Alaska, Economics, Featured, Politics

Cost cuts and dividend caps with Alaska Gov Bill Walker

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By Russell Stigall for Seward City News —

Alaska’s 11th and current Governor, Bill Walker, recently visited Seward to meet with its City Council and answer questions from the public. Alaska’s current budget woes topped locals’ concerns at the August 26 special meeting.

President Barack Obama took the keys to the country a month after the kickoff to the great economic storm of our generation. CEO Jeff Clarke took the helm at Kodak, the photographic film company, when everyone had a cell phone and every phone had a digital camera. For Alaska Gov. Bill Walker his first term “why me” was $30-a-barrel oil.

With a state government balanced on per-barrel price closer to $90, Walker had to make due with a third. After a long and stormy 2016 Legislative Session, with cuts and caps and special sessions, Walker is on the road and in communities, in his words, “running to the fire.”

Oil prices are in the tank. ConocoPhillips Company decided to step away from its offshore Arctic offshore oil exploration and potential production in Alaska. Natural gas is cheap to buy and Alaska’s reserves remote. Walker’s Alaska was paupered by the whims of global markets and of multinational oil and gas companies.

Walker said some of the upheaval in Alaska’s recent election was a reflection of Alaskan’s desire to face this economic hardship head on. A special session this spring was attempt to thwart unrealistic campaign promises he feared legislators would make during recent elections. He said he was concerned the election would revolve around promises to maintain existing programs when cuts were most definitely in the works.

However, some strong incumbents were dethroned by newcomers willing to make tough choices.
“Just the opposite of what I was fearful of.” Walker said.

 

VIDEO: Seward City News conversation with Alaska Governor Bill Walker

 

Marijuana and other revenue sources
Question: I appreciate your appointment of Nick Miller to the Marijuana Control Board. He’s an industry advocate and I think the board will move forward better with him there. How will revenue from marijuana sales and taxes change the financial landscape for Alaska?
Gov. Walker: I’ve seen some presentations that say revenue from that may exceed oil and gas. That would be eye-opening and awakening. However, the governor went on to say comparisons with other states with regulated marijuana were tricky because of Alaska’s relatively small population. A similar problem arises should Alaska consider a state lottery. However…
GW: We need to look at all sources of revenue differently than we have in the past. We tend to roll our eyes at other sources of revenue. All revenue is meaningful. More than $9 million a year pour into state coffers from out-of-state fishing licenses. All of this is on the horizon.

 

I’ve seen some presentations that say revenue from [marijuana sales tax] may exceed oil and gas — Gov. Walker.

 

Climate change and hydrocarbons
Q: What can the state do to ween itself off of its oil dependency?
GW: Couple things. One is, no question, a much cleaner source [of energy] is natural gas. Renewable energy … we now have hydrokenetic energy. Which is a turbine in a river, it’s not a dam. We have two turbines in our rivers. I am a fan of Bernie Carl’s energy fair in Chena Hot Springs. Wind, I see you have wind here, turbines here in Seward. We need to look at all of it. There’s no question about that.

GW: I had this conversation with the President [Barack Obama].There is going to be a bridge transition [between Alaska’s current hydrocarbon-based economy and another] and we don’t want to be in a situation where we haven’t done anything. I’d like to be able to bank those [oil and gas] revenues at some point. We are a hydrocarbon economy in Alaska … and we’re certainly transitioning off that … but it’s going to be a while before we do. It’s a good goal to have, but to transition completely…I do not think we can do it quite yet.

Gov. Walker gave Nevada as an example of a state with new energy opportunities. Nevada is playing host to Tesla’s giga-factory, a multiple-football-field sized factory for producing electric vehicle batteries. “It’s amazing what is being built there,” Walker said.

Alaska set a goal for electricity generation through renewable resources at 50 percent by the year 2025. The state produced nearly a quarter of its electricity through hydroelectric, wind and solar when it legislatively set this goal in 2010. The legislation also called for energy efficiency improvements to some of the Department of Transportation and Public Facilities structures.

See Renewable Energy Alaska Project REAP for more information.

 

Why cap the dividend?
Q: The solution is with the citizens, I agree. I don’t agree with using the Alaska Permanent Fund as the sole remedy to this problem. I think you have to force the Legislature’s hand, but it is a tactic … to bring this dark picture of no-action to the citizens? To say: Here’s what happens if we don’t do it, this permanent fund that you’ve grown used to is going to go away. Is this a tactic? Let’s not ignore the income tax.

GW: I wouldn’t say it is a tactic, it’s more of a strategy. The process doesn’t allow me to create new income. But it does allow me, with a red pen, to reduce spending. When [Legislators] said they wouldn’t touch the permanent fund, I said I will do that. I’ll take all the blame for that. That wasn’t the only thing we proposed, it was the only thing we could do in the way of reduction.

GW: When I said this plan is in pencil, not pen. I meant that. If [legislature] can make it better, please. PFD was only part of the fix but it was the part I could fix with my red pen.

GW: The strategy is I take all the blame. If this ends my political time in Alaska and we fix Alaska I’ll celebrate all day. That’s a cheap price to fix Alaska. That’s the message I’m trying to get to Legislators: embrace this opportunity. If we’d run from the earthquake – well, we ran from the earthquake – but if we’d run from the effects of the earthquake we wouldn’t have rebuilt in the way we did. We have a chance … when you start fixing something it feels good.

GW: I’m willing to be the bad guy.

