Page 1636 – Must Read Alaska

Alaska: Richest state to ever go broke

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June 9, 2017

PERMANENT FUND REACHING HISTORIC MILESTONE

The Alaska Permanent Fund is about to make history again.

The international investment market is strong, the Fund’s portfolio is robust. On Monday, barring a weekend catastrophe, Alaska’s piggy bank will very likely top $60 billion.

For perspective, Bill Gates’ net worth is about $89 billion. We Alaskans have about 67 percent of the Gates fortune. We’ve never been richer.

Or broker, according to Gov. Bill Walker and the Democrats, who want to implement a tax up to $700 million on residents.

The Permanent Fund is making nearly 9 percent gains this year. Not bad for a little sovereign wealth fund that started with merely $734,000 in 1977.

The Earnings Reserve Account portion of the Permanent Fund is now about $11.7 billion. That’s the money that can be used to pay for state government. In addition to that fund, the government has nearly $5 billion in the Constitutional Budget Reserve, the CBR, as legislative types know it.

There are a few other accounts around state government, but those are the big chunks. Together, the State has well over $65 billion in its piggy bank, and $16 billion of it is more or less available for appropriation.

And yet, the Democrats in control of the House won’t pass a budget unless they get an income tax that would take $700 million from Alaskan families. HB 115 is their vehicle, which was designed by Governor Bill Walker’s Department of Revenue.

In his latest compromise package, the governor asked the Senate to accept a “head tax” (aka still an income tax) that would bring in $100 million.

But with the House Democrats quickly rejecting his proposed compromise, the governor is likely to ratchet up his request for taxes to something closer to what the Democrats want.

Over in the Senate, controlled by Republicans, lawmakers say no tax is needed. All that’s needed are some modest cuts and a restructuring of the Permanent Fund, per Senate Bill 26, which is the governor’s bill.

The House agrees in principle with the framework of SB26, but are holding it hostage in order to force through their taxes. The upshot is that pink slips have gone out to state workers in advance of a government shutdown on July 2.

[Read: Walker’s plan: Camel’s nose under the tent tax]

Stay tuned for Monday, when the Senate should hear back from the governor with his responses to a list of questions asked by Senate leadership that pertain to the compromise Gov. Walker is trying to reach.

Very likely, some of those answers will be unpalatable because they will involve even higher taxes than his first compromise offer of $100 million.

Senate leadership sent a letter to Gov. Walker last week asking for answers for why the governor:

Offers no spending cuts, but actually agrees to the Democrats’ $200 million increase in state spending.
Cuts down his tax request, while providing no documentation to the public as to why he needed $700 million two months ago, but only $100 million now.
Accepts a shortfall of $300 million that could be paid for with savings, even though just weeks ago he said he would not accept anything but a fully funded plan.
Shrinks the Permanent Fund dividend.
Accepts the Senate’s version of SB 26, a restructuring of the Permanent Fund.
Establishes a compromise on oil taxes, but only if he gets his “head tax” and only so long as there are no cuts to the budget.

Insiders at the Capitol say it is no secret that the governor’s head tax is a gateway tax, to get something on the books, and come back later for more. His team has told several people in the Capitol this week that the tax is just to get the infrastructure in place.

MICCICHE ON ROLE OF GOVERNMENT

Photo of Senator Peter Micciche — *Sen. Peter Micciche*

Senate Majority Leader Peter Micciche, a Republican from Soldotna, says the struggle is over the philosophies about the role of government. Democrats see government as the economy and have little concern for the private sector, he said.

“This Permanent Fund milestone proves the percent-of-market-value numbers in our SB 26 model is conservative, and doesn’t even reflect the gains made by the fund this year,” he said.

“We began this ‘fiscal gap’ discussion at the end of 2014 with a $4 billion deficit. I believe the House majority and the Administration have failed to adapt to the fact that because of increased oil production,an improved price environment and budget reductions, our deficit has been roughly halved to $2.2 billion,” Micciche said.

By using the Senate’s model, government is funded through the use of earnings of the Constitutional Budget Reserve and the Earnings Reserve Account, without consuming savings, he said.

“Considering the many layers of conservatism built into the modeling…the fact that we are not crediting the 16 percent earnings year of the Permanent Fund, increasing production, improved pricing, etc., the Senate majority feels that we are in a position to fund our government without the burden of new broad-based taxes,” Micciche said.

