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House Democrats: Budget will get ‘lounge’ review

Suzanne Downing
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Rep. David Guttenberg, member of House Democratic Majority

Last week, House Majority Finance Co-chair Paul Seaton, a Musk Ox Republican out of Homer, issued an eight-page memo describing how the new Democrat-controlled Finance review process would work. Seaton has kept his Republican veneer but has joined the Democrat majority.

Instead of subcommittees from the House Finance Committee executing the first deep dive into departmental budgets, those budget reviews will now be part of the existing House standing committees that are tasked with hearing, amending, and voting on policy and legislative bills that are referred to their committees.

The standing committees are intended for policy and law. That’s why the Finance Committee has always structured the budget review through its own subcommittees: They keep their focus on the numbers.

A structural problem arises with the Seaton process: Policy committee chairs cannot also be Finance subcommittee chairs. Seaton overcomes this by placing one Democrat Finance Committee member into each policy committee, and that person leads the discussion and decision making on budgets referred to that committee.

Clear as mud?

That’s the way it looked during the first meeting of the House Resources Committee this week.

Rep. David Guttenberg, a Democrat from Fairbanks, is the Finance member placed into House Resources for the purpose of taking over as defacto chair when it comes to the budget.

The House Resources Committee has a full plate of policy, what with examining oil and gas tax credits, and the expressed desire of the Democratic co-chairs to give the current, voter-approved oil tax structure, Senate Bill 21, a thorough whipping.

Guttenberg described the process of how to work financial deep dives into the standing committees as evolving.

“Each person who chairs a subcommittee has different answers,” he said.

As for his role, Guttenberg made it clear he would not be cutting any more state jobs nor looking to curtail travel, and he planned to issue a “narrative report” to the Finance Committee that will be reached through a  “consensus process” on the budget process, without taking a vote.

Republican members of the House Natural Resources Committee and observers were somewhat stunned that Republicans will be asked to join a consensus on the budget, rather than being allowed to vote. Most Republicans want to continue to trim the budget and won’t want to be placed in a position counter to the will of their own district.

When Republican members of House Resources asked how consensus would be achieved, Guttenberg said there would be conversations in the hallways and the legislative lounge.

We are not making this up.

It also appears that no amendments to the budget can be made in the subcommittee/policy committee; all budget amendments must be forwarded to Rep. Seaton through a yet-to-be-launched limited access database, similar to one  used for the capital budget (known as CAPSIS)

Rep. Chris Tuck of Anchorage said this process will provide more transparency because the policy committees are televised and will be held during working hours.

But the previous process was audio available and the evening and weekend budget reviews allowed working Alaskans at least equivalent access.

House Republican members of the Finance Committee have been placed on about half of the policy committees. Democrats are firmly in control right now of the House review of the state budget.

This “still evolving” process promises to be less than transparent.

Given that Guttenberg has already stated publicly that he has no interest in further cuts to personnel, travel, or anything else, the Democrats’ budget review may be more of a rubber stamp for the Governor’s budget proposal.

Gasline to save us? Hearings today

Suzanne Downing
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“We have no other project that will revitalize our economy the way the gasline will.” – Gov. Bill Walker, State of the State Address, January 18, 2017

The Alaska LNG project is Gov. Bill Walker’s plan to save the Alaska economy. Unfortunately, few of those knowledgeable in the field are lining up behind him.

Today, the Alaska House Natural Resources Committee and the Senate Natural Resources Committee receive their periodic updates from the Alaska Gasline Development Corporation on the progress being made toward a $65 billion project that AGDC is charged with completing.

The private sector partners have all left the project: TransCanada, BP, ExxonMobil and ConocoPhillips are out. Governor Walker is in charge.

At today’s hearings, the vice presidents of AGDC are expected to give testimony, because President Keith Meyer is in Japan checking out the new AGDC office in Tokyo.

PRE-FEED DONE: The pre-front-end engineering and design work has been completed for the LNG project.  What’s logical now is to move into the FEED stage. FEED is the last “gate” in the decision-making process. In this business, if you get as far as FEED, you’re very likely to have a project.

Alaska is not there yet. The private partners did not want to move ahead with a project that was not economical for them. Gov. Walker wanted to go it alone.

PRE-FEED 2.0: What is likely next is FEED-light or a gap year of pre-FEED, burning up the clock while locating new financing, now that the partners have left.

