ADFG proposes sweeping changes to Cook Inlet salmon goals

The Alaska Department of Fish and Game’s recommendations for salmon escapement goal ranges in Upper Cook Inlet are out significantly earlier than they have been in past years. Upper Cook Inlet, which reaches north from the Kasilof River, encompasses a number of heavily fished salmon stocks, including the Kenai and Susitna rivers. ADFG reviews the escapement goal ranges for the rivers every three years or so and makes recommendations before the Board of Fisheries takes up the proposals for the area during the in-cycle meeting. For several rivers in the Mat-Su Valley, ADFG is recommending decreasing the lower end of king salmon escapement goal ranges, meaning that fewer salmon would have to make it up the river before ADFG determines the goal had been met. On the Kenai and Russian rivers, the sockeye sustainable escapement goals would tick up slightly. The goals are recommended for the 2020 season, so the current goals would remain in effect for the 2019 season. The sustainable escapement goal for sockeye on the Kenai River, which is the largest sockeye salmon river in the region, would increase slightly to 750,000 to 1.3 million. The Kasilof River’s sockeye biological escapement goal would decrease slightly to 140,000 to 320,000 fish. The early-run sockeye goal for the Russian River — a popular sportfishing river on the Kenai Peninsula — would remain the same, but the late-run sustainable escapement goal would adjust to 44,000 to 85,000, which is an increase in the lower end but a decrease in the upper end. The sockeye salmon goals in the Susitna River drainage would remain unchanged. The king goals in the Susitna drainage would change substantially, though. ADFG is recommending consolidating and revising the Susitna River king stock escapement goals into four “sub-basins”: the Deshka River, the Eastside Susitna River, the Talkeetna River and the Yentna River. Consolidating the goals would have advantages over the current single aerial survey model as they are based on total escapement as opposed to an index, derived using stock-recruit analyses and could account for years in which surveys were not conducted, according to the memo. “Each sub-basin is unique in terms of geography, harvest and accessibility, and therefore the regulatory structure varies between areas; streams within each sub-basin tend to share the same set of regulations,” the memo states. The Deshka River would have a biological escapement goal of 9,000 to 18,000; the Eastside Susitna River would have a sustainable escapement goal of 13,000 to 25,000; the Talkeetna River sub-basin would have a sustainable escapement goal of 9,000 to 17,500; and the Yentna River sub-basin would have a sustainable escapement goal of 13,000 to 22,000. Alexander Creek and Chulitna River would keep their own separate sustainable escapement goals of 1,900 to 3,700 and 1,200 to 2,900 king salmon, respectively. The Little Susitna River arial survey goal would be lowered slightly to 700 to 1,500 kings, and the Crooked Creek king salmon goal would be increased slightly to 700 to 1,400 kings. The Kenai River’s king goals would remain unchanged. The coho salmon goal in the Deshka River would remain the same, while the Jim Creek and Little Susitna River coho goals would be lowered slightly; the Jim Creek goal’s upper end would increase, according to the memo. Escapement goals are complicated, with multiple types and methodologies for determining them. At its most recent meeting, the Board of Fisheries noted that there is significant confusion around how escapement goals are developed and why certain rivers have one type while others have another. The Upper Cook Inlet escapement goal memo was released several months earlier than originally intended, in part because of public requests for the goals to be released before proposals for the 2020 Upper Cook Inlet meeting are due. “The department recognizes the importance of releasing escapement goal recommendations earlier in the year so the public may submit proposals relative to goal recommendations before the deadline of (April 10),” the memo states. “Thus, department staff completed their review on an accelerated timeline, and developed recommendations for UCI salmon escapement goals.” Kevin Delaney, a former fisheries biologist for ADFG and currently a consultant for the Kenai River Sportfishing Association, said the early release of the escapement goal recommendations allows stakeholders to gather more information as they finalize their proposals and review them for the next year before the meeting in early 2020. “This is the first time ever (ADFG has) gotten them out before proposals were due,” he said. “That should be applauded.” The slight uptick on the Kenai River sockeye goal doesn’t necessarily shift any more fish toward the sportfishery, Delaney said. The recommended lower end of the goal is only 50,000 fish more than the current lower end, and the Kenai River can see 50,000 fish come through on a single day during the peak of the sockeye run. The lowering of the goal on the Kasilof River might be a concern, but the Kenai River is the major driver in the region for sockeye salmon, he said. “The big issue is the Kenai River, and 50,000 fish isn’t going to make a huge difference,” he said. The Kenai River’s sockeye salmon management plan is immensely complicated, with three management tiers based on the strength of the forecasted run and an in-river escapement goal as well as the sustainable escapement goal. The in-river goal is set at 900,000 to 1.1 million sockeye, which accounts for a sportfishery harvest of about 200,000 sockeye in the river above the sonar. The recommendation included in the escapement goal memo only updates the SEG; adjusting the in-river goal would be up to the Board of Fisheries, as that’s an allocative decision compared to escapement goals which are management decisions. Mike Wood, a Northern District setnet fishermen, said it was interesting how some goals decreased in the Susitna River drainage while others increased in the Kenai River drainage. The Susitna valley has struggled with decreasing returns in recent years, with closures for salmon fishing, and the users are concerned that not enough fish are making it past the commercial fisheries in Kodiak and central Cook Inlet to return to spawn. Wood said he was glad to see the department address goals in the Lewis, Theodore and Chuitna, smaller rivers on the west side, and noted that better genetics data from ADFG has helped the staff separate the Cook Inlet west side rivers into individual stocks. “I was glad to see that, because it does have implications,” he said. “They’ve kept the king salmon closed to anything above Tyonek for just about 20 years now to let more fish return to the Susitna River. It’s good to see the Chuitna is bouncing back, and it does make sense to lower it a little bit in the Theodore and not have it at all in the Lewis. The Lewis doesn’t even reach (Cook) Inlet anymore.” Lowering escapement goals for Susitna drainages is concerning, he said, in part because of the nature of the stream. Spawner-return analyses — which calculate how many offspring return on average per spawning salmon — have shown that the Susitna is not as productive as a river like the Kenai, and thus would need more spawners to produce the same volume of return, he said. Wood, who also chairs the Mat-Su Borough’s Fish and Wildlife Commission, said the group is looking at the recommendations and working on a Northern District management plan and how that connects to regulations on setnetters in the area. “Maybe things will come back they way they’re supposed to,” he said. “But just lowering our goals, our expectations, I don’t think is wise in general. I’m cautious of it. Does it mean that we should lower them and then allow people to kill more of them? I don’t think that that really works to the advantage of the fish.” Proposals for the Upper Cook Inlet meeting are due April 10. ^ Elizabeth Earl can be reached at [email protected]

