Page 1640 – Must Read Alaska

What happens if we don’t inflation-proof the Permanent Fund?

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January 12, 2017

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THE GHOST OF RASMUSONS PAST: Alaska pioneer banker Elmer Rasmuson once noted that inflation is the “thief in the night.”

The first chairman of the Alaska Permanent Fund Corporation said it isn’t a question of whether inflation will nibble away at your wealth, but by when and by how much.

That’s conventional wisdom, and those who grew up with the Permanent Fund have become accustomed to hearing how important it is to inflation proof Alaska’s biggie-sized piggy bank.

But today, inflation-proofing is not quite as important as in prior years because the fund, due to its more diverse mix of investments, inflation-proofs itself.

In fact, those who dwell on inflation-proofing are kind of seen as “old school.”

The proposals being offered to fix the State of Alaska’s spending problem rely on some kind of restructuring of the Permanent Fund, and eliminating inflation-proofing is an implicit part of the plans.

That’s OK in theory, but there are risks, experts say.

For example, if the fund invests $1 million into a stock and 10 years later it’s worth $10 million, the fund managers may want to sell it and realize gains. If they do, $9 million will go into the Earnings Reserve Account and $1 million — the original investment — would be retained by the Permanent Fund. That puts the original investment back into the fund, but by then, inflation will have eroded it.

On the other hand (as economists often say), if an investment loses money – as many do – then that loss subtracts from the gains in terms of overall deposit to the Earnings Reserve. In reality, there is discretion surrounding what the Fund states as total net “gains”.

The Earnings Reserve Account gets used in part to fund future state government, in part to pay Permanent Fund dividends, and some could get rolled back into the principal of the fund itself, if the Legislature chooses. In recent years, the Legislature has sent $16 billion in excess revenues into the Permanent Fund to build it up and guard it against inflation.

To fix the State’s fiscal crisis, Alaska may be going into a phase where the Permanent Fund just won’t grow for a time, as it has for many years. It may hit a flat spot while lawmakers try to figure out how to fund government.

Having said that, there is no way to know what financial markets will do. The fund may grow healthily, for all we know, regardless of what lawmakers do with the Earnings Reserve Account.

OPTION 1-DUNLEAVY BILL: The plan offered by Sen. Mike Dunleavy actually would allow the fund to grow, although slowly. Fifty percent of the utilized amount of the Earnings Reserve Account would pay Alaskans their dividends, and 50 percent would be used for state services. Utilized amount means 50 percent of a five-year moving average, so that it is not whipsawed by short-term movemetns in financial markets.

The Alaska Permanent Fund Corporation has provided data showing that the Permanent Fund transfer amount and the Earnings Reserve Account both grow over 10 years using Dunleavy’s approach.

What is also a part of Dunleavy’s plan is relatively large and growing dividends accompanied by deep cuts in spending. Examples of that could include closing schools, eliminating Medicaid options, curtailing ferry service, and stopping automatic pay increases. All tough decisions.

All the while, the State would be mailing large and growing dividend checks to Alaskans, while spending at a deficit, even with the Permanent Fund support. Many Alaskans will find that to be a head scratcher.

Dunleavy’s plan has deep budget cuts — draconian, perhaps — and a spending cap.

OPTION 2-GOVERNOR’S BILL: Gov. Bill Walker’s budget bill, however, takes all of the earnings of the Permanent Fund. Under his scenario, the fund has no way to grow, at least in the immediate future. He also wants a motor fuel tax, which would raise a nominal amount of money. He is probably counting on the Legislature to give him some other kind of tax as well. The budget cuts offered by the governor are merely cosmetic.

The other aspect with the governor’s plan is he takes a big chunk of earnings to fund this year’s budget (FY17), as well as FY 18, in order to leave a bigger balance in the Constitutional Budget Reserve.

The governor’s approach is a complete flip of what he proposed last year, when he had all sources of available funds pouring into the Permanent Fund in order to have a higher balance that could generate $3 billion a year in revenue to pay for state government.

Now he’s offering the bill that the Senate actually passed last year, with royalty reduced to 25 percent, no inflation-proofing and a 5.25 percent of market value draw off the fund (based on average of five prior years).

Why Walker has changed his approach 180 degrees has yet to be explained.

Inflation-proofing has always been a big discussion point around Permanent Fund management. Is it even relevant given current Permanent Fund management techniques? We suspect not.

That will be debated in Juneau this session, and there are arguments to be made on both sides.

