Eklutna hydro power a piece of puzzle as Chugach, ML&P refine sale

Officials are on the clock to hash out the all-important details of the $1 billion sale of Anchorage Municipal Light and Power to Chugach Electric Association in time for the necessary approvals. Nearly two-thirds of Anchorage voters consented in April to a proposal from Mayor Ethan Berkowitz’s administration to sell the municipality-owned electric utility to the neighboring Chugach cooperative, but that vote was just the start of the real work in a deal Municipal Attorney Becky Windt Pearson called “immensely complicated.” The resolution voters approved requires the Anchorage Assembly and Chugach board of directors to subsequently approve the final terms of the sale by Dec. 31. That ostensibly sets a much sooner deadline for final negotiations, as both bodies will need time to review and debate the purchase and sale. Windt Pearson said the negotiating teams have committed to getting an asset purchase agreement done by Oct. 24 in advance of Assembly public meetings and work sessions expected in November, adding that about half of the transaction documents have been negotiated. “We started with a very rudimentary set of terms and we’ve been working towards something that is more nuanced and we’re really pleased with how far we’ve come,” she said. The Assembly is tentatively scheduled to vote on the sale Dec. 4. The utility consolidation is also subject to approval by the Regulatory Commission of Alaska, which could require changes to the structure of the deal. As it stands now, the all-in price for ML&P has gone down slightly from $1.024 billion to $1.009 billion, mostly because of lower-than-expected costs to execute the deal. Chugach has also committed to municipal requests to not lay off any ML&P employees or raise customer rates because of the sale, Anchorage officials said. CEO Lee Thibert said Chugach would find similar senior-level positions for those currently in leadership positions at ML&P. Ekluta hydro shift The biggest change to the original proposal is a shift away from Chugach making 30 years of unsecured payments totaling $170 million. Instead, the utility has agreed to a 35-year power purchase contract from the 39-megawatt Eklutna hydroelectric plant, which Anchorage will remain a partial owner of. How much power Chugach buys from the Eklutna facility will depend on whether or not Matanuska Electric Association agrees to increase its stake in the hydro plant through a separate but related deal with Anchorage, according to Windt Pearson. Currently, the municipality holds a 53.3 percent stake in Eklutna hydro, Chugach is a 30 percent owner and MEA owns the remaining 16.7 percent. Anchorage officials have put forth an offer for MEA to own up to 35.7 percent of the plant or remain a 16.7 percent owner and buy more power from it, according to the power purchase term sheet. If that happens, Chugach would have rights to the remaining 64.3 percent of Eklutna power. If MEA declines, Chugach would simply buy more power from Anchorage, which would remain the majority Eklutna owner. In the event MEA accepts, Chugach’s power purchase payments would start at about $2.5 million per year and gradually increase to more than $3.5 million in year 35, the term sheet states. Without greater participation from MEA, Chugach would start by paying $3.9 million for more power in year one and end with a $5.4 million payment by the end of the power purchase agreement. Windt Pearson said the municipality will keep title to Eklutna either way and the power purchase arrangement puts Anchorage in a better position than the originally contemplated payments that amounted to a 30-year unsecured loan. “(Eklutna) is our asset. If there’s a default under the agreement we keep it and can do something else with it,” she said. MEA spokeswoman Julie Estey said the utility officials are in preliminary conversations with their municipal counterparts to discuss a possible Eklutna deal. Municipal Manager Bill Falsey described the Eklutna proposal as the “correctly shaped puzzle piece to fit the hole” of the less desirable direct payment option. “It’s clean, so rather than retaining a single generation unit at (ML&P’s plant) 2A, with this we could retain the entirety of the MOA share of the Eklutna plant,” Falsey said. Chugach will also be responsible for operating and maintaining the Eklutna hydro infrastructure, which could be a significant point given major changes are likely coming to the Eklutna River watershed over the next decade. A 1991 agreement in which the U.S. Department of Energy sold the Eklutna hydro plant to the utilities included a mandate for the plant’s owners to start studying options to restore fish and wildlife habitat in the Eklutna River in the coming years. Eklutna Lake, with its large earthen dam, also provides the vast majority of Anchorage’s water supply in addition to fueling the hydro plant with water diverted away from the Eklutna River. Environmental studies on how to mitigate the impacts of the dam and power plant must start by 2022; the work must be done by 2032, but the Assembly has urged the utilities to start the process sooner. “Some form of restoration is going to happen,” Anchorage Assembly member Forrest Dunbar said at the work session. If the only option is to shut down the hydro plant, Chugach will continue to make the power purchase payments, according to the agreement term sheet. Clearing debt, PILT Windt Pearson said defeasance costs on the $542 million of ML&P debt Chugach agreed to pay off at closing will be $13.3 million less than originally calculated and the annual payment-in-lieu-of-taxes, or PILT, that Chugach will pay the city for the assets it acquires also won’t be quite as much as once thought based on ML&P’s latest electric rate case determination by the RCA. The debt retirement will account for the vast majority of $767.8 million in cash Chugach will pay the municipality at closing. The PILT, which will replace ML&P’s municipal utility service area, or MUSA, payments, will also be paid over 50 years versus the 30-year term originally contemplated. MUSA payments are a substitute for property taxes on publicly owned utilities and are accounted for in ML&P’s customer rates. Recent MUSA payments have been in the $6 million per year range for ML&P. “There will still be the question at the end of that (50 years) as to how that revenue source is replaced but we have a longer time to consider how to do that, what kind of structure to put in place,” Windt Pearson said. The PILT has also been structured to prevent legacy ML&P customers from bearing the brunt of paying for the transaction, she added. Because it is a calculation based on the assets located in the ML&P service territory, primarily Midtown and Downtown Anchorage, there were concerns that if it continued to be calculated based on actual asset investment it could create a disincentive for Chugach to make future investments in the area. As a result, the same payments will be due regardless of what Chugach does there, Windt Pearson said. That structure will remain until 2033 — while former ML&P customers are getting the benefit of the utility’s ownership stake in the Beluga River natural gas field — at which point the PILT will shift to all Chugach customers, she said further. The Beluga River field is expected to produce feedstock natural gas through 2033. Financing With the major points worked out, Chugach’s Thibert said the utility has retained three financial advisors to help it secure the necessary cash to close the deal. Thibert said that while near-term interest rates are gradually rising, rates on 10-year terms have been flat. “I think the market looks very good right now for co-op financing. The yield curve has been very flat, so that’s encouraging,” he said. “We’ve been talking to financiers out there; there is interest in the market. We feel that this will get plenty of subscriptions once we put this thing out for bid.” Chugach is ready to finish the deal, he added. “We put a lot of time and energy into it and we still have some more work to do but we feel very good about where we’re at. We think it’s been a good process and we look forward to a successful transaction,” Thibert said.   (Editor's note: This story has been updated to correctly note the owners of the Eklutna hyroelectric facility are required to study ways to mitigate its evironmental impacts, but are not immediately required implement mitigation based on the 1991 agreement.) Elwood Brehmer can be reached at [email protected]