“Our plan provides the quickest and most economically healthy way to deliver Alaska out of this current recession; providing more private sector jobs while still preserving critical government services,” Micciche said.

DUNLEAVY SAYS TAX ISN’T NEEDED

Photo of Senator Mike Dunleavy — *Sen. Mike Dunleavy*

Sen. Mike Dunleavy of Mat-Su, has been an opponent of an income tax. He’s a Republican who no longer aligns with the Senate Republican majority because of his budget hawk approach that is stridently anti-tax.

“This has nothing to do with the budget. They don’t need a tax. They want a tax,” Dunleavy said.

“This is like begging your relatives for money and telling them you’re broke when everyone knows you aren’t broke. The public isn’t buying it. They know you can live on your savings for at least 13 years. Meanwhile, you get your other investments going, like Armstrong and Caelus (and other oil companies) and you put more oil in the pipeline.”

Dividend applicant numbers hold steady

Suzanne Downing

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June 9, 2017

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Some 670,407 individuals applied for the 2017 Permanent Fund dividend, according to the Alaska Permanent Fund Division. The number of applicants this year is down slightly from 2016’s applicant pool of 670,599, a difference of 192.

All eligible Alaskans who applied by the March 31 deadline will receive a dividend in October from the Permanent Fund’s investments.

In 2016, the check amount was $1,022, and for the first time in the fund’s history, the amount was set by the governor based on political considerations.

[Read: About that Permanent Fund dividend…]

Those who apply by March 31 deadline and those who are determined eligible are two different matters, but the numbers are telling: Population is holding steady. Even while there is a net migration from Alaska of workers, those who remain are filling in the population with babies, keeping the overall population stable at 739,828.

In 2015, the number of applicants was up, with 678,689 Alaskans appling for the dividend, and the royalty check itself was the largest ever to be distributed, at $2,072.

At the same time, the state was plunging into a recession, with oil patch workers leaving for jobs in other states. Net migration from Alaska over the past three years has exceeded 17,000, and anecdotal evidence from Alaska trucking companies indicate that trend continues this summer. Oil companies uncertain about the investment climate in Alaska have put projects on hold and oil field contractors see work slowing down, with many reporting the economic hit at about 20 percent.

VALUE OF P-FUND UP

The value of the Alaska Permanent Fund itself has increased since 2007, when it held $40 billion. It’s now at an all-time high, closing in on $60 billion. The earnings reserve fund, which can be used to fund state services, has about $11.7 billion.

The Alaska Permanent Fund’s investment return for the fiscal year to date was up 9 percent, according to the agency’s web site.

The fund was created through an amendment to the Alaska Constitution shortly after oil started flowing through the Trans Alaska Pipeline System. A portion of the oil money from North Slope fields is put into the fund because future generations will not have oil as a resource, and the prediction was that Alaska would need to become an investment state.

The state now earns more from investments of the Fund than it does from oil royalties. The Fund started with just $734,000 in 1977.

Governor says he ‘can’t amend’ agenda for session — huh?

Suzanne Downing

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June 9, 2017

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A photo of Governor Bill Walker — *Gov. Bill Walker earlier this week.*

‘IT’S NOT WITHIN MY POWER’

Gov. Bill Walker held a brief press conference today to discuss the progress of the special session and the impending shutdown of state government in nine days.

And then he did something he may live to regret.

He answered a question from KTVA reporter Liz Raines, who asked why he doesn’t limit the call of the special session to the budget. Why not take everything off the call but the budget and avoid a government shutdown?

Walker responded, “I can’t take anything off the call. My role is once I put something on the call, it stays there.”

“Once I put something on the call, it’s not within my powers to remove it from the call.” – Gov. Bill Walker

But that’s not the case.

In October of 2015, Walker did amend his call for special session. He withdrew “an act to monetize certain natural gas reserves through the levy of a gas reserves tax. This proclamation supplements my proclamation of September 24, 2015.” Apparently, amending a special session call is only legal when he wishes it to be:

INSTEAD, A PLETHORA OF NEWS RELEASES

Meanwhile, instead of narrowing his focus to passing a budget, the governor issued a series of 15 press releases from his different departments today, describing the crisis that is about to hit Alaska if government shuts down on July 2 and putting together an incident command structure for when there is no government.