Readers who want to join the fray may wish to school up on the meaning of POMV. And while there will be a lot of heat over the discussion, readers may also want to pray for light.

Bright, shiny objects: Hiring freezes and other cold things

Suzanne Downing

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January 11, 2017

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NEW CAMPAIGN STAFF IN GOVERNOR’S OFFICE? Gov. Bill Walker last year put in place a hiring freeze, but this year he carved out a special position for Jim Whitaker, who had to leave his post as chief of staff for reasons unexplained. Pundits believe it’s because Republicans in the House and Senate don’t trust Whitaker and won’t allow him to darken their doors.

The governor then brought in campaign expert Scott Kendall, who is liked by many for his candor and confidential disposition. Kendall is the new chief of staff and is making the rounds in Republican circles — places where Walker and Whitaker have not been able to comfortably go, since they are so closely aligned with Democrats.

Kendall most recently was a consultant to the Lisa Murkowski for Senate campaign. He has relatively decent street-cred in Republican circles, but is also very close to hardcore Democrats, such as Fairbanks former mayor Luke Hopkins, who is Kendall’s father-in-law.

Not done with hiring campaign experts, Walker has also hired Ship Creek Group founder and principal John-Henry Heckendorn, who has engineered many wins for Democrats and false independents since he arrived in the state five years ago.

These two new aides — one from the moderate right and one from the hard left — give Alaska politicos a sense that Walker is gearing up to defend himself in 2018. But will it be as an independent or as a Republican? Or will he be a Democrat?

Heckendorn, in addition to having his own company, is part of the stable of campaign advisers at Lottsfeldt Strategies, which is closely aligned with unions and Super Lobbyist Mark Begich.

Heckendorn is also still featured on campaign strategist Jim Lottsfeldt’s web site as one of talents. Lottsfeldt owns the website that first broke the news about Heckendorn’s controversial move to the Governor’s Office.

This dynamic duo gives Walker two experienced election experts in his inner circle.

Now, it’s a given that a governor needs a chief of staff. But usually aides who are brought into the Governor’s Office are there for a specific reason or because of specific expertise, such as corrections, education, oil and gas, or health care.

What is Heckendorn’s expertise? The 26-year-old runs campaigns in Alaska. It’s all he has ever done.

Bottom line: This has all the appearance of the governor hiring campaign advisers, putting them on the payroll, and making the public pay for their services.

OBAMA TALKED, WE LISTENED: In an podcast with David Axelrod, President Barack Obama talked about the “Obama Coalition,” which is made up of Democrats and “progressives.”

Obama explained that it’s a winning combination for campaigning, and his method could win the presidency over and over. “But you can’t govern,” he said, because it leads to gridlock in Congress.

Or perhaps it is lost on Obama that in order to govern, you actually have to have negotiating skills and a willingness to forge compromise, neither of which were in Obama’s rather limited practical skill set.

After his presidency, he continued in the podcast, Obama said he’ll use his presidential center for developing the next generation of leaders: “Organizers, journalists, and politicians,” to be precise. He’s going to train 20- to 30-year-olds to give them the tools to bring about progressive change. It’s Episode 108 of the Axe Files on iTunes, if you’d like to hear what’s next for the Obama agenda.

If Mark Begich does not become governor in 2018, look for him to plug into Obama’s training and recruiting program. Could Begich be Alaska coordinator, training new John-Henry Heckendorns?

THE DUNLEAVY PLAN RELEASED: Sen. Mike Dunleavy (R-Mat-Su & Copper River valleys) released a plan for Alaska to achieve a sustainable budget inside of four years. The proposal would reduce the budget another $1.1 billion over four years and requires no new taxes.

Using general fund savings and drawing modestly on the Permanent Fund’s Earnings Reserve Account, Dunleavy’s plan has Permanent Fund dividends paid in full to qualifying Alaskans.

“This fiscal situation we find ourselves in needs to be solved this year,” Sen. Dunleavy said. “We are running out of time and resources to make it happen. In doing so, all Alaskans need to pull together and make sacrifices to get us through this difficult transition. Taxing Alaskans, and/or taking the PFD to cover the large fiscal gap is not necessary. Substantial reductions, however, are needed so existing resources currently at our disposal can be deployed to get us on a path to a sustainable budget.”

“Our economy is in recession and we have the highest unemployment rate in the nation,” Sen. Dunleavy said. “Now is not the time to ask the private sector to give more to government when Alaskans are out of work and businesses are on the ropes.”