The governor will have to go out on the financial markets, perhaps to a sovereign fund from a foreign entity, and secure financing. How that financing will be collateralized — or guaranteed — is of concern to Alaskans. Ultimately, it may put our largest asset, the $50 billion Alaska Permanent Fund, at risk.

GAS GLUT: There’s a lot of talk about “windows” of time when natural gas will not be abundant in the Pacific basin, as it is today.

Meyer of AGDC says the window is between 2023 and 2025.

BP’s economists say there may be a “gap in unmet demand” in 2025-2030.

No one is that good at saying what the window will be, because there are too many unknowns in the market. Essentially, players can get a forecast that tells them anything they want to hear.

But what we know right now is that gas is $3 a mmbtu, or million British Thermal Units. It’s flowing out of the Gulf Coast toward Asia and it costs a total of between $8 and $9, delivered to the same customers Alaska wants to court.

The Wood Mackenzie Report commissioned last year for BP, ExxonMobil, and AGDC shows Alaska’s best case scenario is $11 per mmbtu, delivered. That makes Alaska’s project one of the highest cost options in the world.

CONVERTING IT TO A UTILITY MODEL: When that $11 number came out, it was obvious why the private sector was backing away and suggested if the State insists on moving forward, it consider the gasline a utility, which can operate on a lower rate of return. It would be considered state infrastructure, such as a toll road, which a state might build and then charge people to drive on.

A key component is that the federal government not tax the project. But in reality, that’s a long shot. In a report by Manley & Brautigan to the Legislative Budget and Audit Committee, the tax lawyer Charles Scheutze concluded:

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This is a good deal different from the project being described by AGDC. The lawyer is saying that the project must be owned, developed, and operated by the State in order to avoid taxation.

Having the State actually operating the gasline is of great concern to those who have seen other government-run projects experience lavish cost overruns. It is also alarming to those familiar with the poor track record the State of Alaska has amassed over the years dabbling in private sector endeavors.

The work ahead for the next year or two is nontechnical, financial work. There will be no buying of steel in the near future. Those who work on the gasline project will be working with bankers and private equity companies. They’ll be sorting through the legal issues and the commercial agreements.

There won’t be any big breaking news during this timeframe. The signals to watch for will be nuanced from the Governor’s Office. Look for a possible change in the next year, and a new look at a downsized gasline for in-state use only — owned and operated by the State of Alaska.

Governor Walker beefs up campaign staff, on public dime

Suzanne Downing
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Governor Walker beefs up campaign staff, on public dime

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FREEZE-SCHMEEZE: In January of 2016, Gov. Bill Walker put in place a hiring freeze and travel restrictions for state workers, due to Alaska’s budget crisis. His instructions were very clear.

In a memo from then-Chief of Staff Jim Whitaker,  last year he banned hiring into vacant staff jobs, with the exception of those essential to Alaskans’ life and safety, such as State Troopers, corrections officers, and some in the health fields.

According to his memo, commissioners may ask for a hiring exemption if they feel a job is critical to the mission and cannot be accomplished with existing workforce. Each exemption would be evaluated by the chief of staff.

Since then, the governor has approved all kinds of hiring for all manner of nonessential workers, but the most egregious hires have come in his own office and through highly paid contractors he brought in.

THE $100,000 MAN: We come to the pending employment of John-Henry Heckendorn, who is Exhibit A for a hiring freeze that does not exist.

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Heckendorn is the young man from Massachusetts who came to Alaska five years ago to work on a campaign for Rep. Andy Josephson, someone he met while attending Whitman College.

He found Alaska to his liking, so much so that he decided to start his own campaign company, Ship Creek Group, which gets Democrats elected. He’s good at it.

Heckendorn is associated with Jim Lottsfeldt Strategies, where he appeared on the Democrat operative’s web site as a team member until his profile was removed last week. Heckendorn has a talent for running effective campaigns. His alliance with Lottsfeldt gives him strong union chops, and a direct line to the Lottsfeldt political blog.

Heckendorn is a likable guy. But in fairness, he’s 100 percent campaign operative.

The governor has made Heckendorn an offer to come onboard his Administration, starting at the end of this month.

This is good for Heckendorn, because it’s an off-year for campaigns and money will be harder to come by with only municipal races in Anchorage to play in. He can put his company on auto-pilot while he goes to work for Walker, who has made him a handsome offer: $97,500.