Movers and Shakers for Oct. 7

KeyBank has promoted Jesse Wolf to commercial analyst, a role in which he will assist with client and sales support to Alaska’s Commercial Bank relationship team. He has served as a branch manager since 2008. In that position, he was accountable for soliciting consumer and business accounts to grow branch profitability and was consistently honored as a top producer in Key’s Alaska district. He began his career with Alaska USA Federal Credit Union before moving to KeyBank, and held FINRA–Series 6 and Series 63 licenses. Rural Alaska Community Action Program, Inc. named L. Tiel Smith the new chief operating officer in August. Smith brings more than 15 years of management and strategic leadership experience to the agency which works to improve the quality of life for low-income Alaskans. The COO is responsible for strategic planning, process improvement, and compliance, along with the agency’s accreditation maintenance through the Council on Accreditation. Prior to accepting the COO position, Smith was a consultant specializing in corporate strategic planning, land and resource management, and information technology solutions; the general manager of Bristol Alliance Fuels; and vice-president of Lands and Natural Resources at Bristol Bay Native Corp. Additionally, he served as the BBNC corporate information technology director. Originally from Dillingham, Smith is an Aleut shareholder of BBNC and Choggiung Ltd. He holds a bachelor’s degree from Utah State University and an MBA from Alaska Pacific University. Nathan Dennis joinedR&M Consultants Inc. as an environmental specialist in the Environmental Services Group. His experience includes gathering environmental baseline data, Phase I and II ESAs, storm water management and field environmental services. He previously worked for the Alaska Department of Fish and Game where he was involved with numerous fish habitat preservation and erosion mitigation projects. His work there included gathering environmental baseline data to assist with erosion mitigation on the Talchulitna River; reviewing and editing EIS documents for the Kasilof River; and conducting fish sampling, counting and other relevant environmental baseline data about the salmon run in the Judd Lake fish weir. He also compiled ESA Phase I information and dealt with regulatory permitting restrictions for land use in that area. Since joining R&M, Dennis has supported environmental efforts for the Interior Alaska Veterans Cemetery, UAA campus well permitting, Port of Alaska and Alaska Aerospace Corp. environmental assessment reevaluation. Nathan has a bachelor’s degree in environmental science from the University of Idaho. First National Bank Alaska announced several personnel moves. Pamela Keeler was named compliance senior legal counsel and appointed senior vice president. Her legal expertise is rooted in a diverse education, with a number of degrees in political science-public service, education and law from the University of California Davis, Western Washington University and University of the Pacific’s McGeorge School of Law. With more than 16 years of financial experience, Stephanie Daniels is Cash Management’s newest services specialist and was appointed business development officer. A decorated Army veteran, Rob Parrish was appointed branch manager of the Sitka Branch. A graduate of the bank’s Management Associate Program, Parrish spent time honing his financial skills in Anchorage, Bethel, Eagle River, Kenai, Palmer and Wasilla. Trust Account Administrator Amy Robinson, appointed to trust officer, has extensive knowledge in complex commercial transactions and consumer finance regulation. Aldrich CPAs + Advisors hired Lia Patton, CPA, in its Anchorage office. Patton brings with her nearly two decades of experience in audit and accounting and a unique knowledge of the Alaska business community. Patton oversees federal and State of Alaska single audits, as well as audits for Alaska Native corporations, nonprofit entities, and employee benefit plans. An Anchorage resident for more than 20 years, Patton was a partner at BDO LLP’s Anchorage office, formerly Mikunda Cottrell and Co.