ADFG leaders tout $11 billion return on agency spending

Though it’s a relatively small percentage of the state budget each year, the Alaska Department of Fish and Game wants to show that it’s a worthwhile investment. Each year, the state spends in the neighborhood of $65 million to $70 million from the General Fund to pay for the department. Combined with user fees and federal grants and matches, the total budget clocks in at about $197 million. According to a number of studies conducted in-house and by the McDowell Group, that supports an economic return of about $11.8 billion annually. It’s not a huge surprise, even though the numbers are large, said ADFG Commissioner Doug Vincent-Lang. Some of the wages estimated in the industries certainly do leave the state, but much of it stays as well, he said. The numbers are useful to the department as well as for the public to know what the spending is bringing in, he said. “(About) seven or eight years ago, I think the department slowly started realizing we needed to have a better idea of what our return on investment was,” he said. “I think the Sportfishing Division did a study looking at its benefit to the state of Alaska, then the Division of Wildlife Conservation … not too long after the Subsistence Division got into it, then of course commercial fisheries has been doing it for a long time.” Commercial fishing is the largest private sector employer in the state, with about 60,000 direct jobs provided by the industry. The vast majority of those jobs are in salmon — about 60 percent — followed by groundfish, halibut and crab, according to the Alaska Department of Labor and Workforce Development. Sportfishing supports 15,879 jobs, while hunting supports 27,000, according to information provided by the department. Sam Rabung, the director of the Division of Commercial Fisheries, cited a McDowell report and noted that commercial seafood harvesting contributes about $5.2 billion in economic output to the Alaska economy annually in testimony to the House Finance Committee’s subcommittee on ADFG on March 14. “Managing our fish and wildlife resources comes at a cost that is dwarfed by the return on investment,” he said. “The comfish division’s budget is about $70 million annually, and about half of that is (general fund). But what that does for the state is the direct economic value of commercially harvested seafood contributing to the state’s economy.” Commercial fisheries contribute about $146 million annually in local taxes, fees and self-assessments while the sportfishing industry contributes about $246 million in taxes. Hunters and wildlife viewers paid a total of $3.87 billion in 2019 inflation-adjusted dollars. Roughly $35 million to $37 million of the taxes paid by commercial fishermen are directed back into the Commercial Fisheries Division, while the rest goes into the general fund or to pay for other services like aquaculture through a self-assessed fee, Rabung said during the House Finance Committee hearing. Anglers and hunters also draw down federal funds into the state through license purchases. In 2016, the Legislature passed a bill to increase hunting and sportfishing license fees in response to a stakeholder-led effort to do so, thus allowing the department to access more federal match funds through the Dingell-Johnson and Pittman-Robertson fund programs. According to ADFG, 281,823 Alaskans bought sportfishing or hunting licenses in 2018, or more than half of the state’s adult population. The department also enumerated the economic impact of subsistence resources. Alaskans harvest about 18,000 tons of wild food annually, according to the department. Calculated at about $6 per pound, subsistence provides between $200.8 million and $391 million in 2019 dollars each year, according to a 2014 report from the Division of Subsistence. Going into the fiscal year 2020 budget, ADFG received one of the smaller proposed reductions at about 5 percent. Vincent-Lang said he thought it showed that the department is already well-managed and provides a good return. “When you look at the department budget overall, we came out of the budget scenario largely intact,” he said. “We are having a good return on investment, and I think there was a good understanding by the governor’s office that commercial fishing, sportfishing and subsistence fishing as a key part of the Alaskan identity.” The department’s default is to manage more conservatively when less information is available to managers. However, cutting the management side can also cause the department to manage more conservatively, Vincent-Lang said. Significant reductions to the budget would certainly impact the economic benefit the department sees, but a significant increase doesn’t necessarily mean a significant increase either, he said. However, an increase in funding could result in increased opportunity in fisheries like herring or crab, which are currently conservatively managed, he said. Commercial fisheries are major drivers in communities across the state, especially in coastal communities where there are often not many other economic opportunities. Vincent-Lang said he is planning to work with processors to try to increase seafood processing capacity in communities like those around Norton Sound, where there have been harvestable surpluses of salmon in recent years but not very many processors to buy them. During the House Finance subcommittee meeting on March 14, Rep. Louise Stutes, R-Kodiak, noted that the reductions to the department were concerning because the loss of funding could mean more conservative management, and thus lost opportunities for fishermen. “I would like to see you have not only a focus on the impact to the economy but the impact to the fishermen themselves,” Stutes said. “That should be the number one concern of this state: allowing these fishermen to go out and fully prosecute the fisheries. The state wins when that happens.” ^ Elizabeth Earl can be reached at [email protected]

Legislators turn to dividend spend to plug deficit

Budget negotiations at the end of the legislative session typically focus on one or two sticking points. In recent years of tight budgets those negotiations between caucuses in both chambers have centered on oil tax credits and funding the state’s education and ferry systems; this year, it appears, it will all be about the PFD. Gov. Michael J. Dunleavy largely campaigned on returning to the statutory Permanent Fund dividend formula after three years of lawmakers deviating from it while the state was mired in multibillion-dollar budget deficits. Dunleavy emphasized on the campaign trail that improved oil prices could support current levels of state spending as long as future budget growth was mostly limited to match inflation. It wasn’t until the very end of the campaign and more so after the election — when oil prices fell from near $80 per barrel to eventually stabilize in the mid-$60 range, and expected state revenue dropped in concert — that talk began of major budget cuts to pay for a $3,000 PFD this year. While the newly-elected governor has subsequently chosen to start budgeting by paying a full PFD and proposing major budget cuts to resolve the $1.6 billion deficit at current spending levels using the remaining revenue from all sources, legislative leaders are taking a much different approach. A full, statutorily calculated PFD for the upcoming 2020 state fiscal year is expected to cost about $1.9 billion. House Finance Committee co-chair Rep. Neal Foster, D-Nome, said during a March 28 press briefing that the bipartisan House majority caucus would focus on the budget first and address the dividend with the remaining funding available. “We’re working in House Finance to construct a budget that is fiscally responsible and at the same time funds the things that Alaskans are asking for,” Foster said. He and his fellow Finance co-chair North Pole Republican Rep. Tammie Wilson said they’re looking to make gradual budget cuts over several years to allow government agencies and the businesses that work with them time to react to reductions. Foster suggested legislators could appropriate this year’s PFD in a new, drastically amended version of the governor’s bills to repay forgone dividend amounts, which don’t appear likely to pass as the administration has proposed. The first version of the House budget — also subject to several rounds of amendments — calls for $45 million in cuts to General Fund spending but is more than $1 billion less than the current 2019 budget mostly because it does not include the PFD appropriation that has generally been in the operating budget bill. “I think one of the things we realized is we have to do business different,” Wilson said. “We can’t just keep cutting; we have to change” state government operations to maintain some services at lower spending levels. House Speaker Bryce Edgmon, I-Dillingham, said the eight community meetings representatives held across the state in late March drew an overwhelming response in opposition to Dunleavy’s budget plan. Specifically, individuals testifying against the governor’s budget cuts outweighed those in favor of them by a five-to-one margin, according to Edgmon. The number of Alaskans who testified in community and Finance meetings in support of generally reducing the PFD to pay for government services also outweighed those opposed to PFD cuts by three-to-one based on a tally kept by the majority caucus. “A lot of Alaskans, not all, but a lot of Alaskans are willing to take a reduced PFD in order to protect schools and public safety and road services and other essential items,” Edgmon described. Senate ponders new PFD plan Elsewhere in the Capitol, senators are discussing the prospect of changing the PFD to better match the state’s new fiscal situation. Senate Finance co-chairs Natasha von Imhof, R-Anchorage, and Bert Stedman, R-Sitka, said March 27 that they are working on a new dividend formula that would better fit within the framework of the Permanent Fund percent of market value, or POMV, draw legislation passed last year. The POMV law calls for drawing 5.25 percent of the five-year average Permanent Fund value from the $64-billion fund’s Earnings Reserve Account, which this year amounts to a $2.9 billion draw to pay dividends and support government services. In an interview, von Imhof said the PFD bill would make the dividend a portion of the overall POMV draw on the fund. The current formula is based on a portion of the annual average income the fund produces and changing it to split the POMV would align the currently incongruent statutes, she said. It would also stabilize future dividend amounts, the senators noted. What exactly the proposed split will be is unclear at this point, but it doesn’t appear likely it will be weighted towards dividends. A 50-50 split of the POMV draw would lead to a roughly $2,300 PFD this year, but also leave a deficit of $861 million, according to Senate Finance calculations. Of the budget cuts to expect in the Legislature’s final 2020 budget, Stedman said, “We can’t get to $861 million in reductions; that I can virtually assure you.” Sen. Lyman Hoffman, D-Bethel, said he agrees that the size of the dividend should be debated. However, he and others from both parties contend the PFD should be enshrined in the Alaska Constitution for the simple reason that otherwise it will continue to be a political talking point since the Legislature and former Gov. Bill Walker set the precedent of diverging from the historical formula the past three years. “If we do not resolve the issue on a permanent basis and let the people of Alaska decide what (the PFD) might be we are setting ourselves up for decades to come of making the dividend a political discussion for everyone’s election,” Hoffman said. Wilson said House members also heard in their community meetings that many Alaskans were frustrated not so much by the concept that the PFD formula could change, but that it seemed to be “picked out of the sky” of late. Anchorage Democrat Sen. Bill Wielechowski, who unsuccessfully sued Walker for his 2016 partial veto of the PFD appropriation, emphasized that until the PFD statue is changed the Legislature needs to work within the confines of the existing law. “The reason the dividend was set up was because you had a system where the rich and powerful and the politically connected would come in and take an inordinate share of the government’s wealth and the Permanent Fund dividend program was set up so it was shared equally,” said Wielechowski, who advocates for changes to the state’s oil tax system to generate more revenue. He has also sponsored resolutions to put the PFD in the Constitution, a concept von Imhof rejects. She argues that no allocations were included in the Alaska Constitution because those who wrote it had the foresight to not bind future lawmakers to obligations they might not be able to fulfill. “We have no idea what the future holds. We must be able respond to any set of unknown circumstances that might occur. You have emergencies; you have economic expansion projects; debt service, et cetera,” von Imhof said. “As a strong fiscal conservative I believe that the annual budget needs to be reflective of the times. We need to be able to have some flexibility and we can’t give the individual dividend checks a priority over everything else.” In the committee hearing she described the concept of putting the PFD in the Constitution as valuing the “individual over the community”. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for April 7