The plan would require a constitutional limit on appropriations — a spending cap — to curb government growth. If passed by the Legislature, it would be voted on by Alaskans in the next general election.

“I look forward to the input of my colleagues and other stakeholders,” Sen. Dunleavy said. “Hopefully other approaches will also come forth, allowing us to work collaboratively on a solution for all of Alaska.”

UP IN ALASKA’S NOSEBLEED SECTION: If you’re talking to folks in Fairbanks over the next week or so, be gentle. They might be a bit cranky, what with the temperature dropping to -35 at night.

That’s quite a bit colder than the average low of -13 for January. Over at CraigMedred.news, the cheerful curmudgeon-in-residence breaks down more of weather, climate, and the jet stream news.

If you’re in the rest of Alaska, brace yourself: Some tooth-cracking temperatures are heading our way, too.

Stuck in Gov. Walker’s no-road world

Suzanne Downing

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January 10, 2017

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TAKE A CHILL PILL, WEARY TRAVELER. THIS IS GOING TO BE A WHILE: After being pinned down by weather for three days, the Alaska Marine Highway System was finally able to get the State ferry MV Aurora out of Haines and heading to Juneau on Monday.

The good people of Alaska might rejoice since legislators and some staffers have been stuck in Haines, biding their time at the Mountain Market Cafe while waiting for a spot on a southbound ferry so they can convene at the Capitol to fix the state’s fiscal situation.

Alaska’s lousy fiscal situation is caused in part by overwhelming costs of running services like a Marine Highway System operated by highly paid unions whose members have also spent the weekend in stasis as they waited for the weather to clear — and getting paid for it.

The latest delayed travel event on the ferries started on Friday, when the Aurora sailings in Upper Lynn Canal were scrapped because of high winds and freezing spray.

By Sunday, there was no mercy from the whipping wind, leaving everyone stuck in Haines, Skagway, and Juneau.

A 51-mile road would have solved the problem because a half-hour crossing is manageable in such conditions, whereas a four- or five-hour ferry ride leads to just too much ice accumulating on the lifeboats, creating a hazard.

The weather was great for hotels and restaurants that absorbed cash from the weary travelers. A ferry ride that would have cost $175 all of a sudden was going to cost closer to $400, once you add food and lodging for three days.

Of course, for working class people without expense accounts there was car camping in the dead of winter, with wind and freezing temperatures.

Basketball tournaments were cancelled in Haines and Skagway. At least one traveler vented on Twitter that he had missed his cruise:

It was the same last month, when the Upper Lynn Canal was shut down due to freezing spray, and the people who wanted to go to Skagway to ride the Santa train were out of luck.

December also saw the MV Matanuska break down in Ketchikan, and strand people all across Southeast Alaska. That engine failure disrupted the schedule for nearly a week while it was repaired. The communities of Juneau, Hoonah, Sitka, Kake, Wrangell, Petersburg, Ketchikan, and Haines were all affected.

Similar stories were told by travelers back in mid-October, when they were fogged in in Juneau, with no flights in or out, and the ferry to Haines was broken down in Wrangell.

SEND A NOTE: Sports teams and other bedraggled travelers, including those who missed their winter cruises, can send their thank you notes to Gov. Bill Walker, (Office of the Governor, P.O. Box 110001, Juneau, AK 99811-0001) who cancelled plans for the road to Juneau and is getting ready to use the road funds for other purposes.

Section 16 of Gov. Walker’s draft budget re-allocates the existing Juneau Access money to the Alaska-class ferries ($4.43 million) and “…transportation and infrastructure in the Greater Lynn Canal Area” ($34.14 million). We’re also hearing the airport in Angoon is one project that will get funds. Angoon has 400 residents, but one of them is the mighty Al Kookesh, a leading Democrat who works for Gov. Walker.

Juneau’s new representative, Democrat Justin Parrish, is telling people that the $4.43 million for the Alaska-class ferries will be used to retrofit crew quarters to the vessels.

Those ships, being built in Ketchikan, were specifically designed for use in upper Lynn Canal as day boats to avoid the prohibitively expensive overnighting of crews on board. That’s why no crew quarters were designed into the boats in the first place. But unions want those berths — there’s a lot of money involved when crew sleeps onboard instead of in their own beds. They fought for them before the ferry design was complete, and they’re still determined to get those berths so more “sheet-snappers” can be hired. More paid time can be logged at the expense of the system.

Gov. Walker says he cancelled Juneau Access to save money. Meanwhile, he’s diverting precious federal infrastructure funds to make a ferry system that is already an inefficient money loser even less efficient.