Judge orders briefings in suit challenging tax credit bonds

Parties to a lawsuit challenging the constitutionality of the state’s plan to use bonds to pay off oil tax credits are going backward to move forward after the first oral arguments in the case were heard Oct. 1. Alaska Superior Court Judge Jude Pate ordered former University of Alaska regent Eric Forrer and his attorney Joe Geldhof to submit a brief by Oct. 8 opposing the state’s motion to dismiss the suit on grounds it failed to state a claim upon which relief can be granted. State attorneys will then have until Oct. 12 to respond. During the informal, conversational arguments that lasted about 90 minutes, Geldhof said that he and Forrer had not responded to the June 25 dismissal request because he read it as a motion for summary judgment. “It went extensively into the merits of the state’s arguments and beyond what I, at least, thought was a dismissal for failing to state a claim,” Geldhof told Pate, while noting the state has not answered the original or amended complaints. Both sides have made numerous other filings in the case, including a back-and-forth over Forrer’s request for jury trial to which the state objects. Geldhof has insisted state attorneys have not followed normal briefing procedure in the case, which has greatly slowed its progress. He also contends Walker administration officials, in debates over House Bill 331 in the Legislature, made differing statements over what kind of debt the tax credit bonds would be and how stringent an obligation the tax credits are to pay off in the first place. Assistant Attorney General Margaret Paton-Walsh, in turn, questioned whether Geldhof understands what the state’s motion for dismissal means from a procedural perspective. She said the case raises “purely legal questions. What does the (Alaska) Constitution mean, what does the statute do; does the statute violate the Constitution?” She continued to say that standard procedure would be for Forrer and Geldhof to file an opposition to dismiss and a cross motion for summary judgment. The plaintiffs would generally move for an injunction to block the state from implementing the law, Paton-Walsh said, adding that in this case the suit itself is a de-facto injunction because its mere existence prevents the state from offering bonds to investors. The state filed the motion to dismiss in order to move the case quickly, she said. Geldhof said he believes it’s premature for rulings on his request for a jury trial because there are still outstanding issues of fact surrounding the specifics of the bonds that could be answered through the state answering the complaint, discovery or other ways. For his part, Pate dismissed motions from both sides regarding a jury trial and fact discovery without prejudice, meaning they could be filed again at a later time. He also agreed with the state’s position that the lawsuit is a pretty straightforward one. “I’m not interested in the factual arguments. I’m interested in the law, the language of the statute, the Constitution, that’s it,” Pate said. However, he did not indicate how he might rule on the constitutionality of HB 331. The lawsuit alleges the bond sale would commit the state to debt beyond the restrictions the Alaska Constitution puts on the Legislature’s ability to incur financial liabilities. Administration officials contend the plan is legal because the 10-year bonds would be “subject to appropriation” by the Legislature, which the bond buyers would be aware of, and therefore would not legally bind the state to make the annual debt payments. They would be sold by the Alaska Tax Credit Certificate Bond Corp., which would be established solely for the purpose of managing the bond money. The state Constitution generally limits the Legislature to bonding for debt through general obligation, or GO, bonds for capital projects, veterans’ housing and state emergencies. In most cases the voters must approve the GO bond proposals before the bonds are sold. State corporations can also sell revenue bonds, but those are usually linked to a corresponding income stream and only obligate the corporation to make payments, not the State of Alaska as a whole. Geldhof called the entity — run by a small group of Revenue Department employees including Commissioner Sheldon Fisher and with no income other than the Legislature’s annual appropriations to pay the bond debt — a “shell corporation” that is part of an elaborate constitutional workaround. State attorneys contend the plan is legal because it does not bind the state to pay the bonds, just the corporation, because paying the debt would be “subject to appropriation” by the Legislature and that risk is “baked into the price of the bonds” via a higher interest rate,” Paton-Walsh said. The constitutional sideboards on borrowing are there to prevent the state from exposure to bankruptcy, which she said HB 331 does through the subject to appropriation stipulation. “If you sued the State of Alaska on one of these bonds we would come in and move to dismiss and say we didn’t issue these bonds; they are not a debt of the state,” she elaborated. Geldhof responded that the state’s position ignores the real-world implications to the state’s overall credit rating of not paying the debt. “If the state defaults on these (bonds), if they don’t make the appropriation, there’s significant and obvious fiscal impacts on the State of Alaska, not just the shell corporation,” he said. “The Legislature, in year two, three, four, essentially has what amounts to a gun to their head if they don’t appropriate this money because the credit rating of the State of Alaska is immediately harmed.” Pate noted that state attorneys cited similar actions in other states that have been deemed constitutional, but asked Paton-Walsh if there was precedent in Alaska. She acknowledged there is not. Pate pushed to refocus the attorneys near the end of the hearing, noting that Forrer needs to rebut the state’s dismissal motion. “Heck yeah he’s stated some great claims,” he told Geldhof, “but can relief be granted under the law? That’s the issue.” Geldhof insisted a finding that HB 331 is unconstitutional would be proper relief in the public interest case and stressed his belief that a ruling to dismiss the case for failure to state a claim would undoubtedly be overturned upon appeal. Pate said he expects to issue a ruling on the matter in early November. Elwood Brehmer can be reached at [email protected]