A review of history shows that removing items from a call for special session is rather ordinary:

Gov. Sean Parnell removed something from a call. In 2012, he removed oil tax reform, saying the bipartisan working group in the Senate appeared “incapable of passing comprehensive oil tax reform.”

Gov. Frank Murkowski completely rescinded his call for special session.

In fact, Alaska’s strong-governor form of government gives Walker broad powers to do just about anything, including shut the government down.

Instead of saying he “can’t” take items off his call for special session, Walker might have been more transparent by saying: “I’m choosing not to take anything off the call because I need to frighten my 20,000 employees in order to get my income tax, higher oil taxes, and higher motor fuel taxes.”

Rather than transparency, we get a blizzard of press releases.

Is Juneau’s Justin Parish Alaska’s Kathy Griffin?

Suzanne Downing

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June 8, 2017

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Photos of comedian Kathy Griffin holding a bloody head of Donald Trump, and Juneau Rep. Justin Parish is pictured talking to the camera. — Kathy Griffin, left, posted the image of her holding Donald Trump’s bloody head. At right, Justin Parish, who described holding a gun to the heads of legislators, on a local Juneau podcast this year.

There’s something not right about Rep. Justin Parish of Juneau. He’s prone to theatrics, but has he finally gone too far?

On a Monday KINY radio talk show hosted by longtime broadcaster Pete Carran, Parish was musing about the state’s budget and his opinion of Senate President Pete Kelly, which is not high. “People don’t want to see Pete Kelly’s Alaska,” he said.

He went on to say that Republicans were terrorizing State employees.

Carran then asked Parish about his idea of changing the Alaska Constitution: If legislators don’t finish the budget within 90 days, his idea would be to prohibit them from running for their seats again. All of them.

“I think you would move the gun from the heads of almost 20,000 State workers to the heads of 60 legislators where it more rightly belongs,” Parish said.

A few minutes later in the broadcast he described Republican lawmakers in the Senate as actual terrorists:

“Ya know, it feels like I’m negotiating with someone who’s got our children and our seniors hostage, and their idea of a deal is give the oil industry of your money and we’ll only kill one of ’em,” he said.

House Minority Leader Charisse Millett was taken aback by the comments.

“This is not the way you describe your fellow lawmakers, or State workers — with imagery of a gun to our heads,” she said. “And to use the violent imagery of killing children and the elderly? He is a lawmaker. Where’s Speaker Edgmon in censuring this kind of graphic language coming from the Democrats’ caucus?”

Earlier this year, the House majority Democrats led a push to censure Rep. David Eastman for comments he made to the media, when the Republican from Wasilla speculated that some village women were using their pregnancies as a way to get a free trip to the city. Rep. Ivy Spohnolz of Anchorage was the prime mover behind the censure.

Millett, during those debates over Eastman’s censure, asked Speaker Bryce Edgmon, “What happens, Mr. Speaker, and what are you willing to do the next time someone gets up on the floor and I find something incredibly offensive? Or in committee? Will you take a stand for me? Will you censure the person that has offended me?”

[Read: Democrats target Alaska Native lawmaker]

Millett today said Parish went too far in using language that puts a gun to the heads of Alaskans, and in describing the violent killing of children and elders, analogously, by Republican state senators.

Kathy Griffin, the comedian, famously got in trouble with her commercial sponsors last week for posting on social media an image of herself holding the imaginary bloody head of President Donald Trump.

Parish, the lawmaker, painted word pictures to describe violence against Alaskans. The actions of the two are only separated by the visuals. Within a span of three minutes, Parish had three times described Republicans as terrorists in increasingly graphic terms.

The violent verbal imagery, distasteful as it is, also misses the point that the ones creating the crisis are Parish’s very own House Democrats, more so than either the Governor or the Senate. The Governor has offered a significant compromise, which was rejected immediately as “dead on arrival” by the Democrats and near-Democrats who are this year’s House majority leaders.

By contrast, the Senate credited the governor for his effort and offered to discuss it further, sending him a letter to ask for clarification of some of his ideas.

But for Parish, it’s all about the theatrical descriptions of guns to heads, the killing of the children and old folks, which drew a swift response from Tuckerman Babcock, chair of the Alaska Republican Party.

“I’ve been involved in Alaskan politics since 1978, and Juneau has a long history of electing Democrats and Republicans of stature, gravity and influence, and now they’ve elected a buffoon,” Babcock said. “Whether a Democrat or a Republican, this is the worst Juneau has ever produced.”