Heckendorn is 26 years old.

That’s equivalent to nearly 100 Permanent Fund dividends. And that’s not including benefits.

What is Heckendorn’s job? From the paperwork, it’s unclear. There is no actual job description. He told the Alaska Dispatch News that “he will work with the Legislature and the state’s executive-branch agencies.”

Where did the governor come up with the position?

An analysis of the paperwork trail shows Walker has taken a position from the Governor’s Office of International Trade, which had been occupied by an associate director who the governor let go to trim the budget. The governor has slyly converted it into a special assistant position that is likely related to Walker’s re-election bid.

Heckendorn, according to the governor’s organization chart, is at the same reporting level as Communications Director Grace Jang. He will be a special assistant to the Chief of Staff and Governor, but technically reports to Marcia Davis, deputy chief of staff.

His handsome salary at the assigned Range 23, between a step E and F, indicates there has been a salary override. This is a salary step that Heckendorn might only see after working a few years, but he’s getting it right out of the gate.

The new position will be stationed in Anchorage, where the bulk of election strategy work is likely to take place:

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WHITAKER, ESSENTIAL TO LIFE AND SAFETY: The governor has also retained his former chief of staff, Jim Whitaker, keeping him at his very lucrative chief-of-staff salary of over $173,000, plus benefits.

Whitaker is around Range 29, Step Q, and adding in the benefits he receives, he pulls down the equivalent of 249 Permanent Fund dividends.

Whitaker’s job description is Special Projects Coordinator, a job created for him after Walker needed to get him out of the spotlight, since he is unpopular with legislators. Whitaker, readers recall, spoke in endorsement of Barack Obama at the Democratic National Convention in 2008.

How did Walker carve out that position vacancy? In the paperwork trail it appears that he took a constituent relations position, (PCN 01-405X) , that was in Fairbanks.

That position was vacant due to downsizing his staff. Now he is up-sizing the position from a Range 14 to a Range 29 in order to keep Whitaker close by.

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KENDALL, CAMPAIGN MAN AND CHIEF-OF-STAFF: Walker hired former Murkowski campaign operative Scott Kendall as his new chief of staff.

Kendall is in charge of signing off on the Heckendorn hire, and in fact may be looking forward to having the young man join the staff in just 10 days.

Kendall himself came in on a salary override, of nearly Range 29, Step O. With his benefit package, Kendall costs Alaska nearly 232 Permanent Fund dividends.

The world of Bill Walker’s own office salary overrides, layered on his previously announced hiring freezes, gets weirder by the day: This week he announced wage freezes for most non-union state workers.

While admirable, it’s not new.  Recall last year’s attempt at freezing wages, an effort by Republicans in the House, which ran into a concrete wall of Democrats. The bill would have kept wages steady until oil hit $90 a barrel.

Back then, Alaska AFL-CIO President Vince Beltrami called it a “ridiculous sideshow,” and said he was glad to see that Democrats in the House were blocking its passage.

The governor’s bill, SB 31, holds unions harmless and goes after non-union state workers instead.

“Until we enact a sustainable fiscal plan, we must make adjustments,” Governor Walker said in a Jan. 19 press release. “I believe in leading by example and have reduced my own salary by one-third. While it won’t close the fiscal gap, this legislation (SB 31) is a necessary part of the solution to Alaska’s fiscal crisis.”

His bill and transmittal letter are here.

The reality is that the Governor’s Office is in no way leading by example.

THE SALARY OVERRIDE GOVERNOR: This could get awkward for Gov. Walker. While freezing wages for many rank-and-file state workers, he is dramatically upgrading positions in his own office, creating new ones, and re-purposing trade promotion staff to serve as political operatives for his own re-election.

Andree McLeod, a citizen activist who requested the documents from the Governor’s Office that are cited in this story, had this to say:

“Walker’s actions do not match his rhetoric. His attempt to seem fiscally prudent is disingenuous at best and is three budgets too late. He campaigned on the promise to decrease high exempt salaries but has chosen to increase them year after year. Even his most recent exempt hires contained salary overrides (salaries over the required amount) to his newly hired chief of staff Scott Kendall and his former chief of staff Jim Whitaker who was kept on at the same rate.”
Look for the Senate Finance Committee — and other Alaskans — to have questions about the governor’s actions.