INSIDE REAL ESTATE: Anchorage, Kodiak only areas to see vacancies up, rents down

Anchorage and Kodiak were the only two areas where vacancies rose in 2018 and rents dropped, according to the latest survey by Alaska Economic Trends in conjunction with the Alaska Housing Finance Corp. Anchorage’s vacancy factor rose to 6.2 percent, up slightly more than 1 percent due to negative migration. Meanwhile, the Matanuska-Susitna Borough had a net migration of 1,233. Its vacancy factor was down to 7.3 percent from 7.6 percent in 2017. However, it was still higher than Anchorage’s. Single-family homes in Anchorage have an average monthly rental rate of $2,149. Higher rental income can be obtained for four-bedroom homes that have a double- or triple-car garage. Renters with pets can expect to pay an additional $100 to $150 per month plus a pet deposit according to leasing agents. Smokers also pay a premium. The most popular rental areas and the most expensive in Anchorage are in the Bootlegger’s Cove area and southeast Anchorage. Rental rates tend to be lower in East Anchorage, which has an abundance of zero lot lines and older two-bedroom, multi-family units. Newer properties have a premium and so do units with an interior washer/dryer. In the Fairbanks North Star Borough, a three-bedroom single family home rents for $100 more than in Anchorage while the lowest rental rate is in the Wrangell-Petersburg borough where single-family homes rent only for $1,034. The rental rates above include all utility costs, according to the survey. However, more desirable rentals in age and location often charge the renter for at least gas and electric, assuming separate meters are available. In particular, single-family homes and luxury duplexes often have tenants paying basic utilities while providing water and sewer. In Anchorage and the Mat-Su, more than 90 percent of all rentals use natural gas for heat and hot water. However, in almost all areas of the state, cooking is powered by electricity, as are washer/dryer hook-ups. The small increase in vacancy factors and modest decline in rental income is reflective of the stability in the housing market which continues to adjust to historic lows for new construction permits, whether for sale or rent. As of August 2018, Anchorage had only 10 applications for multi-family permits, totaling 129 units, compared to 21 applications in 2017 for 153 units, which demonstrates that multi-family projects are increasing in size and scope of the number of units per projects. Duplexes, considered by some the new affordable single-family home when each side is sold, has had a decrease in number of units built so far in Anchorage. The latest Municipality of Anchorage published statistics for August show a decline in year-to-date permits from 58 compared to 76 in in 2017. The MOA does not differentiate between rentals and for sale units for multi-family and duplex permits. ^ Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