(Read more: Road to common sense.)

Walker had a decision to make, and he went with the advice of the Neo-Luddites. He decided to take no action at all on building the one thing he could have built during his term as governor. He has no plan for making travel to Juneau efficient and affordable, and even if he had a plan, he has no money to execute it.

Meanwhile, the forecast for Tuesday’s Aurora sailing looks favorable, with 12-foot seas and freezing spray, but no anticipated cancellation. Yet.

Long live the Electoral College

Suzanne Downing

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January 8, 2017

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By WIN GRUENING

screen-shot-2016-09-11-at-4-57-44-pm — *Win Gruening*

In the weeks following America’s historic presidential election, Trump detractors continue to offer reasons why Hillary Clinton lost. Yet the litany of excuses continues to ignore the flaws in the candidate that were largely responsible for her defeat.

The Democratic mantra is that it’s “undemocratic” that Hillary Clinton lost in the Electoral College but won the popular vote by the largest margin in history — around 2.8 million votes. However, as a percentage of the popular vote (a fairer comparison), this ranks right in the middle of presidential elections where this has occurred.

More to the point, Clinton won one state, California, by 4.3 million votes. So, while she would have won President of California by a landslide, taking that one state out of the equation results in her losing the national popular vote by 1.5 million votes.

Hillary defenders and apologists have cited racism, sexism, misogyny, voter ID laws, the FBI and Russian hacking for Clinton’s defeat. And finally, the Electoral College is at fault and needs to be abolished.

Although this is the fifth time in U.S. history the winner of the popular vote lost the presidency, many Democrats remain obsessed with why this happened. Yet, House races are also reflective of the national mood and Republicans received 3 million more votes than Democrats did in those 435 contests. Given those numbers it’s hard to argue that our incoming president lacks legitimacy.

Lost in this controversy is another seldom mentioned fact. There were 24 U.S. presidents elected that did not receive a popular vote majority. In other words, candidates may have won a plurality of the popular vote but not a majority.

Indeed, this happened most notably in 1860 when Abraham Lincoln won 60 percent of the electoral vote but only 39 percent of the popular vote — the lowest percentage of popular vote ever received by a winning president.

Even Hillary Clinton did not receive a popular vote majority due to votes for third-party candidates.

This points out the real danger we face when tinkering with the Electoral College — not that a future president wouldn’t receive the most popular votes but that he or she wouldn’t be representative of the country at all.

Without the Electoral College, it’s possible to envision a scenario where a third-party candidate wins a presidential election with less than 40 percent of the popular vote — mostly from a handful of large states — but lacks any sort of geographic representation across the country. What the Electoral College provides is a guarantee that whomever is elected is supported by a diverse cross-section of the country — not just a few populous states — like California or New York.

We should all be careful what we wish for. Like other questionable tactics employed by Democrats in the past eight years, a change to our electoral system could perversely work against them. For example, when Harry Reid decided to use the “nuclear option” in confirming lower court judges and presidential cabinet appointments he set a precedent. To the Democrats’ regret, now they no longer have control of the Senate, this limits their ability to influence future Republican presidential appointments. After President Obama used sweeping executive authority to bypass Congress, cries by Democrats will fall on deaf ears when the same authority is exercised by a Republican president.

Likewise, abolishing the Electoral College embodied in our Constitution should not just be a knee-jerk reaction to losing an election. One of the likely outcomes of such a change would be to increase the number of minority political parties — in effect lessening the power of both the Republican and Democratic parties.

Ironically, one could argue that just as third-party candidates contributed to Hillary Clinton’s 2016 defeat, abolishment of the Electoral College could make this more likely for a major party candidate in the future.

Not surprisingly, controversy about the Electoral College has been a constant in presidential politics. Over the course of 200 years, the Electoral College has been the target of more than 700 repeal or reform proposals, according to the National Archives and Records Administration. None of those proposals ever received serious attention.

Abolishing the Electoral College requires a constitutional amendment passed by a two-thirds vote of the House and Senate and ratification by three-fourths of state legislatures. This is highly unlikely given the political realities of our current electoral map since Republicans now control both houses of Congress, 69 of 99 state legislatures, and two-thirds of the governorships.

Rather than looking to a constitutional amendment, advocates of a closer link between the popular vote and the presidential outcome would be better served by confronting the real reasons Democrats lost the election and make appropriate changes to address the main concerns shared by a majority of Americans.