The interview:

What if oil spill didn’t hurt a Prince William Sound fisheries?

The 907

Suzanne Downing

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June 8, 2017

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Coast Guard historic photo of Exxon Valdez being towed in 1989 to Naked Island for temporary repairs. The tanker had run aground and caused an oil spill in Prince William Sound. — *A Coast Guard patrol boat crosses the bow of the Exxon Valdez as the tanker is being towed to Naked Island, Prince William Sound, Alaska, for temporary repairs, 1989. US Coast Guard photo*

OTHER REASONS SURFACE FOR HERRING DECLINE

By CRAIG MEDRED
CRAIGMEDRED.NEWS

Almost 30 years after the oil tanker Exxon Valdez hit Bligh Reef and smeared Prince William Sound with more than 11 million gallons of Alaska crude oil, a team of state and federal scientists have concluded the spill – as bad as it looked and as much impact as it had on marine mammals and birds – appears to have done no real damage to fisheries.

“We found no evidence supporting a negative EVOS (Exxon Valdez Oil Spill) impact on herring, sockeye salmon, or pink salmon productivity, and weak evidence of a slightly positive EVOS signal on Copper River Chinook (king) salmon productivity,” the study says. “It is unclear how EVOS may have impacted Chinook salmon positively.”

Somewhat surprisingly, however, the study found two non-oil spill events – one natural and one manmade – that appear to have caused significant changes in Sound fisheries. And one of them, a naturally occurring spill of fresh water, appears to be what crippled herring stocks there.

Exxon has long been blamed for the collapse of herring, which once supported a fishery worth $6 to $11 million per year, but the new study funded by the Exxon Valdez Oil Spill Trustee Council, a government entity established to track the Sound’s recovery in the wake of the spill, fingers fresh water as the real culprit.

“Herring productivity was most strongly affected by changing environmental conditions,” the study says, “specifically, freshwater discharge into the Gulf of Alaska was linked to a series of recruitment failures—before, during, and after EVOS (Exxon Valdez Oil Spill).”

And the other big factor driving significant environmental changes in the Sound?

The annual spills of hundreds of millions of pink salmon fry.

Income tax isn’t needed because this is a false crisis

Suzanne Downing

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June 8, 2017

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Photo of Scott Hawkins — *Scott Hawkins*

By SCOTT HAWKINS
SENIOR CONTRIBUTOR

Gov. Bill Walker and the House Democrats are promoting a false crisis in order to enact a very bad solution.

They want Alaskans to believe that the state really, really needs a personal income tax. Right now.

Although Walker recently proposed a smaller income tax and misleadingly labeled it an “education head tax,” the gambit is clear: Get the proverbial camel’s nose under the tent.

Interestingly, the plan landed with a dull thud in both the Senate and House, with House Democrats objecting that it does not go nearly far enough in taxing Alaskans.

However, the so-called crisis is entirely artificial, a ruse to grow government even larger.

[Read: Governor’s compromise: Camel’s nose under the tent plan]

The reality is that new taxes on Alaska families and businesses are entirely unnecessary. The state of Alaska has ready access to adequate funds to support state spending at roughly current levels and still pay a respectable Permanent Fund dividend. The numbers work. I’ve done the math.

IT’S SIMPLE: PASS SB 26

Here is a simple, straightforward fiscal plan:

First, pass the Senate version of Senate Bill 26, which moves Permanent Fund management to a “percent of market value” (POMV) approach to earnings withdrawal. That will deliver enough money to fund a $1,000-$1,200 dividend to all Alaskans, while providing $2 billion to support state services.

This alone closes the bulk of the fiscal deficit without new taxes.

But before final passage, SB 26 needs just one crucial amendment: Rather than setting the dividend at an arbitrary level and capping it, dedicate a portion of the POMV earnings – about 30 percent – to dividend payments, and put that in statute. This is essential in order to give Alaskans a long-term piece of the action and a rising dividend over time. It offers an upside in the future and maintains the public’s direct connection to the fund.

Adding $2 billion annually to state coffers, combined with ongoing general fund revenue of roughly that same amount, totals $4 billion. That just happens to be the agency operating budget passed by the Senate this April, which included significant but manageable cuts. Voila, problem largely solved.

As a backstop, we still have almost $5 billion in the Constitutional Budget Reserve (CBR). Drawing a modest $400 million each year from the CBR would allow for a respectable state capital budget, keeping our critical public infrastructure maintained and upgraded. At that rate, the CBR would last for well over a decade.