Trustees keep up push for inflation-proofing Permanent Fund

Those closest to the Permanent Fund are beginning to talk more openly about their wishes for the $65 billion endowment as its management becomes increasingly politicized. Alaska Permanent Fund Corp. staff recommended to the Board of Trustees Sept. 26 that the board approve a resolution urging legislators to fortify protections against gradual degradation of the Fund’s value. The resolution reemphasized two that the seven trustees approved during their 2017 annual meeting. Last year’s resolutions requested legislation to prioritize the amount needed to inflation-proof the corpus of the Fund before the tally of its statutory net income — gains or losses — every year. Permanent Fund Corp. CEO Angela Rodell said the current state law definition of the Fund’s “net income” is not accounting based. “This would subtract inflation-proofing from the statutory net income and allow it to stay back” in the corpus, Rodell explained. Rodell has expressed concern — as several of the trustees did during the meeting — that not making an annual transfer from the Earnings Reserve Account to the corpus puts the Fund’s long-term health in jeopardy. The Earnings Reserve Account is where the Fund’s annual earnings are deposited in most years, and where investment losses are pulled from in rare bad years. It can be spent via a majority vote of the Legislature; the corpus is constitutionally protected from being spent. APFC Trustee and former Natural Resources Commissioner Marty Rutherford said the board needs to remind legislators that they have a responsibility to manage the fund for future Alaskans, not just present-day challenges. For years, the Legislature made the inflation-proofing appropriation without issue. However, legislators declined to approve the transfer in fiscal years 2016-2018 as they debated whether or not to utilize a portion of the Fund’s earnings for government spending. And while they made $942 million inflation-proofing payment to the corpus last year, they rejected Gov. Bill Walker’s proposal to make the retroactive payments and now the precedent to not make they appropriation has been set. “I think what we’re saying is because you haven’t inflation-proofed for three years we want the law to change so that inflation-proofing occurs automatically,” trustee and former Attorney General Craig Richards said. Richards was also elected chairman of the APFC board on Sept. 27. The board ultimately tabled the issue until a later date, which was done at Richards’ request despite his support for the resolution. He asked for a one-day late October work session for the board to draft additional recommendations for the Legislature on how it deals with the Fund. In a brief interview, Richards said he wants the trustees to form a concise message about the need for sticking to sustainable draws from the Permanent Fund, avoiding ad-hoc appropriations from the Earnings Reserve and predictability in how the Fund will be used. “Follow whatever formulas are on the books,” he said. In May, legislators passed legislation establishing an annual 5.25 percent of market value, or POMV, draw from the Fund to pay both Permanent Fund dividends and support government services. The POMV draw will automatically be reduced to 5 percent per year after three years, but several of the trustees noted that changes are likely coming to Senate Bill 26 — the law that established it — in the next legislative session that starts in January. While the Alaska Supreme Court ruled unanimously in August 2017 that the Legislature’s power of appropriation supersedes it’s need to follow other laws it has passed, Permanent Fund managers have consistently stressed a worry that shifting politics will play into how the state spends money from the Earnings Reserve. Not knowing what will be asked of them and how much money will be needed at a given time hampers their ability to protect the Fund’s investments and maximize its earning potential, they contend. ^ Elwood Brehmer can be reached at [email protected]