Win Gruening was born and raised in Juneau and retired as the senior vice president in charge of business banking for Key Bank in 2012. He is active in civic affairs at the local, state, and national level.

Bright, shiny objects: Unhappy women, drug-addled thieves

Suzanne Downing

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January 7, 2017

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UNHAPPY WOMEN PROTESTING: On Jan. 21 in Alaska, you might see some protests by women against President-elect Donald Trump.

The upcoming protests, to take place one day after Trump takes the oath of office, are the handiwork of Democratic Party activists. They’re planned for various morning hours in Juneau (a march from the Capitol to the arts center), Homer (arts center), Anchorage (TBD), Palmer (Turkey Red Restaurant) and Fairbanks (Golden Heart Plaza).

They’ll also be raising a ruckus in Bethel, although since the event coincides with the Kuskokwim 300 race, the barking of sled dogs might drown out the chanting of the indignant.

It’s all part of a national day of emoting by women who voted for Hillary Clinton and who don’t like the way half the nation voted, and especially the way that the other 42 percent of American women voted. They’ll be marching in San Francisco, in Washington, D.C. and in Key West, Florida.

At least one supportive national fashion blogger is advising women on what to wear to the Jan. 21 protest march, (presuming you are not in the Florida Keys) and that includes the correct vegan insoles in your shoes and chic Ray Bans for your eyes — and do leave your Swiss Army knife at home, she advises. Seriously.

In a message to the Capital City Republican Women, the Juneau march organizers from the publicly funded AWARE shelter, wrote this:

Hello Capital City Republican Women. This is Saralyn from AWARE. I hope this finds you well. We are hosting the Womens March in Juneau on January 21, and wonder if you might like to participate in some way. It is a non-partisan march with a focus on women’s rights, health, and safety. We’ll be marching from the Capitol to the JAHC, and we are also inviting groups to have tables with information/ action ideas. If you would like to be involved, or have a table, please let me know, or let AWARE’s volunteer coordinator know. We can be reached by phone at 586-6623 or by email at [email protected] and [email protected]. All the best.

Pro-tip: Avoid these protest areas in morning on Jan. 21, especially if you haven’t “checked your privilege.” And please don’t use the word “sourpuss” in the vicinity; it simply will not be the politic phrase of the day.

BREAK-IN CITY: Juneau is going through a bad patch. Homes are being broken into at what appears to be a record pace. While Mayor Ken Koelsch is solidly law enforcement, Juneau has a weak mayor form of government, so he’s going to have his hands full with this one.

Drugs appear to be the driving force behind the epidemic of break-ins, some of which are happening in broad daylight.

Juneauites, who 20 years ago didn’t even lock their homes, are now locking them even if they leave to walk the dog.

They’re also sharing tips with each other about the best security systems to install, comparing cost and connectivity to the local police department. This is new behavior for Juneau residents, and they’re not happy about having to adopt it.

Meanwhile, the Juneau Police Department has launched 2017 as the Year of Kindness, with all kinds of hands-on activities to promote kindness throughout the community.

How about a Year of Law Enforcement?

MAT-SU CRIME SPREE: In the Mat-Su Valley, residents are fed up with the rash of property crimes fueled by — you guessed it — drug-starved addicts.

State Trooper Andy Gorn told the crowd that gathered on Jan. 4 for a town hall meeting that “at any given time there’s six troopers working out here.” That’s too few troopers for the 100,000 residents in the valley, he said. In actuality that is one trooper on duty for every 1,666 people, which seems adequate, if so many of them were not drug addicts.

As for the budget, the Alaska State Troopers have lost 32 trooper positions in two years, according to Alaska State Trooper Director Colonel James Cockrell. The FY 2018 proposed budget for Troopers is 8 percent lower than it was in three years ago. Full-time positions will drop from the 885 Troopers in 2015 to 813 in the proposed budget for 2018, for a loss of 72 positions.

Employment forecast: Stormy weather

Suzanne Downing

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January 6, 2017

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OVER TWO YEARS, ONE OUT OF EVERY 24 JOBS DISSOLVES

Unemployment in Alaska rose to 6.8 percent in November, compared to 4.6 percent nationally.

Today, Alaska has the highest unemployment rate in the nation, having shed 6,800 jobs in 2016.

That’s significantly more job losses than the Alaska Department of Labor had predicted at this time last year.

Labor publishes an employment forecast each January, and last year predicted a loss of 2,500 jobs for 2016.

That turned out to be a rosy scenario. An additional 4,300 jobs went away, making the State’s guesstimate off by more than 225 percent.