Next, the Legislature needs to enact a spending cap and put it before the voters. If we don’t, the next time oil prices jump up we will paint ourselves into a financial corner yet again. This is essential. I would suggest the cap be a bit lower than the status quo, trending down slowly but steadily over the next several years, and then stabilizing.

Pound for pound, we have the largest state budget in the nation by a wide margin. It is laughable to think that there is no room for moderate, responsible reductions.

Alaskans mustn’t allow themselves to be duped by a hard-left House majority and their ally in the Governor’s Office. They are trying to lay the groundwork to grow an already-large government, pure and simple. If new taxes are enacted now, they will only go up over time. You can count on it.

Moreover, taxes on the scale the House majority is calling for would be a heavy, ill-timed blow to our already-ailing state economy. There would be a fresh wave of small business closures throughout the state, accelerated job losses, reduced after-tax incomes and sharper declines in property values.

If we can avoid such unforced errors, good news is on the horizon. There have been several very large oil discoveries on the North Slope over the past couple of years. Once some of those come on line in the five- to seven-year time frame, they will cause pipeline throughput, and thus state revenue, to leap by 40 percent or more. That is truly a game changer in a good way, provided that our elected officials don’t fumble it.

The fiscal plan outlined above works. It puts us on a sustainable path, with an economic and financial upside for Alaska’s families and businesses.

Scott Hawkins is board chairman of ProsperityAlaska.org. He is president and CEO of Advanced Supply Chain International. An economist, Hawkins was the founding president of the Anchorage Economic Development Corp.

Newest astronauts include Alaska’s own Robb Kulin

Suzanne Downing

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June 8, 2017

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Photo of the newest class of astronauts for NASA — *Robb Kulin, of Anchorage, stands in the middle of a group selfie photo of the latest class of astronauts chosen by the National Aeronautic and Space Adminstration (NASA).*

A record-breaking number of applicants, some 18,300 of them, sought to be part of this year’s NASA astronaut class. Twelve made the cut. One is from Alaska.

On Wednesday, Vice President Mike Pence helped introduce the 2017 astronaut class during an event at the Johnson Space Center in Houston.

Among the new astronauts is Robb Kulin, 33, of Anchorage. He’s worked as a fisherman in Chignik, has been an ice driller in Antarctica, and has a doctorate in engineering from the University of California, San Diego. He also has a bachelor’s degree in mechanical engineering from the University of Denver and a master’s degree in materials science. Kulin is a pilot and plays the piano. He SCUBA dives and skis.

His parents, Stephen and Karen Kulin, live in Anchorage, where he graduated from Service High School.

*Tanner Kuhl and Robb Kulin operate an ice drill in Antarctica as part of a research study involving ancient trapped air. (Thomas Bauska photo)*

Kulin was most recently a senior manager for flight reliability at SpaceX, where he has led the Launch Chief Engineering group in Hawthorne, California.

Kulin should be ready for space flight, having spent time in the wildest reaches on earth. While in Antarctica, the adventurous Kulin led a team that was gathering drilled core samples of ice to examine ancient air in the Taylor Glacier. Scientists theorize that around 11,500 years ago, methane in the atmosphere increased by 50 percent within a span of 200 years, leading to climate change. For two months Kulin worked toward the eventual goal of establishing the Taylor Glacier as an ancient air and ice sample archive that can be used in future research.

[Read: Searching for Ancient Air on the Taylor Glacier]

A LONE NAYSAYER

Sen. Dan Sullivan posted a congratulatory note on Twitter today: “Congrats to Alaskan Robb Kulin, selected out of 18,300 applicants to join @NASA 2017 Astronaut Candidate Class. #NewAstronauts.”

And because this is Alaska, some former journalists could not help themselves but be a quick draw on social media. Former Alaska Dispatch News Editor Pat Dougherty responded to Sen. Sullivan’s cheerful message with a retort: “Could this doofus @SenDanSullivan seem any more irrelevant?” Sullivan’s communication director Mike Anderson responded to Dougherty, reminding him to #StayClassy.

But, Dougherty aside, everyone else was congratulatory in the social media storm that ensued, including Gov. Bill Walker, who also said he was excited to learn the news, and a former classmate of Kulin’s, Natasha Price, who posted on Twitter: “So freaking cool to see my schoolmate since kindergarten, Robb Kulin, in this photo.”