Anna Henderson was appointed general manager for Anchorage Municipal Light and Power. Henderson will take over for current GM Mark Johnston, who has accepted a position in the Lower 48. Henderson has been with the municipality since 2006 and at ML&P in various roles for more than 10 years. She currently serves as the manager for the Regulatory Affairs Division, where she is responsible for overseeing a $60 million annual operating budget and a $10 million to $20 million annual capital budget. Henderson also has experience managing gas supply operations, leading negotiations in purchase and sales agreements, managing federal contracts and leading the development and approval of utility rates for ML&P. She holds a bachelor’s degree in business administration from the University of Alaska Anchorage. Johnston, who has served as the general manager for ML&P since 2015, will leave the utility on April 19. Opera Fairbanks, the nation’s farthest-north professional opera company, hired Carol Wilbur as president. Wilbur has served on the board of directors of the company for several years. Founded in December 2005, Opera Fairbanks has been producing live opera and providing educational experiences to Alaskans since 2007. Wilbur has degrees in education from Michigan State University and metalsmithing and painting from the University of Alaska Fairbanks, where she taught metalsmithing there from 2001-06. She currently maintains a private studio at Well Street Art Co. Her work has appeared in galleries across the state, and she holds several awards for her work in both painting and jewelry. The Alaska Chamber announced that its executive committee has hired Kati Capozzi as president and CEO. Capozzi most recently worked as the campaign manager for Stand for Alaska Vote No on 1, the group that worked to defeat Ballot Measure 1 in November 2018. The Vote No campaign defeated the ballot measure with 62 percent of the statewide vote. Prior to leading Stand for Alaska, Capozzi worked for five years as a communications and project manager for the Resource Development Council for Alaska. She has also worked for the Alaska Oil and Gas Association and the Alaska Chamber in previous capacities. Joseph Dallaire was appointed Fairbanks District Attorney, effective May 1. Dallaire is replacing current Fairbanks District Attorney Gregg Olson, who is retiring after more than 19 years of service with the Criminal Division of the Department of Law. Dallaire, a former law clerk to Fairbanks Superior Court Judge Randy Olsen, joined the Fairbanks District Attorney’s Office as an Assistant District Attorney in 2007. He has prosecuted all types of matters in the Fairbanks District Attorney’s Office, including complex felony matters. Since 2017, he has been the Fairbanks Deputy District Attorney, supervising the office and coordinating with law enforcement agencies and courts in Fairbanks and Utqiagvik (formerly Barrow). Dallaire is also an Alaska Police Standards Council-certified police instructor and has provided legal instruction to law enforcement throughout the state. Dallaire previously served as president of the Farthest North Chapter of the Alaska Peace Officers Association and was named its 2016 Criminal Justice Professional of the Year. He has also previously served the community as a member of the Fairbanks North Star Borough School District Board of Education’s Curriculum Advisory Committee.