Readers will be forgiven, then, for looking askance at the January 2017 prognostication by the Department of Labor, which says another 7,500 jobs will be shed.

If the department’s forecasting has as much wiggle room as it did a year ago, actual job losses could be closer to 18,000 this year.

This possibility is not far-fetched. Experienced economists know that the Department of Labor tends to underestimate sharp changes in employment, partly due to its statistical sampling techniques and partly due to an institutional reluctance to go out on a limb.

As a result, the State’s official forecasts tend to “play it safe,” which at times like this can result in overly mild prognostications.

Even if Labor’s numbers are correct, by this time next year Alaska will have lost 14,300 jobs within a two-year timeframe.

That’s one out of every 24 Alaska jobs.

According to the Department of Labor’s forecast narrative, this recession in Alaska is beginning to resemble that of the 1980s, “but without the pre-crash bubble.”

That’s an important statement: There is no real estate and banking bubble to burst. Nonetheless, this recession is beginning to look disquietingly serious.

Long-time Alaskans may recall that the sharp job losses of the late 1980s did not stabilize until impacts from the Prince William Sound oil spill clean-up activity began to ripple through the economy. But this time around, with (hopefully) nothing quite like that on the horizon, Alaska could see several years of steady decline, as the economic impacts of reduced state spending and the likely imposition of broad-based taxes exert a steady drag on employment.

The losses started in the oil patch but have now spread more broadly across the economy. Retail and service sectors, as well as Alaska’s important construction industry, are getting pulled into the downdraft.

An important lesson from past Alaska downturns is that job losses here do not result in rising unemployment rates to nearly the degree that they do elsewhere. Rather, the victims of job losses tend to “vote with their feet” and leave Alaska in search of greener pastures.

For example, Alaska’s unemployment rate in 2016 averaged 6.8 percent, which is actually lower than 2014’s 7.0 percent even after shedding 14,300 jobs. It could be inferred from these data points that net population loss since 2014 exceeds 20,000.

Had the displaced workers remained in Alaska, we would instead be experiencing a statewide unemployment rate approaching 11 percent.

Policy makers in Juneau have their work cut out for them, as they grapple with the twin demons of a massive fiscal deficit and a sharp, widespread economic downturn.

Insurance: Consumers brace to pay more, get less under Obamacare in Alaska

Suzanne Downing

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January 6, 2017

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Insurance: Consumers brace to pay more, get less under Obamacare in Alaska

Obamacare’s next victim may be access to medical care in Alaska, particularly in rural areas and for all who are mandated to buy their insurance on the Affordable Care Act exchange.

This Friday, the Alaska Division of Insurance holds a listening session to gather information on the “80th percentile rule,” which is a consumer protection regulation that governs insurance reimbursements to out-of-network medical providers in Alaska.

This listening session only applies to one insurance company — Premera Blue Cross Blue Shield — because it is the last man standing in an Obamacare insurance market that collapsed in Alaska after President Obama signed the Affordable Care Act into law.

Premera wants the rule removed so that they can pay out-of-network providers at a loss instead of a market rate. This will give them the hammer to force those doctors into their network.

The Governor’s Office, through senior adviser Jim Whitaker, is pressuring for the change.

The problem with only looking at the private insurance market, as Premera does, is that it doesn’t account for veterans, Tri-care, Medicare, or Medicaid, or the impacts to these programs.

For better or worse, our health care system relies on cost-shifting from private payors to these government health care programs. If Premera can leverage doctors into its network, it reduces the ability for physicians to take on and subsidize government health care. Our veterans and seniors will find it even harder to get care.

Premera has to make money. Its biggest cost driver right now is the Obamacare law and the multiple mandates that go with it, which have made insurance even less affordable for people in Alaska not covered by Walker’s Medicaid expansion, or those who don’t qualify for the federal tax rebates.

Many Alaskans are now paying $1,500 a month or higher for basic, “bronze plan” insurance, that has deductibles as high as $6,000 to $10,000. And the rates will go up again this year.

HISTORY

In the late 1990s, insurance companies began reducing their reimbursement rates as a way of increasing their margins. This shifted the cost burden to Alaskans.

The Division of Insurance realized consumers were being hurt with huge medical bills. In 2004, the Division adopted a regulation requiring insurance companies to pay at the 80th percentile as the usual and customary rate.