For Robert Service High School, it is the first astronaut alumnus, which is “freaking cool” bragging rights for any high school in Alaska. The astronaut candidates will begin two years of training at the Johnson Space Center starting in August.

Haines activists turn in recall petition, await decision

Suzanne Downing

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June 7, 2017

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Street scene of Haines, Alaska, featuring local signs and a bear statute. — *View of Haines, Alaska, where a recall election of three Assembly members is unfolding. (Photo by Jeremy Keith, Flickr)*

KEEPING IT WEIRD IN HAINES POLITICS

A petition for a recall of three Haines Assembly members has been submitted to the clerk of the Haines Borough.

Clerk Julie Cozzi has 10 days to certify 258 signatures are valid on the petitions. The petitioners, including Don Turner Jr., say they have a few dozen beyond what was required.

Three borough assembly members are the subject of the recall: Tom Morphet, Tresham Gregg, and Heather Lende.

The sponsors behind three Haines Assembly recall petitions turned in their signatures Tuesday afternoon.

Meanwhile, a second borough assembly member has resigned, citing the bitter political climate in the town of 2,508. Margaret Friedenauer, a former public radio reporter at KHNS (Haines), resigned last week, citing the general political climate. Mike Case, former borough mayor, resigned from the Assembly in April after the Assembly majority voted to hire Deborah Schnabel as the borough manager.

The petitioners are accusing Morphet, Jackson, and Lende of violating the Alaska Open Meetings Act, due to the three conducting official business via email on matters pertaining to work at the harbor.

Morphet and Lende, elected last year, are also accused of misusing their official position. Morphet owns the local newspaper, the Chilkat Valley News, and Lende writes obituaries for the newspaper. They had repeatedly pressured the police chief to begin providing the newspaper with a police blotter. The chief, Heath Scott, had discontinued it due to the time it was taking away from other police duties.

Small town police blotters are widely read items and drive sales for newspapers, posing what might be seen as a financially motivated conflict of interest for Morphet and Lende.

If the recall proponents are successful, three temporary Assembly members will be appointed and in October nearly the entire Assembly as well as the mayor’s seat, now held by Janice Hill, will face election.

HIRING OF BOROUGH MANAGER

Photo of Debra Schnabel — *Debra Schnabel, from her Facebook profile.*

Debra Schnabel, who is stepping down as executive director of the Haines Chamber of Commerce, comes from a well-known Haines family.

However, her hiring as borough manager, after the Assembly dismissed Bill Seward after just six months, has caused some hand-wringing around town because her brother, Roger Schnabel, owns the construction company, Southeast Road Builders. Southeast Road Builders, a long-time Haines company, is often the low bidder on borough work, which Debra will now oversee.

According to Must Read Alaska sources in Haines, the concern is that Debra Schnabel won’t be able to sign contracts or impartially supervise the work of her brother’s company, or even address performance issues or resident complaints about the company’s services, should they arise.

Southeast Road Builders is doing work on the somewhat contentious harbor expansion and also won the next fiscal year’s winter road sanding contract, which Debra Schnabel will now have to sign on behalf of the borough. The company wins most of the local work because its well established and is locally owned, important in an isolated community like Haines.

The borough’s attorney sent the Assembly a memo saying that Roger Schnabel would be prohibited from contracting with the borough, which may leave the borough having to seek construction services from communities like Juneau or elsewhere.

[Read: Recall fever spreads to Haines, Alaska]

HOMER RECALL ELECTION IS TUESDAY

Meanwhile, on the shores of Kachemak Bay, the town of Homer will hold a special election on June 13 to decide whether to recall three city council members there.

[Read: Homer recall petition gains ground.]

Haines police union files complaint against Assemblyman Morphet

Walker’s compromise: ‘Camel’s nose under the tent plan’

Suzanne Downing

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June 7, 2017

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*Contents of a newspaper ad that was placed by business group ProsperityAlaska and which appeared in newspapers today.*

WALKER TAX: $200 MILLION … $700 MILLION … $100 MILLION?

Compromise doesn’t come easy for a governor who has made his living as a litigious attorney. But today, Gov. Bill Walker offered a compromise. It was immediately rejected by his best political friends: The Democrats.

Why? The compromise didn’t bring in enough taxes.