FISH FACTOR: Plan to end local fish tax split panned at Senate hearing

None of the members of the Senate Community and Regional Affairs committee lives near the sea, but at a hearing last week they were not impressed by Gov. Michael J. Dunleavy’s plan to pull millions of dollars in fish taxes from remote coastal towns. Bills submitted to the Legislature by the governor would remove the ability of towns to keep their share of local fisheries business and landing taxes. For decades, the taxes have been split 50-50 with the state. Dunleavy wants to take all of the funds for state coffers, meaning a combined loss of $29 million to fishing towns come October. More than 20 mayors, financial officers, harbormasters and fishermen testified against the tax grab at the CRA and outlined how it would devastate coastal Alaska. “The share of fish taxes is used to ensure sustainable communities,” said Nils Andreassen, executive director of the Alaska Municipal League. “They contribute to general funds, operate and maintain ports and harbors, many of which the state transferred in neglect to municipalities 10 years ago; they support education, hospitals, public works, solid waste, grants to local nonprofits and to replace gaps in state capital investment.” Yakutat City and Borough Manager Jon Erickson said the loss would likely close down the community’s lone fish plant. “What part of shutting down rural Alaska equates to Alaska is open for business?” he asked. Kodiak City Mayor Pat Branson called the tax loss “cost shifting and revenue grabbing” and a “quick fix to a long-term problem of the state budget deficit.” “Every municipality and every Alaskan should have in-depth research and analysis,” Branson said. “This budget approach lacks the understanding and awareness of the realities of living in a resource economy and in a geographically remote location.” “Moorage rates in Wrangell would increase from 43 to 57 percent to cover the loss of money dedicated to our harbors,” said Lee Burgess, financial manager of the City and Borough of Wrangell. “It’s an example of arbitrarily picking winners and losers and causing disproportionate harm to certain communities relevant to how much of their economic platform is made up by commercial fishing.” “Fisheries is our only industry and fish tax revenues make up 26 percent of our $31 million general fund revenues, over $8 million annually. We use fish and sales taxes to pay our own way,” said Frank Kelty, mayor of Unalaska/Dutch Harbor, the nation’s top fishing port for more than two decades. “If the state takes away the share of fish taxes, who will step up to assist communities across Alaska with projects needed to support the seafood industry, which is the economic engine of all fishery dependent communities?” “If you’re looking for money to run the state why not revise the oil subsidies to big oil that collect more profits per barrel than any other oil field in the world. We fish hard and pay our taxes. We deserve our taxes to benefit our communities,” said Shawn Dochtermann, a longtime Kodiak fisherman. “You took oaths to defend Alaskans,” said Jeff Guard, a Cordova city council member. “We are under attack and you have the power of the purse to defend us from these draconian budget cuts.” Fisherman Stosh Anderson of Kodiak closed his testimony with a haiku: “Fishermen pay tax, “Absconded by the government. “Infrastructure fails.” And so it went as Alaskans from Petersburg, Akutan, Bristol Bay, Adak, Homer, St. Paul, Kenai and more shared their concerns. Sens. Click Bishop, R-Fairbanks, Chris Birch, R-Anchorage, and Elvi Gray-Jackson, D-Anchorage, asked Department of Revenue Commissioner Bruce Tangeman if there had been any communication with communities about the fish tax loss, or any economic impact analyses done. The answer was no. Tangeman said the governor intends to share 50 percent of state alcohol tax revenues through a community assistance program to soften the loss, or about $20 million. Birch asked about the motivation behind allocating alcohol taxes to the fishing towns. “I don’t know what the policy call was,” Tangeman responded. (Rep. Louise Stutes, R-Kodiak, and Dunleavy policy advisor John Moller both said they were unaware of the alcohol tax proposal at subsequent public meetings in Kodiak.) “The thinking behind this is we need to bring all our revenue streams together to benefit all Alaskans,” Tangeman said. “Obviously, these folks are seeing this from their backyards. I hope they can all appreciate the state is really struggling and we have a budget that is unsustainable.” “Is this bill a priority of the Dunleavy administration?” asked Bishop. “Yes, it is,” Tangeman said. “I want to tell you how much I appreciate and respect your comments that the state is struggling,” said Gray-Jackson. “But you can’t punish communities because the state is struggling. That is just not the way to handle this.” Halibut intel More halibut from Atlantic Canada and a shift in consumer preferences are two new drivers in the halibut market. The Pacific fishery opened on March 15 to prices similar to last year, where they’ve pretty much stayed: in the $6 per pound range to fishermen on the Alaska mainland; $5.50 to $6 in Southeast and in the $4.75 to $5.25 range at Kodiak. A major Kodiak buyer said the market is favorable for fish headed to fresh markets, but that won’t absorb all of the halibut coming out of Alaska. Contrary to preseason reports, just about every major packer is sitting on frozen inventory from last year, “a halibut hangover,” and buyers will be cautious about freezing more. The market for frozen halibut is really changing, he added. “Two of the largest buyers in the old steaking program, where they’d buy an 80-or 100-pounder, that’s just completely going away,” he said, adding that it’s tough to even move frozen halibut in the smaller sizes. What consumers want now is the convenience of vacuum-packed halibut fillets or chunks, either fresh or frozen. All market reports show that the biggest hurt in Alaska’s halibut market is coming from Atlantic halibut from eastern Canada. That could put more than 10 million pounds into the U.S. market this year compared to 300,000 to 400,000 pounds just six years ago. Alaska fishermen can catch 17.7 million pounds of halibut through Nov. 14. Salmon surprises An ambitious winter research trip to study salmon in the deepest waters of the Gulf of Alaska yielded some surprises. The five-week trip by an international team of 21 researchers docked in Vancouver last week. CBC News said researchers collected thousands of samples in their quest to learn more Pacific salmon survival in the open seas of the Gulf, a major feeding ground. “The main inspiration of this project is to increase our awareness of the challenges the salmon meet in the open ocean and in the coastal areas,” said Dr. Vladimir Radchenko, director of the North Pacific Anadromous Fish Commission with five member countries: the US, Canada, Russian, Japan and Korea. The Gulf project was a centerpiece of its International Year of the Salmon initiative, a five-year project to study salmon in the northern hemisphere as they face challenges from an off kilter climate. Aboard the research vessel Professor Kaganovsky the team trawled a span of nearly 5,000 miles in waters 200 miles from shore and collected salmon data at 60 locations. “Since during the winter all salmon species migrate off shore, the main spots of aggregation should be located beyond 200 miles in February and March,” Radchenko said. Researchers also pioneered a new DNA testing method to identify where the salmon hatched. The research led to some surprising discoveries. One of the most abundant species in their catches was coho, contradicting the belief that most coho overwinter in coastal areas. Pink salmon — the most abundant of all Pacific species — comprised only 10 percent of their trawl catches. The scientists also hope to learn if large releases of hatchery pinks and chums from Pacific Rim countries are impacting wild fish in the open ocean. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Production issues prevent Furie from meeting gas supply contracts