For instance, if you go to a surgeon in Alaska who is out-of-network (and many are), and your bill is $10,000, but Premera has set the “usual and customary rate” at $2,000, you’ll be ponying up $8,400 from your own pocket. That may seem like an extreme example, but for a chemotherapy or radiation therapy center in a small community, the rates charged are typically much higher because there are so few patients.

Alaska’s specialty doctors and medical providers have very small patient loads across which to spread their costs. In Seattle, doctors have hundreds of thousands of patients. But in Alaska, a specialty physician doesn’t have a huge number of patients to help him/her spread out the costs. So they charge more.

Whether 80 percent is the right level is the debate at hand. But to change anything now in the insurance market would be risky. With the Republican Congress and with an incoming Republican president, Obamacare is facing repeal or, at the very least, overhaul.

For Alaska to make any changes to reimbursements in the marketplace at this time seems premature, considering that major federal changes are most certainly on the horizon.

Trump tweets China: Get a grip on N.K.

Suzanne Downing

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January 4, 2017

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KIM JONG-UN IS AN ALASKA-SIZED PROBLEM

President-elect Donald Trump, who will be sworn into office in 16 days, is moving the needle on major international issues in a way that no other president in modern history has done prior to taking office.

Trump is doing so 140 letters at a time. His tweets are driving diplomats and pundits to distraction. But his tactic of being a disruptive force to the status quo is promising for a world grown accustomed to the Obama Doctrine, which is hinted at in a tepidly received speech Obama gave in 2014 at West Point: “The United States will use military force, unilaterally if necessary, when our core interests demand it.” (Italics ours)

In actual practice, the Obama Doctrine can be summed up as empty threats, leading from behind, and drawing unserious imaginary “red lines” in the Syrian sand. Coming on the heels of such weak international leadership, the world is suddenly paying attention to art-of-the-deal Trump. Will his method of tweet-shaming result in better outcomes than Obama’s imaginary lines?

Let’s take a look at what Trump is saying about North Korea and China this week:

“North Korea just stated that it is in the final stages of developing a nuclear weapon capable of reaching parts of the U.S. It won’t happen!” Trump tweeted.

Not quite done, he continued in a follow-up message: “China has been taking out massive amounts of money & wealth from the U.S. in totally one-sided trade, but won’t help with North Korea. Nice!”

Critics say North Korea will be testing its intercontinental missiles quite soon, regardless: “I think North Korea will probably test the KN-08 (intercontinental ballistic missile) this year, no matter what Trump tweets,” wrote Jeffrey Lewis, director of the East Asia Nonproliferation Program in an email to CNN.

Lewis is an expert, and he has conventional wisdom on his side. But he’s no Donald Trump.

Actual parts of the KN-08 may have already been tested. Photo evidence is ample that North Korea is very close to having a finished product. At some point its rocket success rate, which is less than 15 percent, will improve.

Even if Trump’s blustery tweets can’t stop a missile, China is taking notice, and was forced to issue a response to the president-elect’s blistering remark. It likely galled the Chinese to have to respond to a tweet from Trump.

This much is clear: Trump, as an international figure, is going to be the Honeybadger President: He just doesn’t care about conventional wisdom. And he doesn’t care much about what others think is protocol.

Not only was Trump willing to take a call from the president of Taiwan shortly after winning the election, an act that shocked and offended the mainstream media, he’s now shaming the Chinese for their ineptitude with North Korea.

China, he’s correctly noting, enables North Korea’s ambitions, expanding through trade the nuclear hopes of unstable Kim Jong-un.

According to the Council on Foreign Relations, China is — as it has been for so long –North Korea’s BFF, its biggest trading partner, and supplier of most of its food, arms, and energy: “It has helped sustain Kim Jong-un’s regime, and has historically opposed harsh international sanctions on North Korea in the hope of avoiding regime collapse and a refugee influx across their 870-mile border,” the council says.

Here we are in 2017 with the Chinese-created Frankenstein of Nations growing out of control and ever-less stable. At any time in the next four years, the Swiss-cheese-loving, wine-swilling, 32-year-old Kim will roll out his nuclear arsenal in a grand, public test, hopefully not after consuming copious amounts of liquor.

His near-term objective? A nuclear-tipped missile that can reach the continental United States, thus giving him enormous bargaining power to prop up his regime.

Trump will have to deal with Kim, he’s signaling that he knows it, and he’s willing to do so. How he does will be at the time and place of his choosing.

But in the meantime, Alaska is wary of North Korea’s nuclear ambitions, as we are home to the one of the nation’s most important missile defense systems, and we’re also closest in proximity to North Korea.