In a follow up question through email the Office of Alaska Governor Bill Walker said this year money from the Permanent Funds’ Earning Reserve Account was used to cover the Permanent Fund Dividend. These funds are earnings from the principal of the Permanent Fund, and are the source of the dividend. The money to cover the state’s budget deficit came from its Constitutional Budget Reserve.

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Governor’s reasoning: “halving the PFD this year preserves the size of that fund so that it can continue to provide dividends and be used by the legislature – if they should decide to and pass the appropriate legislation – to fund government services.”

Without a cap on Alaska’s PFD, the Governor’s staff wrote, if the state legislature decides to pull cash from the ERA as an ongoing source of government funding, “the money will eventually run out.”
“By vetoing several appropriations the legislature made including half of the appropriation for the PFD this year, the Governor was able to protect more of the ERA, and make it more likely that dividends will continue in the years to come.”

 

Questions linger for Seward’s long term care
Q: I’m medical power of attorney for a resident at Mountain Haven. In the last two years the state has made changes to its waiver for elderly. Conditions are getting harder and harder. She needs to be up there, she has a number of medical problems. I ask you to take a look at that department and see how they are balancing their budget. Is there a medical reason these decisions are being made or is there a budgetary reason? It is concerning to me because those are the constituents in Alaska who are not able to come to these meetings.

Where that affects the city is we built Mountain Haven with some promises made by the state. So the citizens of Seward actually fund, with some taxes, Providence [Medical] shortfalls. If it is a situation where no one qualifies for long term care assistance from the state, then we will never be able to, as a small community, support that.

GW: We will get clarification on that. Whether it is a budget issue or a waiver issue … budget or not we try to do the right thing.

“I was impressed,” Christy Terry said in a later phone interview. “Gov. Walker didn’t take it as criticism.”
The governor asked for contact information to pursue the question further. Terry said she is digging deeper into the details with Providence and Mountain Haven to give the governor a clear picture.

 

Budget or not, we try to do the right thing — Gov. Walker

 

What if Alaska had never developed its oil resources?
Q: Back before Alaska was a state, before the oil revenue, a lot of people in Alaska were lobbying that the state would be viable. What was the plan back then, before we were a state? We didn’t have all those oil reserves. Are we in fact viable without those oil reserves, or oil money?

GW: The initial footprint of Alaska was just north of Fairbanks. We said no … we need the whole piece to live off. [The federal government] said that it wouldn’t be providing all the infrastructure, there’s not going to be an I-5 or other forms of inter-modal transportation, so we’re going to have to live off the resources. Alaska is the only state, we as a state own the resources in the ground. But we can not sell the resources in the ground. There is a clause in [Alaska’s] statehood pact that says: if you do, if you sell the resources in the ground it reverts back to the federal government.

GW: We assumed that we would have access to those resources and we have not. We thought we’d have access for timber purposes, we thought we’d have access to oil and gas development and we have not.
So here we sit with a ¾ empty oil pipeline next to 10 billion barrels of oil, 35 miles to the east of that pipeline. So it was the access part that didn’t work.

GW: We have not gotten the benefit of the bargain. For us to be expected to survive we need to be able to develop our resources responsibly. We got a much lesser deal than some of the other states got.

GW: I was just in a meeting this morning looking at what we are doing with the Department of the Interior and changes there. It is a constant battle if we don’t have access. We can live off the land. It is viable. We need the benefit of the deal we were promised.

 

Does Alaska’s future rest on LNG?
Q: How much of your future energy plan is the Alaska [Liquefied Natural Gas] project? Was it something we were really really looking at? Or was it more of a hope thing?
GW: We have not put that into our financial model, because its something that it out there … we have a different opportunity today than we did six months ago … we’ve had different opportunities, unfortunately the headlines do not match the opportunities. I will do everything I can to make sure that Alaska’s gas, that we have the opportunity, if it is not viable, it will not get financing. We can’t bank on that. We can’t put that into our financial model. If we get a $billion a year, that is five times what an income tax would bring in. It is the largest untapped resource of energy in the world that has not gone to market.

GW: So we are going to continue to look for a way to bring Alaska gas to market while at the same time not risking, not a dime from the permanent fund, not risking Alaska’s future. But that is an opportunity we just can’t ignore.

 

[Alaska’s natural gas reserves are] the largest untapped resource of energy in the world that has not gone to market — Gov. Walker.

 

Tax the net
Q: Can Alaska have an online sales tax?
GW: Big issue nationally. I’m a big believer in buy local. When it comes time for donations for the little league uniforms … it is the local merchants that you go to. State can only tax online sales if the state itself has a sales tax.

 

Inspire public service
Q: Service. Never underestimate the power of inspiration. Communicate your passion. Inspire and I think you’ll get a lot of participation. I think you’ll get a whole bunch of people volunteering to plug in. Alaskans are really self-reliant. I do it because it feels good.

GW: Thank you for your volunteerism. We have seen a lot of that … organizations that say ‘we’ll help with this piece.’ I really appreciate that.

GW: I don’t look at the dark cloud of where we are, I look at the bright future of where we are going to be. Thinking of all the resources we have and all the opportunity we have in this state. I get excited about that. I don’t like to live in what I call the deficit dungeon all the time. That’s why I like to travel around Alaska, because I get to see first hand what happens when people pull together. I’m trying to ignite that a bit around the state. I think some legislators don’t see that passion you talk about, our love of Alaska and what people are willing to do to make sure we’re okay.

Contact the reporter at russellstigall@gmail.com.

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