One of Southcentral Alaska’s few natural gas producers has not been able to meet its contracted supply requirements for more than two months. Furie Operating Alaska stopped supplying natural gas to Enstar Natural Gas Co. Jan. 25, according to Enstar spokeswoman Lindsay Hobson. The small Texas-based producer operates the offshore Kitchen Lights natural gas field in central Cook Inlet and also has a firm contract to supply Homer Electric Association with feedstock gas for its power plants. Hobson wrote via email April 1 that Furie had resumed delivering gas to Enstar in recent days but at volumes below what the utility had contracted for. HEA has not received gas from Furie since about Feb. 25, the Kenai Peninsula electric utility’s Manager of Fuel Supply and Renewable Energy Mikel Salzetti said April 1. The utilities have avoided service disruptions by purchasing spot market gas and drawing on purchased reserves stored in the Cook Inlet Natural Gas Storage Alaska facility commonly known as CINGSA. The gas storage is in a depleted Kenai-area gas field and has 11 billion cubic feet, or bcf, of capacity for Southcentral utilities to store gas reserves, which are usually built up in summer. It was finished early in 2012 at a time when there were widespread concerns that declining natural gas reserves in the Cook Inlet basin could result in gas shortages. Enstar’s parent company SEMCO Energy Inc. is a majority owner of CINGSA. Hobson said the warmer-than-normal late winter and early spring across Alaska has helped keep Enstar from needing to purchase additional gas; HEA, on the other hand, has been forced to purchase gas to fill the void in addition to drawing on its CINGSA reserves, according to Salzetti. He said Furie is the electric utility’s only current firm supplier, which meant the utility had to backfill all of its gas needs of approximately 12.4 million cubic feet per day. A previously scheduled overhaul to a nine-mile section of the transmission intertie that connects the Kenai Peninsula power grid to Anchorage added to the headache caused by the gas supply disruption, Salzetti said. The transmission work in the Turnagain Pass area took the intertie offline for about two months, according to Julie Hasquet, a spokeswoman for Chugach Electric Association, which owns that portion of the intertie. Hasquet said the work was done March 20 and the transmission system is back online. The intertie outage meant HEA had to run additional power generation units in Soldotna to provide its own backup, or spinning reserve, power in case its Nikiski plant or the Bradley Lake hydro power plant went down. Normally, HEA runs its more efficient combined-cycle Nikiski power plant and uses the transmission intertie, and the access it affords to Anchorage-area power — as its spinning reserve, Salzetti said. Furie is one of the newer entrants to Cook Inlet that were supposed to ease Southcentral gas supply concerns by developing new fields and adding competition to the market. In 2015 the company installed the Julius R platform at Kitchen Lights, which was the first new production platform built in Cook Inlet in decades. In September 2015 Furie and HEA agreed to a supply contract that began April 1, 2016, at prices lower than previous contracts. Enstar then signed a contract with Furie in early 2016 for gas deliveries beginning in April 2018 and running through March 2021. The initial Enstar-Furie contract was for 18.6 bcf of gas, or about 20 percent of Enstar’s total expected demand for the period. Furie leaders did not respond to multiple requests for comment in time for this story. However, a Feb. 11 letter from Enstar and Alaska Pipeline Co. President John Sims to Furie leaders and investors contends “Furie has had a difficult time meeting required milestones under the (gas supply agreement) from the time the ink was dry on the GSA.” Alaska Pipeline Co. is a sister company to Enstar under SEMCO Energy. According to the letter, Furie has had problems proving up its gas reserves to meet its contract with Enstar and has had operational problems with its wells. The producer asked for a delayed delivery of more than half of its firm supply commitment to Enstar on Jan. 17 as it worked on issues at its facility, the letter states. Hobson said Enstar understands the supply disruptions are due to a Furie pipeline that froze during a cold stretch of January weather. Alaska Pipeline-Enstar agreed to defer the full deliveries until March 31, according to the letter. Salzetti said Furie has been in regular contact with HEA during the ordeal and has given utility officials a verbal estimate as to when gas deliveries will resume but he declined to elaborate further on the discussions. Furie officials said in 2017 they planned to work on developing oil prospects in the Kitchen Lights gas field, but those plans have largely been scuttled because of the state’s delay in repaying millions of dollars in oil and gas tax credits the company earned for its previous work, according to the 2019 Kitchen Lights Plan of Development filed last October with the state Division of Oil and Gas. In late 2017, former Natural Resources Commissioner Andy Mack issued a default notice to Furie for allegedly not conducting the work the company claimed it would in prior development plans. Furie’s work in 2018 was sufficient to resolve the default, according to Oil and Gas records. Officials at the Regulatory Commission of Alaska, which approved the gas contracts, said the commission is aware of the situation but it doesn’t typically act on such matters until a formal complaint is filed, which hasn’t happened. Salzetti said that while HEA put all its stock in Furie for feedstock gas, the utility’s contingency plans have worked. He noted that some other utilities in the region rely on a single source of gas as well. “We evaluate lots of criteria when we negotiate gas supply contracts and obviously we knew that a single supplier operating a single field is somewhat of a risk and at the time it was a risk we were willing to take for the price we received for that gas,” he said. With overall gas demand lower in spring and summer there is usually more supply available at better short-term prices, Salzetti added, which leads him to believe HEA could get through the rest of the year without Furie’s supply. HEA’s contract with Furie is through the end of 2019, he said. ^ Elwood Brehmer can be reached at [email protected]

Federal judge rejects deal for road through Izembek National Wildlife Refuge

A federal judge on Friday morning vacated a land swap deal between the Interior Department and an Alaska Native corporation that set the stage for building a long-sought road between Alaska Peninsula communities of King Cove and Cold Bay. U.S. District Court of Alaska Judge Sharon Gleason ordered the January 2018 land exchange agreement signed by former Interior Secretary Ryan Zinke and King Cove Corp. leaders invalidated because Zinke failed to explain the reasoning behind the department’s policy reversal, according to Gleason’s 31-page ruling. The land exchange was meant to facilitate construction of an 11-mile gravel road through a portion of the Izembek National Wildlife Refuge currently designated as wilderness. King Cove leaders and Alaska lawmakers have long petitioned federal officials to approve the road; they see it as an essential link for emergency services when bad weather prevents flights out of King Cove or boat travel across Cold Bay. In late 2013, then-Interior Secretary Sally Jewell rejected land swap deal passed by Congress in 2009 after a U.S. Fish and Wildlife Service environmental review determined the road would irreparably damage critical waterfowl habitat in the 315,000-acre Izembek Refuge. In summer, the refuge is home to 98 percent of the world’s population of Pacific black brant, a goose that breeds there, according to the Interior Department, as well as other sensitive wildlife and waterfowl. With a paved runway longer than 10,000 feet, Cold Bay’s airport has one of the longest civilian runways in the state and is the area’s main link to Anchorage 600 miles away. The old military post was built during World War II. King Cove’s airport has a 3,500-foot gravel runway for the community with roughly 950 year-round residents. Over the years 18 people have died in plane crashes or waiting to get medevac service out of King Cove, according to the Interior Department. However, no one has died trying to leave since 1994. According to Sen. Lisa Murkowski, there have been 98 medevacs from King Cove since 2014 with 21 conducted by the U.S. Coast Guard.  A coalition of Alaska and national environmental organizations sued Interior shortly after the swap was announced contending, among other things, that the agency did not follow specific procedures for such deals in the 1980 Alaska National Interest Lands Conservation Act, which also established the Izembek Refuge. Judge Gleason found that Zinke failed to provide rationale for the reversal from Interior’s 2013 decision and thus violated federal Administrative Procedures Act. While federal attorneys argued in court filings that Zinke understood the potential impacts to wildlife the road could have and instead “came to a more humane conclusion,” the 2013 decision is not addressed in the eight-page agreement with King Cove Corp, according to Gleason. “The Exchange Agreement does not explain the agency’s ‘reversal of course arising out of concern about economic and social hardships’; moreover, there is no language in the Exchange agreement suggesting the Secretary’s reversal is the product of his rebalancing of the facts in light of new policy goals,” Gleason wrote, citing previous federal court decisions. “While a court should ‘uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned,’ a court may not ‘supply a reasoned basis for the agency’s action that the agency itself has not given.’” Zinke said in a formal statement when the equal-value land exchange was announced that it fulfills the federal government’s duty to keep Americans safe. “Previous administrations prioritized birds over human lives, and that’s just wrong,” Zinke said in 2018. “The people of King Cove have been stewarding the land and wildlife for thousands of years and I am confident that working together we will be able to continue responsible stewardship while also saving precious lives.” The now-defunct agreement called for an equal-value land swap between King Cove Corp. and Interior in which neither side was to give up more than 500 acres. The land swap rejected in 2013 would have traded 206 acres of Izembek land and 1,600 federal acres outside the refuge for about 56,000 acres of state and King Cove Corp. land. Opponents of the swap said Gleason’s ruling illustrates the arbitrary manner in which Interior has handled public lands issues under President Donald Trump. “The court’s decision today provides an important and essential check on Interior’s public land giveaway. The agency’s attempt to skirt the law to benefit private or commercial interests disregards the intention of Congress and the purpose of the refuge itself,” said Katie Strong, an attorney for the environmental nonprofit law firm Trustees for Alaska, which filed the suit on behalf of the nine conservation groups. Others have argued authorizing the road would set a dangerous precedent for allowing development in areas designated as wilderness and could be used by seafood companies instead of just for emergency purposes as proponents have claimed. Alaska Native groups from the Yukon-Kuskowkim Delta have fought against the road over concerns it would impact populations of geese they hunt for subsistence and use the refuge. A spokeswoman for Interior said the department could not comment on ongoing litigation. King Cove Corp. spokeswoman Della Trumble said in a prepared statement that it’s disappointing the court found process flaws in the agreement, but “the King Cove group will never give up our fight for this land exchange. It is so crucial for safeguarding the lives of our families. This access is truly a matter of life and death for us,” Trumble said. House Speaker Bryce Edgmon, I-Dillingham, who represents King Cove and Cold Bay, echoed that sentiment in a statement Friday. “The people of King Cove deserve reliable access to healthcare, and the fight to build a simple gravel road affording them that basic right has taken far too long. Today’s U.S. (District) Court decision to invalidate the plan to allow a land exchange between the Interior Department and King Cove Corp. is disappointing and presents an unnecessary setback,” Edgmon said.   Elwood Brehmer can be reached at [email protected]

