Alaska’s biggest problem

Trust is a precious commodity. Once lost, it is difficult, often impossible, to regain.

Friendships, marriages and business partnerships die when trust disappears. Many among the 40 to 50 percent of Americans whose marriages end in divorce know this problem too well. But this story isn’t about trust on the personal level.

It is about trust on the societal level. Specifically, it is about the brewing trust problem facing the state of Alaska and all Alaskans.

Gov. Bill Walker has for months now been running a stealth campaign to convince Alaskans to open the state’s oil-wealth savings account to help fund government. It wasn’t until almost the end of January that finally revealed he had hired consultants “last fall to help make a sales pitch for his proposed solutions to the state government fiscal crisis.”

The best-case spin is that Walker and his operatives have been privately trying to nudge business and political leaders into backing a plan to save a state economy hard hit by plummeting oil prices.

The worst-case spin is that Walker dispatched a couple of covert agents — one a Washington, D.C. lobbyist and the other a longtime Alaska political operative — to set up secret meetings with business and political leaders to help stage a raid on the state savings account in order to prop up a bloated bureaucracy.

The reality probably lives somewhere between, as it usually does.

But individual Alaskans, who’ve always been leery of back-room dealings by politicians, seem to be leaning increasingly toward the idea that they may be getting played by those in power. This is not good.

Nothing stymies political action quicker than the whiff of a voter revolt in the air, and political action is in this case necessary because the state is in legitimate trouble.

Despite a population smaller than the city of Columbus, Ohio, Alaska faces a New-York-City-size financial crisis that will require the cooperation of all Alaskans and especially their political leaders to solve. Unfortunately, cooperation is just about impossible without trust, and trust in this state is tattered.

It could be worse

Before getting into that, though, let’s consider where Alaska is as a state compared to where New York City was 40 years ago when it suffered a budget meltdown that shook the nation. The Big Apple in 1975 teetered on the edge of bankruptcy because of a $453 million budget gap. NYC was then a megalopolis of close to 8 million people with a huge tax base. It had imposed city income and capital gains taxes in 1966 to go along with city taxes on corporate income, income from  unincorporated businesses, and property.

And yet it still lacked the cash to pays its debts.

Alaska today is a wild, northern backwater with less than one-eighth the population of New York City, but with a $3.5 billion budget gap nearly eight times as big and a tiny tax base that can basically be summarized in four words: Exxon, BP and Conoco-Phillips. Traditionally, this crude-oil-fueled base produced a mountain of revenue, but the mountain has shrunk to a molehill as oil prices have tanked.

Luckily, Alaska is not teetering on the edge of bankruptcy because it’s sitting on about $53 billion in oil-fueled savings in the Permanent Fund and faces a total state debt of only about $28 billion.  A big chunk of the debt is due to pension obligations and health-benefits promised retired state employees.

Alaska’s nation-leading, per-capita-debt of nearly $40,000 per person (yeah, that’s what every Alaska man, woman and child owes the pensioners and banks) is a little troubling, but given that the state has the assets to pay that for everyone, why worry?

Alaska isn’t a ship on the rocks like New York was in 1975. But Alaska is a ship steaming toward an approaching shoreline with the captain and crew arguing over what the passengers want. And the passengers are edgy because they don’t know who to trust.

How the hell did we get here?

Unity gone bye-bye

Maybe it’s time to go back to where this began, at least politically, with a new “independent” governor and hopes for a new sense of Alaska cooperation at a time when it was becoming clear cooperation was needed. Alaskans have been watching global oil prices fall for going on two years now. Anyone who was thinking could see the the state budget was headed for the sort of crisis that hadn’t been seen since the last crash in oil prices in the 1980s.

In a perfect world, the political arrival of a one-time Republican joined to a long-time Democrat as governor and lieutenant governor on an “Alaska First Unity” ticket would have spelled salvation. Certainly there was reason to hope.

As the Washington Post observed shortly after the election of Gov. Bill Walker, the former “R”, and Lt. Gov. Byron Mallott, the steadfast “D” slated to run for governor on his party’s ticket before the merger, positive winds of change seemed to be blowing across the frozen north.

“The idea of politicians from different ends of the ideological spectrum joining hands and singing bipartisan carols while all the country’s problems disappear is one of America’s favorite and most enduring fairy tales,” wrote the Post’s Jaime Fuller.

Unfortunately, the fairy tale was quickly strained by differences of opinion within the Legislature over how to manage the budget shortfall. The end result became a special session where Republicans and Democrats tried to blame each other for not getting a budget done in the regular session.

And no sooner had they settled their differences than Walker poisoned the waters by a decision to grandstand on Medicaid expansion. The legislative majority wanted Medicaid reform before expansion. Walker wanted to make political hay and unilaterally seized the day.