Toyko or bust: Fish office replaced by natural gas office in Japan

Suzanne Downing
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The Alaska Gasline Development Corporation has opened an office in Tokyo, Japan to market the state’s wealth of natural gas.

And the State of Alaska has closed down another office — one that represented the trade interests of fishing families in Alaska.

While the Governor’s Office for many years had a seafood office in Japan’s capital, anyone who wants to talk fish now needs to go through the office devoted to talking nat-gas. The office being run by AGDC is a one-stop shop for any of Alaska’s resources, but the person in charge is a natural gas guy.

Oddly, the governor made no mention of the historic change in his State of the State Address on Wednesday, but an invitation to the opening of the new office was making its way around the small circle of media at the Capitol even while the governor spoke. It was dated January 12, six days before the governor’s speech.

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Similarly, no mention was made in the governor’s State of the State speech about the Houston office that AGDC announced it would open back in July.

That office never materialized, and no public discussion has taken place about why, or about the need for the Tokyo office.

On Jan. 11, AGDC President Keith Meyer spoke about the gasline project in Kenai to a group of business and industry leaders, and also made no note of the office he had opened in Japan that week.

And at the most recent board meeting of AGDC took place on January 12 — the same day the Toyko Office opening was quietly introduced to industry — no mention was made.

That meeting was almost entirely held behind closed doors in an executive session, with no written notification before or after the executive session about any topics discussed.

Alaska’s seafood industry is the fourth-largest supplier of seafood imports to Japan, and has been for decades.

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Masatoshi ‘Nick’ Shiratori 

Now, with the fish trade expert gone, a former employee of Mitsubishi Corp. will be Alaska’s representative on all trade matters. He will work with the administration to secure long-term contracts for gas, as well as financing for the gasline project that may cost $65 billion. Masatoshi “Nick” Shiratori is anchoring the new office.

AGDC officially became the sole owner of the giant gas export project on the last day of 2016 after its private partners – Transcanada, BP, ConocoPhillips, and ExxonMobil decided the massive project was not for them. AGDC is a public corporation owned by the State of Alaska.

Alaska seafood in Japan has been a declining market because of changing tastes among younger Japanese, according to the food blog Northwest Asian Weekly.

Not as many millennial Japanese are eating the kinds of seafood that come from Alaska waters, but instead are turning to chicken, pork and beef, the magazine said. Without a robust trade representative, Alaska’s Japanese market position could erode even more as the skills needed to handle and prepare seafood are lost.

The Alaska Seafood Marketing Institute has worked to counter that trend by actually teaching the Japanese in Tokyo various time-saving tips, such as its  “Cook It Frozen” campaign.

Read more by Nat Herz at the Alaska Dispatch News about the Tokyo office non-announcement.

A president underestimated from Day One

Suzanne Downing
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It’s President Trump.

At 8 am Alaska time, The Donald became the most underestimated president in modern times. Even the parade this afternoon is sparsely attended, compared to the past few presidential parades.

Sometimes it’s nice to be underestimated. Half of the public doesn’t seem to expect much of Donald J. Trump. Maybe that’s going to work to his benefit.

By comparison, Barack Obama had been practically anointed as the Inevitable One, a process that started with his stunningly “on-message” keynote speech at the Democratic National Convention back in July of 2004, four years before he ran for the presidency.

If anything, the quite effective orator Obama had been overestimated, which led to the deep disappointment that many Americans felt during his presidency. As it turned out, he was not a unifier. He divided the nation bitterly.

Not Trump. His was an uphill battle all the way to the late hours of Election Night, 2016. He’s never been one to be “on message.” Half of his supporters cringed even while they backed him, because he is not a man used to crafting every turn of a phrase. He is not, as is evident, politically correct enough for half of the voters. Those who voted for Hillary are not coming over. Ever.

Trump fought this battle alone much of his journey to the White House. He had to clear a crowded field of usual suspects. He did so with a blustery and blistering style that scared many mainstream Republicans, who were convinced he was the one candidate who could not win against Hillary Clinton. They, too, underestimated him.

Eighteen months ago, the media could barely contain its disdain when Trump announced his candidacy. They thought it was a joke. From the outset, they made a winking sport of their coverage, using dismissive phrases and code language. One could almost see them laughing into their sleeves.

A reporter in 2015 asked him: “You are not a nice person. How are you going to get people to vote for you?”