Russian producers press forward in face of sanctions

Russia’s big gas producers, Gazprom and Novatek, have been busy with plans for new liquefied natural gas projects, expanding their market reach and attracting foreign investment. If it all comes true, Russia could enter the mid-2020s with capacity to make almost 70 million tonnes of LNG a year, more than 20 percent of last year’s global demand. Russian gas is well positioned to reach new markets in Asia and the Atlantic Basin, a Shell executive said March 20 at an LNG conference in Moscow. Stuart Bradford, Shell’s senior deal lead, said Russian supplies could come from the Arctic, the Far East and Baltic Sea. Shell, the world’s largest seller of LNG at 22 percent of the market last year, is a partner with Gazprom in LNG export projects in the Baltic and Far East. The proposed Baltic terminal would be in the northern Leningrad region, with capacity of 10 million tonnes per year. The plant would get its feed gas from West Siberia. The cost is projected at slightly more than $11 billion — at the lower range of the global per-tonne average. Start-up is tentatively planned for 2023, depending on a timely investment decision. The 10-year-old Shell/Gazprom Sakhalin-2 terminal in the Far East, with Japanese partners Mitsui and Mitsubishi, has a nameplate capacity of 9.6 million tonnes per year. The owners want to add a third liquefaction train at 5.4 million tonnes per year, at a cost of $5 billion to $6 billion, but they still need to resolve gas-supply issues. In addition to investing in LNG capacity, Shell said in February it had created a new 50-50 venture with Gazprom to use Shell LNG’s expertise to develop Russian technology for liquefying gas. The venture would help insulate Russia from any new U.S. sanctions on LNG technology. Also in the Far East, ExxonMobil and state-controlled Rosneft, Russia’s largest oil producer, are moving closer to building their own liquefaction plant, Sakhalin-1, on the same 589-mile-long island as the Shell/Gazprom terminal. Reuters reported March 20 that ExxonMobil’s Russia unit may make a decision this year to start front-end engineering and design work for the gas project with partner Rosneft. Sakhalin-1 has been producing oil and reinjecting its gas since 2005. The companies reportedly are looking at a $15 billion project. Gazprom/Shell, however, would prefer that Rosneft/ExxonMobil ship or sell their gas to Sakhalin-2 instead of building a new terminal, but they have not succeeded in those negotiations. Russia’s largest non-state-controlled gas producer, Novatek, is focused on the Arctic, where it led a consortium with Chinese and French partners that started up the $27 billion Yamal LNG project in December 2017. Novatek is moving toward an investment decision this year on its next Far North gas project, Arctic LNG-2. At 19.8 million tonnes annual capacity, it would be larger than Yamal’s 16.5 million tonnes, but reportedly would cost 10 percent to 20 percent less to build with modular components towed into place. The company will be able to deliver Arctic LNG to Europe at half the cost of U.S. Gulf Coast cargoes, Novatek Chief Financial Officer Mark Gyetvay said in February. The company would build equipment and technology in Russia to protect itself. “We will not hold ourselves hostage to U.S. sanctions,” Gyetvay told the International Petroleum Week event in London. China, which helped finance almost half the cost of Yamal, also is looking at investing in Arctic LNG-2, as are Saudi Aramco and Japanese companies. France’s Total already has signed on as a 10 percent partner. “Arctic LNG-2 fits into our strategy … based on giant, low-cost resources primarily destined for the fast-growing Asian markets,” Total CEO Patrick Pouyanne said March 5. The Japanese government is pushing Mitsui and Mitsubishi to decide whether they want to take a stake in Arctic LNG-2, according to a March 4 report in the Nikkei Asian Review. The Japanese government sees it as an opportunity to make progress on a long-running territorial dispute with Russia over a set of islands annexed by Moscow after World War II. While the trading houses understand the project’s significance as a new source of LNG, U.S. gas is starting to arrive in Asia and the companies also could decide that expanding Sakhalin-2 is a better investment. Expanding its partnership reach to the Middle East, Novatek CEO Leonid Mikhelson said he has been talking with Saudi Arabia Oil Minister Khalid al-Falih about an investment in Arctic LNG-2. “I think we will get something concrete in the coming months,” Mikhelson was quoted by Reuters on March 17. Currently, Yamal LNG travels directly to Asia aboard expensive ice-class gas carriers when sea ice allows transit through the Northern Sea Route. But when that’s not possible — even with icebreaker escorts — the gas heads to Europe for sale or reloading aboard conventional LNG carriers for the longer voyage to Asia. Novatek would like that to change. “Our plan is to keep the Northern Sea Route open 12 months a year by 2023-2025 with 100-megawatt-hour nuclear icebreakers,” Chief Financial Officer Gyetvay told delegates at an energy conference in Moscow. He did not provide further details. Rather than competing, Gazprom and Novatek should develop an integrated strategy against challenges from other suppliers, Tatiana Mitrova, director at the Skolkovo Energy Center in Moscow, said at an LNG conference in Moscow on March 16. The global market is a “cruel battlefield,” she said, naming Qatar, the United States and Australia as Russia’s competitors. Gazprom holds a monopoly on pipeline gas exports from Russia, while Novatek sells its LNG into the same European market. Mitrova gave that as an example where the companies could work together, perhaps with pipeline gas providing baseload supply and LNG meeting demand peaks. Meanwhile, Gazprom said it is on target to start deliveries to China in early December through its new Power of Siberia pipeline. The plan is to start at 500 million cubic feet per day next year, ramping up to full capacity of 3.6 billion cubic feet per day by 2025. At full capacity, the pipeline would about equal China’s pipeline gas imports from Central Asia, mostly Turkmenistan. Those combined pipeline imports would about equal the amount of gas imported as LNG last year. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Movers and Shakers for March 31

Scott Rowley has joined KeyBank as vice president and senior payments advisor with the Enterprise Commercial Payments Group. For the past 10 years, he has provided treasury management solutions for high-revenue clients and has extensive experience in consulting and servicing, along with implementing treasury management products and processes. Previously Rowley worked as a treasury management consultant for Wells Fargo. He holds an MBA in international business from Regis University in Denver.

