea Party revolt. This shift brought Republicans back into power in the House and incited a round of fighting between GOP congressional leaders and the Obama administration. A result was government shutdowns and near-defaults on the national debt. But once Trump took office, things changed: The president focused on his biggest legislative achievement, the $1.5 trillion tax cut passed in 2017. This appeared to satisfy Republican lawmakers and quelled concerns about rising deficits. Democratic presidential candidates have for the most part pledged to roll back Trump’s tax cuts for corporations and wealthy individuals. But they would use the money not to lower the deficits but for increased spending on expensive programs such as Medicare for All. So the deficits won’t animate the presidential campaign? It doesn’t seem likely, though former Rep. Mark Sanford, who has mounted a long-shot Republican campaign against Trump, is urging Republican voters to return to their historic concerns about the high deficits. And economists note that today’s huge deficits are occurring when the economy is in a record-long economic expansion. This is unlike the previous stretch of trillion-dollar deficits, which coincided with the worst recession since the 1930s. But analysts warn that if the economy does go into a recession, the huge deficits projected now will expand significantly — possibly to a size that would send interest rates surging. Such a development, if it sparked worries about the stability of the U.S. financial system, might produce the type of deficit crisis they have been warning about for so long.

Pages

Subscribe to Alaska Journal RSS