Gov. Bill Walker will offer his third State of the State address at 7 p.m. tonight, Jan. 18.
State of the State day is typically filled with excitement and anticipation on the Third Floor of the Capitol, where the Governor’s Office is situated. This year there may be some hand wringing thrown in with that anticipation.
The governor is developing a track record, after all, and it’s concerning the public. Walker has seen the polling numbers and they’re not good as he heads into his third year: His approval rating dropped into the 30’s and his disapproval numbers are steadily climbing, according to a Walker-sympathetic pollster. The public’s confidence in the governor’s ability to manage his key initiatives is flagging.
Gov. Walker has a particular challenge this year. While a leader must express optimism and cast a vision that gives people hope, the economy of Alaska is encountering strong headwinds. That means he, as governor, is encountering headwinds as well.
In fact, a combination of low oil prices and high state budgets created a perfect storm under Walker’s watch. His method of dealing with it in the past two budget cycles was to immediately convene a “summer tax camp” (or feedback session, if you will), at the University of Alaska Fairbanks in the summer of 2015, and begin the process of softening the target so he could tax Alaskans wage-earners and job-creators without making the budget cuts Alaskans wanted first.
2015 was a faux crisis compared with 2017.
Now, in Year 3 of his governorship, Walker has an actual economic meltdown on his hands because he didn’t want to do the heavy lifting for the two prior years.
The economy will be the elephant in the room, as Alaskans face the largest job loss since the economic crash of the 1980s: More than 14,000 jobs will disappear in just two years — most of them in the private sector.
Alaskans are reluctantly packing their trucks and leaving the state to look for opportunity elsewhere.
The governor desperately needs to articulate a plan for getting the state back on track. He cannot allow the economic downward spiral to continue. He is going to have to exude confidence tonight, but also substance. Most of all, his speechwriter must dissuade him from discussing the beer and carrot economy.
PIPE DREAM: Walker ran for office primarily on the gasline, and back in 2014, candidate Walker provided a clear and convincing vision for building that gasline, in contrast with Gov. Parnell, who had been proceeding more cautiously, allowing the private sector to set the pace.
Once in office, Walker spoke of the gasline project as his highest priority during his first State of the State Address in January of 2015.
Over the past 24 months, Walker hired his friends, like Rigdon Boykin, who he paid $120,000 a month, and Radoslav Shipkoff, who he paid $100,000 a month, as well as other special consultants to help him move the gasline forward. He blew up the board and leadership of the Alaska Gasline Development Corporation, put in place his own appointees, and proceeded to burn through the cash.
He blew through two commissioners of Natural Resources, who could not support his gasline vision. He traveled to Asia multiple times to tout the gasline and tell the world that Alaska was on track.
In 2015, Walker stated this during his State of the State:
Under my administration, we will finally begin building the Alaska gas line to tidewater.
It will be done with Alaska hire to the maximum extent allowed under the law.
And it will comply with Alaska’s constitutional mandate that our resources be developed for the maximum use and benefit of Alaskans. I was honored to have the president of a major Japanese energy consortium travel from Tokyo to Juneau last month for our inauguration.
I met with this Japanese delegation the following morning as my first official meeting as your governor.
About 10 days later, they returned to Juneau with a memorandum of understanding.
Since signing that MOU, other significant LNG buyers in Asia have contacted me expressing similar interest.
In fact, on our way to church on Christmas Eve, I received such a call from a major Japanese company.
The gas is available. The market is responding. And as we know, Alaska is the crossroads of the world. It’s time we engage those markets, diversify our economy, create long-term fiscal stability and job growth.
If Walker pushes forward with the same gasline message tonight, viewers may be reminded of the old Hans Christian Anderson story, “The Emperor’s New Clothes.”
MEDICAID EXPANSION: While the gasline is a messaging hurdle for Walker, touting his Obamacare Medicaid expansion is a tough sell as well.
The health insurance experiment under President Obama has led to all but one insurance company leaving the Alaska market, and there’s no telling what the future of the program will be under a Trump Administration.
The Centers for Medicare and Medicaid Services reports that Medicaid expansion enrollees in Alaska cost about 49 percent higher than had been estimated. Looking ahead, Alaska will soon pick up at least 10 percent of the cost of the Medicaid expansion population, which grows by the year as more and more people lose their jobs and fall under the income threshhold for mandatory insurance. While the Legislature passed some significant reforms, cost drivers are continuing to grow.
Last year the Legislature approved $55 million in extra funding to bail out the last remaining insurer, Premera, and prevent Obamacare from altogether collapsing in Alaska. There was no help from the federal government — or did Walker seek help in fixing what the federal government had created as a monopolistic problem that plagues many states?
PERMANENT FUND DIVIDEND: By 2016, Gov. Walker and his then-Chief of Staff Jim Whitaker, had developed such sour relations with lawmakers that Walker abandoned working with the Legislature and simply garnished half of every Alaskan’s Permanent Fund dividend.
That didn’t help solve the budget crisis because he does not have appropriation authority over it, but that $600 million is now sitting in reserve, waiting to be spent to patch a budgetary hole somewhere. To his credit, he had to know that taking half of the Permanent Fund dividends would be deeply unpopular and that he would pay a political price for it. Therefore, his move was probably not a cunning political maneuver, but an actual attempt to preserve some options for this year’s budget dialogue.
BUDGET THAT CAN’T BE CUT: If polls can be believed, Alaskans are not entirely impressed with a governor who has had to be dragged kicking and screaming into budget discipline. Alaskans think government has not yet been trimmed to its true fighting weight.
The Senate Majority this year is looking for another $300 million in cuts and has stated they’ll come from Transportation, Education, and Health and Social Services, as well as other portions of state government. The House, now controlled by Democrats, is instead lining up a host of taxes.
The majorities of two governmental bodies are far apart, which is where a truly nonpartisan governor might have a shot at success.
But the governor is not nonpartisan. Through his agent Bruce Botelho, Walker has populated key positions up and down the bureaucratic column with Democrats who are there to protect state jobs. Unless he cleans house, Republicans in the Legislature will remain mistrustful.
Walker’s move to hire Scott Kendall as his chief of staff was a step in the right direction. Jim Whitaker, who is one of Walker’s closest allies, was so toxic to the governor that he finally had to be moved aside, but the damage to the relationship between the Executive Branch and the Legislative Branch has been bloody.
Retaining Darwin Peterson as governor’s legislative director was a solid move on Walker’s part. Peterson has had his bumps dealing with legislators, but they know him and basically trust him, or at least understand that he has certain water to carry for the governor. That relationship goes a long ways. The rumors of Peterson’s demise were greatly exaggerated, but Chief of Staff Kendall has done damage control.
THE ECONOMY: The one thing Walker can do is to focus the bulk of his attention on getting more oil into the pipeline. He needs to stop listening to the inner-circle fatalists who whisper in his ear that we are in a post-oil era. We’re only in that era if he makes us so. Walker needs to believe in oil again.
Judging from the massive finds announced lately, such as the Smith Bay discovery by Caelus Energy, the Pikka field by Armstrong Oil, and the Willow discovery by ConocoPhillips-Alaska, there’s plenty of oil to put in the pipeline. SB-21, the tax reform bill, is bringing all that oil into play, but it will remain in the ground if the governor monkeys around with taxes again.
There’s an old saying: “It’s not enough to work hard. You have to work on the right things.” Work on oil, Governor, and jobs will return, taxes and royalties will flow, and the working men and women of Alaska will have their faith in government restored.
(Alaskans can catch the State of the State address on your computer with Gavel Alaska coverage or watch it on 360 North. )