Officials explain how state would cut Medicaid budget

Department of Health and Social Services leaders believe they can cut about $100 million out of the state’s Medicaid budget quickly while getting to the remainder of Gov. Michael J. Dunleavy’s goal of $225 million in state Medicaid cuts will be more complex. The Dunleavy administration is planning a 5 percent cut to many, but not all, provider payment rates as well as changes to payment methodologies and administrative consolidations to save roughly $100 million; much of the proposed cuts can which can be done without legislative approval but do require permission from the federal Center for Medicaid Services, or CMS. Administration officials have stressed in media calls and legislative hearings that the spending cuts have been developed in ways that will protect primary care access, small hospitals and general access to services while aligning payment levels with other public payer entities. Dunleavy has pledged to eliminate the state’s $1.6 billion budget deficit without new taxes while restoring Permanent Fund dividend payments to their statutory calculation. DHSS leaders said in a media briefing ahead of the initial March 19 House Finance subcommittee meeting on the department’s budget that the changes were expected to result in $94.6 million of savings to the state’s General Fund; the department’s presentation from the hearing stated $102.9 million of savings are expected. They acknowledged that the goal of $225 million in cuts — other budget documents indicate upwards of $270 million in General Fund reductions — to Medicaid services was a directive from the Office of Management and Budget that the department was subsequently tasked with meeting. “Our division directors have truly been scrubbing all areas, working together, collaboratively, to try to find a variety of ways we can meet that $225 million objective,” DHSS Deputy Commissioner Donna Steward told the House subcommittee. As of February, there were about 214,400 recipients in Alaska’s Medicaid program, according to DHSS. A 5 percent provider rate cut and withholding inflation adjustments is expected to save $24.3 million in the fiscal year 2020 budget. However, the lower reimbursement levels will not apply to primary care providers, federally qualified health centers or at least 11 small hospitals across the state deemed to offer critical access to basic care in their respective areas of the state. That means the state will primarily be counting on Alaska’s large hospitals to absorb the rate reductions without corresponding cuts to offered care. Former Gov. Bill Walker’s administration implemented a 5 percent across-the-board rate cut last year, but it has since been restored to 2017 levels, Steward said. DHSS officials are also planning a shift to hospital diagnosis-related group, or DRG, payment schedules, which are intended to encourage cost-containment by making a single payment that covers all charges associated with an in-patient stay for a given condition. The shift to DRGs is expected to save the state $4.5 million per year. Health and Social Services Committee co-chair Rep. Ivy Spohnholz, D-Anchorage, was critical of much of the Medicaid plan but said she’s excited to hear of the move to DRG billing for hospitals as it is “incremental steps towards value-based compensation” and more transparency. Other changes to a cost-based methodology for late-stage renal disease treatment and more frequent amendments to the state’s preferred pharmaceuticals list would result in smaller savings, according to Steward. “Right now we are not able to change the drug list quick enough to take advantage of a reduction in drug prices that happen on the national level,” she said, adding that the state has been amending its list about twice per year, while the federal list usually changes quarterly. The pharmacy pricing adjustments are expected to net savings of $2.1 million per year. The leaders of some of Alaska’s largest hospitals have been highly critical of Dunleavy’s plan to cut Medicaid spending; they insist that provider rate cuts will simply push more physicians and clinics to stop accepting Medicaid. Alaska State Hospital and Nursing Home Association CEO Becky Hultberg said in a formal statement that the administration’s plan “is not well thought out, realistic or achievable. It is simply a blunt instrument developed in response to the mathematical exercise required by the Office of Management and Budget.” Steward noted that any provider rate changes must be approved by the federal CMS and monitored over three years to see how the change impacts providers or access to care. She also said the rate adjustments will only last through 2020 as the administration identifies longer term cost savings in the second phase of its Medicaid overhaul. What exactly the second round of changes will consist of is unclear, as it will require multiple approvals and possible waivers from CMS, according to DHSS officials. Hultberg wrote in testimony to the House subcommittee that the Hospital and Nursing Home Association conducted its own analysis of options for capturing Medicaid savings in 2017 and a consultant concluded that a provider tax and moving to DRGs for large hospitals could help and be further evaluated for implementation in 2021. A former commissioner of Administration under former Gov. Sean Parnell, Hultberg also wrote to lawmakers that few quick and simple cuts to state government spending remain after five years of budget reductions without significantly disrupting the larger economy. After drafting a report for the Hospital and Nursing Home Association on the economic impacts of Medicaid, longtime Alaska economist Jonathan King concluded that the proposed cuts would likely result in at least 8,000 job losses in the state. Dunleavy’s proposed cuts to state Medicaid spending would also forgo upwards of $465 million of federal money in 2020, according to Steward. Medicaid spending has helped insulate the health care sector from Alaska’s ongoing recession that has touched nearly every other industry in the state. And while overall Medicaid spending in Alaska continues to rise, the state’s part of that bill is shrinking. According to the Legislative Finance Division, overall spending on Medicaid in Alaska has increased from $1.7 billion to more than $2.3 billion since fiscal year 2015, but the state’s portion of that has actually gone down from $724 million in 2015 to $677 million, which includes a $15 million supplemental budget request, in the current fiscal year. Medicaid expansion, approved by Walker in 2015, has increased the federal government’s share of Medicaid payments and the Legislature has in recent years taken measures to capture all available federal Medicaid funding. The House subcommittee rejected Dunleavy’s proposed budget cuts by a 5-3 vote that split along party lines, with majority member and Finance Committee vice chair Jennifer Johnston voting with minority member Republicans. The cuts could become part of the budget later in the process or the governor could still veto a portion of the state’s Medicaid appropriation. Administrative savings, dental care Additional savings are expected from a host of smaller Medicaid program changes, including halving the time providers have to file claims. Steward said a proposal to cut the period that providers and others have to file a claim after performing a service from 12 months to six months should help reduce the number of “aberrant” claims the department deals with. Illegitimate Medicaid claims sometimes arise when a provider retires or leaves Alaska but doesn’t notify the state about the change. She noted that much of the $10 million in savings expected from time reduction would likely be a one-time benefit as some late claim filers will miss out on payments only once before changing their habits. The department is also anticipating $500,000 in savings from implementing a nurse hotline to help guide individuals in making their medical care decisions. The hotline plan was generally well received by the subcommittee members. To the contrary, a plan to cut about $27 million in Medicaid adult dental coverage — $8.2 million state savings and $18.7 million federal reduction — was not well received by Democrats on the House panel. General adult dental coverage is an optional Medicaid service. Steward acknowledged that no analysis was done when it was decided that adult dental coverage would be cut from Medicaid but added that emergency dental procedures will still be covered and provide a “backstop” for patients. Alaska Dental Society Executive Director David Logan wrote to the subcommittee that cutting preventative adult dental care would inevitably lead to more costly emergency room visits, which can only provide temporary relief. “In most situations in health we want to push people towards the preventative care and not the emergency phase of care but in this instance, for example, we’re doing the exact opposite,” Rep. Geran Tarr, D-Anchorage, said. “We’re saying forgo the preventative care that’s less costly that will prevent more significant health problems.” Elwood Brehmer can be reached at [email protected]

Road shows kick off in Kenai: Dunleavy advocates for budget while House goes own way