Walker has struggled to establish a need for taxes, and the proof is in the fact that in 17 months, he has asked for an income tax that would raise $200 million, then one for $700 million, and now one for $100 million.

It appears that some tax — any tax — would do, so long as the governor can get the camel’s nose under the tent.

WALKER’S TAXING HISTORY

2016: Walker in January of 2016 said the state absolutely needed $200 million in income taxes or massive layoffs would ensue.

He proposed a simple income tax, but it failed in the Republican-led House and Senate.

If it had passed, Alaskans would be paying taxes to the State of Alaska from the income they are earning today.

By blocking the 2016 proposal, HB 250, Republicans saved Alaskans $200 million — money they are allowed to keep for their own families.

2017: Walker needed not just $200 million earlier this year, but nearly $700 million in income taxes. He alluded to it in late 2016 — his next tax proposal would be higher. He made good on that promise.

Walker worked behind the scenes with Rep. Paul Seaton of Homer, a Republican so liberal his party has abandoned him, to advance HB 115, designed by the Walker administration in concert with a Connecticut tax professor, Dr. Richard Pomp, who never once testified in front of the legislature about the complicated bracket scheme. The original version was so flawed that even Seaton had to pull it back for massive rework.

HB 115 was so complicated, Alaskans would have to hire a tax accountant to complete their tax bill to the state.

[Read: Walker’s new tax scheme: You’re going to need an accountant]

In the interim between 2016 and 2017, Walker used his considerable political muscle to flip the House to Democrat control. The 22-member majority is solidly all-in for an income tax — and no further cuts in State spending.

But the Republican-led Senate would not budge earlier this year.

2017: Now, in special session, the governor recognizes the impasse is real. But he has offered yet another income tax: This one raises just $100 million. He might still need the 60 Revenue workers it was predicted would be needed for his last proposal, to the tune of $14 million in government expenses to collect.

Walker is calling it an education head tax, but it’s an income tax. Those who make up to $20,000 a year would pay $50, and those in the $500,000 and up range would pay $500.

This is also what’s known as a “gateway drug,” for government, as it puts an income tax on the books, which the governor and Democrats would come back and “reform” in subsequent legislative sessions.

In his compromise package, Walker also asks for $85 million from increased motor fuel taxes.

But he offers not a single cut to state spending.

“That’s not a compromise. That’s asking for a surrender.” – Tuckerman Babcock, chairman of the Alaska Republican Party.

By now the governor has a Democrat-led House so radicalized that even he can’t even control it. They rejected his proposal before it even hit their desks. As articulated by Rep. Gabrielle LeDoux earlier this spring, “If the Senate thinks we are going to get out of here with just the POMV (Permanent Fund restructuring) they have another think coming.”

Apparently the governor has “another think coming,” too, according to that logic.

[Read: Angry Gabby crashes press conference]

BUSINESS COMMUNITY REACTS

small photo of Scott Hawkins — *Scott Hawkins*

ProsperityAlaska, a pro-business group headed by long-time businessman Scott Hawkins, responded to Walker’s tax plan with a full-page ad in four newspapers — the Fairbanks NewsMiner, the Kenai Peninsula Clarion, the Juneau Empire and the Alaska Dispatch News. The ad called out Walker and the Democrats for demanding taxes from Alaskans when they aren’t needed to balance the state budget.

“Walkerocracy,” the ad’s headline reads, with a definition that describes it as “a bureaucracy that proposes new taxes on its citizens even though they are unnecessary.”

“If you look carefully at the numbers, we already have enough money to support government at roughly current levels without new taxes,” said Hawkins, who is an economist by training.

“Moving to a percent-of-market-value (POMV) approach to managing the Permanent Fund would close the majority of the budget gap and fund dividends at respectable levels,” Hawkins said. “This would require very small withdrawals from state savings that could be sustained for well over a decade.”

The newspaper ads are similar to a direct mail postcard that arrived in the mailboxes of tens of thousands of Alaska voters. ProsperityAlaska was also responsible for that mailing.

In addition, the group teams up with the Alaska State Chamber of Commerce and the Resource Development Council to grade lawmakers on their votes as they pertain to making Alaska a business-friendly state. Finally, ProsperityAlaska is associated with The Accountability Project, which has weighed in on state legislative campaigns in recent years.