Trump’s answer was “I think I’m nice…But I think people want competence.”

(Watch Trump’s speech announcing his candidacy on June 16, 2015).

That very day of his announced candidacy, the spokeswoman for the Democratic Party, Holly Schulman, poked fun at the entire Republican field: “Today, Donald Trump became the second major Republican candidate to announce for president in two days. He adds some much-needed seriousness that has previously been lacking from the GOP field, and we look forward to hearing more about his ideas for the nation.”

The Democrats were pulling for him back then. They didn’t think he had a chance against Mrs. Clinton. He was the Democratic establishment’s favorite candidate.

Dismissed by the liberal intelligentsia, and hammered by the media as temperamentally unequipped to lead the nation, Trump motored on, tweeted on, and never once apologized for who he is.

Today, Trump’s  inaugural address mirrored the remarks he made back on June 16, 2015.

He did not try to mend fences with the liberal establishment. He didn’t turn and throw a single compliment to his predecessor, but doubled down on his “take back our country” populist message.

It was the speech of a fighter who, for all his theatrics, is remarkably consistent in the platform that he ran on: American jobs, American schools, Americans’ safety and national security come first for him.

No more than one half hour after he became president, his Administration began to unwind some of 11th-hour moves of the Obama Administration:

He suspended a Department of Housing and Urban Development rule that Obama approved on Jan. 9, which lowered charges for borrows on risky mortgages backed by the the Federal Housing Administration. Conservatives have held that moving mortgage risk to the federal government and away from the private sector is bad policy; the federal government should not take over what the private sector should be doing.

 CONFIRMATIONS BEGIN: In the U.S. Senate, lawmakers are expected to take up the confirmation votes for two of Trump’s cabinet as early as today:
Retired Marine Corps Gen. James “Mad Dog” Mattis, Trump’s nominee for Defense secretary, and retired Marine Corps Gen. John Kelly, the president’s choice to lead the Department of Homeland Security are the first to be voted on.
Those two confirmation votes may be presided over by U.S. Sen. Dan Sullivan, Alaska, who is also a Marine.
RIOTERS AND PROTESTERS: A mass hysteria took hold among Trump opponents over the recent weeks since the election. The public grieving has devolved into violence as today, hundreds of lawless rioters are costing the nation millions of dollars as they break windows, start fights, and leave at least a few Trump supporters bloodied in the nation’s capital.
Tomorrow, women protestors take to the streets across the nation to express their displeasure with the president.
As they do so, Americans will watch football, attend basketball practices, go to work, pay bills, visit friends, and gather around the dinner tables of America from Nome to Nantucket.
In short, we will carry on with our lives, expressing love for family, love for country, and love for freedom that was expressed by this, the Most Underestimated president we have known.

The partying part of the transfer of power

Suzanne Downing
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Alaskans are making the most of the celebration under way in Washington, D.C., at events leading up to the swearing in of Donald J. Trump tomorrow. More photos from the Alaska celebration that continued late into the night. While much of Alaska is hunkered down for one of the coldest January’s in memory, ambassadors to the nation’s capital are having a cool time: The weather forecast for Friday in Washington is a high of 49 degrees and rainy.

Partying for a new president

Suzanne Downing
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The celebrating continues tonight in Washington, D.C., as Alaskans gather to ring in a new president who they hope will have a positive impact on the state and the nation. Some outtakes from the celebration under way, which included Alaska’s own mushing mortician, Scott Janssen, and a sled dog. The inauguration of Donald Trump as president is tomorrow, and tonight’s partiers will be lining up starting at 6 am to get good spots, if they don’t already have assigned seating. Come back for more photos.

Photos from Alaskans’ inaugural celebration

Suzanne Downing
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The Alaska-themed Inaugural Celebration is under way in Washington, D.C. We’re posting photos that participants send to Must Read Alaska.

The celebration, with honorary cohosts Sens. Lisa Murkowski and Dan Sullivan, is at the Washington Plaza Hotel. It’s an Alaska extravaganza with Native dancing and drumming, Hobo Jim, Alaska beers and seafood, and historic photos and artifacts on display.

More photos from Alaskans in DC:

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Bejean and Jay Page locate their seats for tomorrow’s swearing-in ceremony.

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Rep. Don Young photo-bombs a constituent for the family scrapbook.

 

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