SOLDOTNA — The members of the House Finance Committee and Gov. Michael J. Dunleavy are both on the road this week, hitting many of the same communities but talking about two different budgets in two very different meetings. Dunleavy kicked off his roadshow in Kenai on March 25, talking to a crowd of about 150 people about his budget plan and the three constitutional amendments that accompany it. Three nights before, Reps. Gary Knopp, R-Kenai, Jennifer Johnston, R-Anchorage, and House Speaker Bryce Edgmon, I-Dillingham, hosted a packed meeting to gather public input before the House develops its own budget. The House Finance Committee is dispatching members to communities all over the state to hold town hall meetings. So far, the meetings have reportedly all been packed with residents; in Kenai, more than 200 people filled the Soldotna Regional Sports Complex to deliver public testimony. Johnston, who serves as vice chair of the House Finance Committee, said she kept a tally in her notes of what the testifiers supported. “I think it was fairly civil,” she said. Though people spoke both for and against Dunleavy’s proposed budget, the majority opposed the cuts and asked for the Legislature to look at taxes and using the Permanent Fund Dividend to pay for government services. Johnston said she noted a lot of support for reducing the PFD. These House Finance meetings are part of the process as the House builds its own budget, she said. The majority of people opposing the cuts mentioned concern about the reductions to K-12 education spending. The Kenai Peninsula Borough School District, which operates 43 schools for approximately 8,800 students, is proposing to cut the majority of its extracurriculars and close five schools, among other cuts, to balance the budget. Pegge Erkeneff, the communications liaison for the district, told the committee members that that doesn’t even meet the cuts they expect. “I’ve been accused of (these projections) being a scare tactic,” she said. “I can assure you it is not. It’s still $5 million shy of $22.4 million if we implemented everything on this sheet.” Several people also noted that they appreciated the opportunity to speak at the House Finance Committee meeting, as Dunleavy’s planned meeting on March 25 would not be as open a forum. Dunleavy’s administration also received some pushback after it became public that his roadshow was organized and hosted by Americans for Prosperity. The governor’s meeting was held at the Cannery Lodge, a private facility in Kenai. Attendees were admitted by a Kenai Police Department officer and the gate at the front of the property was closed shortly after the meeting began. While there was no open planned public comment, attendees at the meeting submitted written questions that could be asked during a panel Q&A session. Ryan McKee, the Alaska state director for Americans for Prosperity, said the group approached the Dunleavy administration several months ago about doing a speaking tour with them and that the timing of the announcement just happened to fall as the House Finance Committee announced its own tour. Dunleavy has worked with AFP in the past, so the organization didn’t feel the meeting was out of place, McKee said. “The governor is going to be the one who goes out and does the big town halls; it’s not really our place to host that for him and have this big space,” he said. “We’d rather have this small space where we can have these questions asked … and everyone can walk away feeling like they got something. I’m sure he’ll have bigger events, but that’s not really what we were looking at.” Dunleavy said the partnership with AFP helped the state save money while enabling him to travel and speak to residents about the budget. The organization offered a venue and time, and the administration is willing to work with other partners, he said. “We didn’t want to spend money from the government to go and do a very expensive roadshow,” he said. “…I know there are some who would prefer we partner up with other outfits. Let us know who they are.” Dunleavy brought Alaska Department of Revenue Commissioner Bruce Tangeman, Office of Management and Budget Director Donna Arduin and Alaska Attorney General Kevin Clarkson with him on the tour to talk about both his proposed fiscal year 2020 budget and long-term plans. Much of the discussion lingered over the Legislature’s spending habits, with Dunleavy asserting that the state’s problem is primarily overspending. One of his three proposed constitutional amendments would set a new state spending cap, tying it to inflation and the state’s population. The other two amendments — one enshrining the PFD in the state constitution and the other requiring a public vote before the institution of any new broad-based taxes — are also part of the administration’s long-term fiscal plan. While Americans for Prosperity doesn’t take a formal position on the PFD issues, the group strongly supports a spending cap and the vote before new taxes, similar to Colorado’s Taxpayer Bill of Rights. “(This year), you’re having meetings, the House is having meetings — on the budget, we’re supporting the process,” he said. “The spending cap, we support that 100 percent, and the Taxpayer Bill of Rights.” Clarkson explained that the Legislature has to approve the resolutions for constitutional amendments by a two-thirds majority before they go to a public vote to be ratified. “If you have legislators out there who you are in contact with, you need to let them know that they should be voting for the governor’s amendments,” he said. Tangeman said what the administration has heard is that the House is starting with the fiscal year 2019 budget and planning to go closer to status quo and look at implementing taxes. “There is no way you can tax $7 billion out of our economy,” he said, referring to long-term projections of what would be required to pay for the budget at current annual increases if the Permanent Fund Earnings Reserve account is depleted. Both Dunleavy and the House Finance Committee planned meetings throughout the week in various communities around the state, while the Senate began holding hearings on the first of the constitutional amendments on March 21. ^

OPINION: Status quo isn’t sustainable

There’s been no shortage of sturm and drang over Gov. Michael J. Dunleavy’s proposal to radically overhaul the state budget with deep cuts to K-12 and university education, Medicaid and the state ferry system. What there has been very little of from the defenders of the status quo are alternatives to achieve better outcomes and reform the state’s unsustainable spending habits. After avoiding it for more than a decade thanks to triple-digit oil prices followed by spending down state savings and dipping into the Permanent Fund Earnings Reserve and dividend appropriations to cover the deficit since multi-billion dollar shortfalls hit four years ago when prices bottomed at $26 per barrel, the time of reckoning has finally arrived. Competing roadshows from the governor and the House Finance Committee are now traversing the state with diametrically opposed goals: one by the Republican governor that favors cutting services to match revenues, capturing local property taxes on oil properties and leaving the PFD untouched and the other that has been organized by the Democrat-led House in order to give vent to public outcry over the drastic proposed reductions and a venue for PFD cuts and new or increased taxes to fund government. Neither solution is achievable in the reality of a divided government in Juneau, but only one recognizes the old axiom known as Stein’s Law: “if something cannot go on forever, it will stop.” The simple fact is the state is spending more than it can afford, and until appropriations are brought in line with reality the PFD will continue to be reduced until it either goes away to fund the budget or a statewide tax regime will have to be imposed to balance the books. Raising taxes on the oil industry won’t do the trick, and driving out investment for the short-term objective of plucking the golden goose will only accelerate the revenue shortfall. Dunleavy has been accused of being heartless or amoral for his proposed budget, but is it any less heartless to continue to accept failure as the best we can do while spending our way into oblivion? The governor isn’t wrong to point to Alaska’s dead-last ranking in reading as a failure of our education system. That doesn’t mean he hates kids. The governor isn’t wrong to point out ferry ridership is falling as costs are rising. That doesn’t mean he hates Southeast Alaska. University of Alaska President Jim Johnsen can claim the UA system is “more vital than ever” but that doesn’t change the fact that its largest campus can’t graduate teachers after losing its accreditation. Hundreds of millions in “free” federal Medicaid dollars have no doubt boosted the health care sector of the economy during the three-year recession, but the governor is not wrong to point out that outcomes aren’t improving. The last thing a state should be proud of is having nearly 1 out of every 4 residents on Medicaid. The goal of state policy should be to get as many of these people to work and off assistance. There are no doubt flaws with the governor’s proposed budget, from the abrupt rollout that shocked many if not most observers around the state and the resulting failure to get any buy-in from stakeholders, not to mention falling far behind in the messaging battle, to the sheer scale of cuts this large in one year. Restoring a full PFD according to the statutory formula was the centerpiece of Dunleavy’s campaign and a sudden reversal of that pledge would be political suicide. That doesn’t mean, however, that $1.9 billion in dividends amid the biggest budget cuts in history is the wisest long-term plan, either. That means a compromise is going to have to be in order. But in order for there to be a compromise, both sides need a vision and a plan as starting points. So far only Dunleavy is checking those two boxes while the Legislature appears to be choosing the same can-kicking path of the past decade in a dangerous game of chicken with the veto pen. One way or another, that which can’t continue, won’t. What takes its place will decide our future and the great question of the day is whether our elected officials are up to the challenge. Andrew Jensen can be reached at [email protected]

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