*Front and back of postcard that was sent to tens of thousands of Alaskans last week by ProsperityAlaska.*

“We want Alaskans to understand that some of our leaders are trying to put one over on us. There is no crisis. “This is a hard-left agenda to penalize working people in order to grow government,” Hawkins said. “Beyond the fact that it isn’t needed, an income tax would hammer an already-ailing economy, deepening and lengthening Alaska’s current recession.”

Babcock added that if the governor wants $100 million, he can get it by cancelling his “fantasy gas line.”

WALKER’S COMPROMISE GROWS STATE SPENDING BY $200 MILLION

Walker’s proposal:

Offers no spending cuts, but actually agrees to the Democrats’ $200 million increase in state spending.
Cuts down his tax request, while providing no documentation to the public as to why he needed $700 million two months ago, but only $100 million now.
Accepts a shortfall of $300 million that could be paid for with savings, even though just weeks ago he said he would not accept anything but a fully funded plan.
Shrinks the Permanent Fund dividend.
Accepts the Senate’s version of SB 26, a restructuring of the Permanent Fund.
Establishes a compromise on oil taxes, but only if he gets his “head tax” and only so long as there are no cuts to the budget.

SENATE SAYS ‘IT’S A START’

photo of Senate President Pete Kelly — *Senate President Pete Kelly*

Senate President Pete Kelly called the governor’s proposal a good starting point.

“The Senate Majority appreciates Gov. Walker offering a solution. The only way to reach agreement on the issues before us is when all parties are willing to sit down and have a real discussion. These are important issues with real-life consequences for hundreds of thousands of Alaskans. The Senate is currently evaluating the Governor’s proposal. While we’ll agree on some points and disagree on others, an operating budget for FY2 is our highest priority,” he said.

“When we swore an oath of office, we vowed to discharge our duties. Our sole requirement, under the Constitution, is to pass an operating budget each year. The Senate is committed to prioritizing that action, and there is no time to waste. July 1 is fast approaching,” Kelly said.

“We have called on and will meet the House at the conference committee table to carry out those budget negotiations, as we do every year. We have said many times we stand ready to negotiate. Our goal is to deliver a reduced budget that continues essential services for Alaskans, avoids unnecessary layoffs and delivers stability and certainty to our private sector.

“The Majority appreciates the Governor’s willingness to step up with a comprehensive proposal and, while we prioritize a budget, we will continue to talk with the Governor to achieve consensus.

“We have requested additional detail on his proposal, which will help our members make an informed evaluation. We are pleased to see the Governor agrees a small structural deficit – easily absorbed by reserves – such as the Senate included in its fiscal plan, is acceptable,” Kelly said. “The Senate Majority remains strongly opposed to an income tax.”

Sen. Kelly and other members of the Senate leadership asked the governor for clarification. They sent a letter to the governor today, looking for guidance on the following topics:

“HB 57/HB 59: Operating & Mental Health Budgets – House versions – Is the intent of your proposal to restore all Senate cuts or just the more significant cuts? Does your proposal include forward funding education from the earnings reserve account at $1.7 billion as in the House version?
HB 111: Oil and Gas Tax Credit Reform – Senate plus 100% ring fencing – Your administration shared language relating to the ring fencing provision with the Senate on Saturday, June 3, 2017. Is this the language you propose to achieve the stated goal of “100% ring fencing?” If not, please define “100% ring fencing.” Does your administration have modeling showing the impact to industry of implementing ring fencing? How would you intend to address shared development costs.
SB 12: Education Head Tax – Is your goal to reach $100 million in revenue? Is it your intent that this tax is designated? If so, to education generally, or to school facilities, construction and maintenance, as in SB 12? Is it your intent that this tax must be bracketed? Are there other changes to SB 12 you would advocate for in a final bill? What year do you intend this tax to take effect (to be assessed on income)? What are the costs associated with developing and implementing the tax, both initially and ongoing? What is your proposed approach for collecting from self-employed individuals?

SB 26: Permanent Fund Protection Act – Some provisions in the House CS are clean-up and a good approach; does your proposal accommodate such changes? The Senate version of SB 26 features appropriation and draw limits; please confirm that these are included in your proposal.
SB 23: Capital Budget – Governor’s priorities plus Senate deferred maintenance and oil and gas tax credit payment – Please identify your proposed priorities. Please be specific in listing, other than deferred maintenance and oil and gas tax credit payments, which items from the Senate version your proposal includes or does not – whichever list is shorter.

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