As uncomfortable as it is to imagine, Alaska is both in the crosshairs and is the first line of defense against a nuclear-armed Kim Jong-un.

ALASKA’S ROLE IN REBALANCING PACIFIC POWER

Alaska has an important role in protecting not just itself, but the entire continent.

Last month, U.S. Sen. Dan Sullivan spoke at the Reagan National Defense Forum, where he argued that it’s time for America to face the threat that North Korea has become:

“…[what] President-elect Trump is going to face in regard to North Korea is — it is a mess. I think it’s our responsibility to give the incoming administration options and time,” Sullivan said. What Sullivan left unsaid is it’s a mess because it’s been handled poorly by the current administration.

“Here’s the scenario I worry about: Right now, most Americans believe the North Korean nuclear issue is a regional issue: Japan. Korea. China. And at some point we are going to wake up and our public is going to wake up to the fact that the head of North Korea, who is not very stable and not very predictable, is probably going to have the capability to hit our country with an intercontinental ballistic missile with a nuclear warhead on top of it,” Sullivan said.

Sullivan went on to describe why Alaska remains front and center for a more robust missile defense system and why his work on the Armed Services Committee is important to Alaska.

In the National Defense Authorization Act of 2016, Sullivan inserted provisions to require the missile defense agency to perform testing every year, and to develop a long-range discrimination radar in Alaska at Fort Greely. The design review for the radar is scheduled for this month, with construction in Alaska to begin in 2019.

In 2016, he added these provisions to the NDAA:

Missile Defense: Added $400 million above the Department of Defense’s $8.1 billion budget request for missile defense programs. Funding includes $1.28 billion for the Ground-Based Midcourse Defense portion of the Ballistic Missile Defense System, much of which is based at Fort Greely.

Missile Defense Sensors: Included $233.6 million for Missile Defense Sensors and $137.6 million for the Long Range Discriminating Radar, to be located at Clear Air Force Station.

F-35: Included $5.3 billion to acquire 44 F-35As. Eielson Air Force Base will be the home of a F-35A squadron.

The Alaska delegation’s challenge will be to educate the president-elect about the real threat that North Korea already poses. “It won’t happen” is a great Twitter dig, and the transparency of sending that message so the whole world can see it in real time is not lost on us.

But snappy as it is, it doesn’t come close to addressing what is rapidly become a clear and present danger to the United States and the world. That is going to take military might, employed with courage and resolve, to back up the tweets, and thereby restore American credibility in Asia.

Swearing in day in DC for Murkowski, Young

Suzanne Downing

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January 4, 2017

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Swearing in day in DC for Murkowski, Young

screen-shot-2017-01-03-at-1-53-14-pm — Senator Lisa Murkowski is sworn in by Vice President Joe Biden this morning, as her husband, Verne Martell, holds the Holy Bible.

Alaska Sen. Lisa Murkowski was sworn in this morning in Washington, D.C. Rep. Don Young was also sworn in for his 23rd term, 45 year to begin in March.

Along with that comes changes in seniority. Murkowski is now 25th in seniority in the Senate, and is moving into Sen. Ted Stevens’ old office this month, which was occupied most recently by retired Sen. Harry Reid, a longtime foe of Alaska’s economy. Her new room assignment will be 522 in the Hart Building.

Sen. Dan Sullivan, who did not need to be sworn in this year, rises to 92nd or 93rd in seniority, depending on whether Sen. Jeff Sessions takes the job of U.S. Attorney General.

Murkowski retained assignments on these committees: Energy and Natural Resources Committee, Appropriations Committee, Indian Affairs, and Health, Education, Labor and Pensions.

Sullivan retained his committees as well: Armed Services; Commerce, Science and Transportation; Environment and Public Works; and Veterans’ Affairs.

Committee chairs will be selected by a vote of the members and then ratified by the Senate Republican Conference.

screen-shot-2017-01-03-at-3-47-17-pm — **Alaska’s team:** Senator Lisa Murkowski, Representative Don Young, and Senator Dan Sullivan today, in Young’s office, after the swearing-in ceremonies.

Young started the day strong by introducing 38 bills, some of which had languished in the 114th Congress, including reauthorizing the Magnuson Stevens Act, reforming the Antiquities Act, opening Arctic National Wildlife Refuge to limited resource development, and reducing burdensome federal regulations.

Young is the longest serving House Republican and 2^nd longest serving overall member of the House.

House committees will be named later this month.

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Swearing in day in DC for Murkowski, Young

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