“We’re doing this for a many reasons,” he said at a press conference. “The number one reason is for healthy Alaskans. Any time you can provide health care opportunities for over 40,000 Alaskans, that’s a good thing, it’s a good day to do that, it’s the right thing to do. That’s why we’re doing it. It’s healthy for the economy. Anytime you can bring in $146 Million in federal dollars into our state when our economy is such that . . . we would lobby and fight hard for that to happen.”

Walker is not a bad man, but at times he seems a politically tone-deaf one. To Republicans, his unilateral action on Medicaid reeked of a lefty politician pointing a finger at them as big, bad, greedy, heartless and uncaring. Walker’s arguments for Medicaid played well in the corners of the state where that is how Republicans are viewed, too. But it didn’t do much to foster cooperation across the political aisle, let alone trust.

And not everyone was buying the “healthy for the economy” argument either. Writing in Forbes magazine, budget analysts Josh Archambault and Christie Herrera from the Foundation for Government Accountability warned that “peer-reviewed research of previous Medicaid expansions to able-bodied adults shows that expanding Medicaid will diminish work, dampen earnings, reduce labor-force participation and hurt the economy. Those conclusions are supported by the independent Congressional Budget Office, which confirms that Obamacare will cause millions of working-age adults to drop out of the labor force or reduce their hours, ultimately reducing economic output. In Alaska, nearly 4,000 able-bodied adults could drop out of the labor force entirely, with many more reducing hours to avoid the welfare cliff.”

The Republican-run Legislative Council, which unfortunately wasn’t as good at making its case as Archambault and Herrera, promptly sued the governor to block Medicaid expansion. The Council took a public thrashing from the then leading voice at the state’s largest news organization, the Alaska Dispatch News (ADN), but refused to back down. The two sides remain locked in litigation while arguing over who is spending more state money on attorneys.

Steamrollering the legislature

Against the Medicaid backdrop, Walker decided to push a budget plan through the Legislature not by working with dominant Republicans there, but by spending $200 an hour on consultants Jack Ferguson — a D.C. lobbyist best known for his wheeling and dealing for Rep. Don Young, R-Alaska, and the state’s late Sen. Ted Stevens — and Art Hackney — a  political consultant probably best known for helping kill the Pebble Mine in Western Alaska — to try to mobilize political pressure.

Again, there are two ways to look at this campaign that has operated largely out of sight since the governor’s decision of last September to sidestep the public and take the issue straight to the ruling elite. Casey Reynolds of, an internet media start up, back in October asked if it could attend one of the governor’s budget discussions only to be told “the meeting is closed to the media.

“That was odd,” Reynolds wrote, “because I noticed the attendee list included the ADN’s (Alaska Dispatch New’s) Alice Rogoff  who kind of IS the media in Alaska. The Gov’s office said publishers didn’t count in the media ban. I was also curious why a group like the Alaska Miners Association would be invited but apparently broader trade groups like AOGA (Alaska Oil and Gas Association), RDC (Resource Development Council), and the State Chamber of Commerce were not. That remains a mystery.”

Best case scenario: The meetings were closed to the public so everyone could freely offer opinions without worrying about being held publicly accountable for said opinions.

Worst case scenario: The politics of the smoke-filled room with audiences carefully selected to ensure a consensus of those who would agree with the governor.

All of which looked bad enough before Hackney, the “R” rep in the governor’s office of budget sales, got kicked out of the room and thrown under the bus for reasons hard to decipher. One minute he was meeting with influential Alaskans to push the governor’s budget plan and the next he was dealing with charges that he might have over-billed the governor’s office for those meetings.

That story broke with reporting a review was underway because Hackney charged the state for a meeting with ADN publisher Rogoff, a friend of the governor who claimed the two never discussed the governor’s budget. She later amended that statement to tell KTUU that “I’m sure the subject of the fiscal plan came up in passing.”

While she was doing that, however, her newspaper was reporting Hackney had billed the state for “possible phantom meetings,” including one with the governor himself, and countering Rogoff’s statement to KTUU that she was “sure” of fiscal talks with the claim that she “acknowledged that the meeting occurred but had no recollection of discussing Walker’s budget plan.”

Can anyone be believed?

The story changed again the next day when the newspaper revealed a sign-in sheet at Anchorage’s Atwood Building, which houses the governor’s office, actually recorded Hackney signing in there late in the evening on the day he billed the state for the meeting with the governor.

That didn’t, however, stop ADN’S Dermot Cole from suggesting the governor fire Hackney for, among other things, those “phantom meetings,” which had suddenly lost the pretext of “possible phantom meetings.” Cole’s daughter is a press secretary to the governor, and his column mainly served to further a growing public perception that the ADN is the governor’s publicist.

Given that the media is already among the least trusted entities in the country, it might not matter much what the state’s largest news organization does one way or the other, but in a time of crisis it wouldn’t hurt if there was some organization in the state pushing for cooperation instead of trying to undermine it.

One of Cole’s new colleagues at the ADN, old-school Democrat Charlies Wohlforth, actually contributed to the discussion of the state’s political crisis by volunteering the main problem the state faces is that legislators, most of whom are Republicans, are “incompetent or cynically self-serving or both. In a lot of cases, probably both.”

After hours spent interviewing Hackney, it’s not hard to understand how he has been left wondering how all this politicking came into play to make news of his billings.  He contends he spent far more time talking to Alaskans about the state’s fiscal problems than the time for which he billed, and the claim appears to have some merit. Hackney, like a lot of others in the state familiar with the fiscal situation (including the author) has been talking almost non-stop about this issue with fellow Alaskans for months.

Like many Republicans, Hackney favors significant cuts in spending. He said the governor at one point had a plan to cut the budget by about $600 million this year and use earnings of the Permanent Fund to cover the remainder of the fiscal gap. But the budget the governor actually proposed cut only $100 million (or added $200 million depending on who is spinning the numbers) and proposed a wealth redistribution plan that would create a state income tax while continuing the Permanent Fund Dividend, the annual payout to Alaskans.

Poor people, who do not pay income taxes, would get a $1,000 dividend. Many others would end up using all or part of the PFD to subsidize their state income-tax payment. And the PFD would be a partial rebate against tax payments for the wealthiest Alaskans, who would hand over a combined $200 million to the state.

Hackney said he can’t imagine state Republican leaders backing an income tax that will be costly to set up and is slated to bring in only $200 million. He told the governor that, he added. Hackney now wonders if he’s now being pilloried because of his failure to embrace the governor’s budget proposal.

None of these goings on are making it any easier for the Republicans who dominate the legislative branch to trust the “unity party” running the executive branch. Neither is it helping to reassure average Alaskans that they can trust anyone: Politicians; the media; business leaders who’ve been in closed-door meetings with the governor; public employee unions maneuvering behind the scenes; GCI, the Alaska telecommunications behemoth that has pledged millions to lobby Alaskans to act because of its worries the state economy could continue a downward spiral into disaster; and the Rasmuson Foundation, the source of funding — often joint public-private funding — for many a righteous cause.

As reported in November,  Rasmuson has ideas “similar to those presented by Gov. Bill Walker’s administration last month. The governor’s office said it has had closed-door meetings with the Rasmuson Foundation and business leaders about his fiscal plan proposal, but that there isn’t a direct collaboration with the foundation.”

Katie Marquette, a spokeswoman for Walker, told KTVA News that “these are all separate initiatives from the efforts that the governor’s office is working on,’ … ‘But the governor greatly appreciates the Rasmuson Foundation’s separate efforts to educate Alaskans about the state’s current fiscal situation.'”

That’s what she said. The key question is what Alaskans heard, because it’s hard for Joe or Jane Alaskan to wonder about all these “private” and “closed-door” (can you say secret?) meetings between politicians and the important folk and not start to get little suspicious.

When the Legislature held a hearing last week on the governor’s plan, it was hard to avoid the impression that trust in the state is so broken that grassroots opposition to doing anything is taking root and spreading. A comment from Pamela Goode of Deltana, as reported by the Juneau Empire, sort of summed up how a growing number of Alaskans seem to feel about their government:

“If you can pull this off without getting tarred and feathered, I’ll congratulate you for the crime of the century,” she said.


4 replies »

  1. You have tapped the ethos of our times Craig. Big majorities of citizens across the nation have lost trust in government. It will be a long journey in this country before we create a culture of trust again. This is a time when we must learn to govern ourselves. Thanks to the foresight of statesmen like Sen. Yule Kilcher, Alaskans have the right to the ballot initiative written into the Alaskan Constitution. Senator Mike Gravel is another Alaskan who has done yeoman’s work to establish that right across the nation. Only 25 states have the codified right to ballot initiatives. Citizens of states which do should start using them to establish laws “of, by and for” themselves.

  2. While this article attempts to run cover for Art Hackney, rest assured this man is running point to capture the PFD. His anger with the governor was mostly centered around the “other” tax revenues in Walkers proposal. Art wanted to roll out his grand scheme without the “other taxing baggage.” As for his questionable billing, you only need to ask why he billed the state for a Center Right meeting which had ZERO to do with any State budget discussions. And then, to top it off, by billing the State for meeting with Ross Bieling, a candidate client is extremely suspect considering Bieling is on record in opposition regarding the PFD grab. Given the climate of this Administration, you can rest assured they are baking another cake in the back room in another attempt to blame Alaskans by imposing revenues for an overblown and unsustainable budget. Classic government protecting government at the peoples expense.

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