APOC expedites hearing on complaint against Dunleavy backers

Alaska campaign regulators decided Oct. 2 to fast-track their review of two complaints filed by the re-election campaign for Gov. Bill Walker and Lt. Gov. Byron Mallott against groups supporting the election of Mike Dunleavy, the Republican candidate for governor. That means the commissioners with the Alaska Public Offices Commission will have a public hearing on the merits of the complaints Oct. 4, instead of weeks from now, to decide whether the groups violated campaign finance laws. The commissioners could have also decided to dismiss the complaints, according to Tom Lucas, APOC campaign disclosure coordinator. APOC is the state agency that regulates campaign finance. It can levy financial penalties for violations. At a three-and-a-half-hour meeting in Anchorage on Oct. 2, Walker-Mallott campaign staff argued for the expedited review of the two complaints with the November general election just over a month away. An Anchorage lawyer for the two groups named in the complaints — the Republican Governors Association and Families for Alaska’s Future — Dunleavy — argued against speeding up the process. The Republican Governors Association, or the RGA, is a Washington, D.C.-based organization that backs Republican candidates for governor. Families for Alaska’s Future — Dunleavy is an independent expenditure group formed this year that has gotten nearly all of its funding from the RGA, according to APOC reports. The Walker-Mallott campaign is accusing the RGA of setting up Families for Alaska’s Future — Dunleavy as a “front group” so it appears the ads it’s funding originate in Alaska, not Outside, and so it can shield its donors from public disclosure. Also, the campaign says, the RGA reserved $1.5 million worth of ad time in Alaska for the purpose of influencing the state’s election, but the organization hasn’t registered with APOC as an independent expenditure group and hasn’t reported the expenditures, which the campaign says it should have. “These are some of the largest expenditures in Alaska state election history,” Walker-Mallott campaign manager John-Henry Heckendorn told APOC commissioners. “I think that would be a pretty terrible precedent to set — that organizations that come up here and spend money for the purposes of influencing Alaska’s elections don’t have to play by Alaska’s laws.” Independent expenditure groups can raise unlimited funds from individuals and organizations, but can’t coordinate with the campaigns of the candidates they’re supporting. The groups must register with APOC and file reports about their finances, including where their money is coming from and how they’re spending it. In a statement last week, RGA attorney Michael Adams said the facts alleged in the APOC complaint are false. The Walker-Mallott campaign is also accusing Families for Alaska’s Future-Dunleavy of failing to properly register and file reports with APOC. The campaign says the RGA transferred hundreds of thousands of dollars of ad time to the independent expenditure group, but the group hasn’t reported any in-kind contributions from the RGA. Stacey Stone, the Anchorage attorney representing Families for Alaska’s Future-Dunleavy and the RGA on Oct. 2, said the Walker-Mallott campaign hadn’t provided substantial evidence to support expediting the complaints, as required by state law. The alleged violation involving the RGA also happened nearly six months ago, she said in a filing with APOC, and the campaign has “sat on its rights.” “The reason not to rush this is, again as I said, while Walker-Mallott may want to take away the due process of those who are against it because they feel like they’re running from behind, there’s a substantial and fundamental fairness that’s required for due process — it’s the notice and the opportunity to be heard,” Stone told commissioners. APOC chairwoman Anne Helzer announced Oct. 2 after a closed-door executive session that the commissioners would expedite their review of the two complaints. She did not go into details about why. According to state law, when the commission is deciding whether to expedite a complaint, it will consider factors such as whether the alleged violation could affect the outcome of an election “if not immediately restrained,” whether the alleged violation could cause “irreparable harm” and whether there was reasonable cause to believe a violation had occurred. The hearing was set for 1:15 p.m. Oct. 4 at APOC’s Anchorage office. The Walker-Mallott campaign filed another complaint last week against the RGA, but didn’t request expedited review. The complaint stemmed from activities during the 2014 campaign season.

COMMENTARY: A fix for the deficit of trust created by PFD cuts

Over the past four years, Alaska’s political class has focused on addressing the state’s budget deficit, and rightly so. When the price of oil crashed, the state found itself facing a multi-billion-dollar deficit. But as our campaign hears from everyday Alaskans across this great land, a deficit more corrosive to the health of our republic is emerging: a deficit of trust. Alaskans are leery of politicians who say one thing and do another. When Bill Walker ran for office in 2014, he said he had “no intention” of cutting Permanent Fund dividend checks. Not long after his inauguration, however, he was singing a different tune. In the span of three years, his administration denied every man, woman and child in Alaska over $3,700 each. The governor’s dividend-cut policy isn’t wrong solely because it’s bad for the economy — paying Alaskans a full dividend would provide a tremendous boost to Alaska, which suffers from anemic growth, high unemployment, and outmigration. It’s wrong because it severed trust between the people and their representatives. The Alaska Permanent Fund and dividend program were established by the people in 1976 and 1982, respectively. The people were wise enough then to know politicians would be tempted to spend away the oil boom and so constitutionally protected some of the revenue and created the dividend program to protect the fund. Since 1982, the dividend program has worked as intended, protecting the fund while benefitting Alaskan families. Then suddenly — after more than three decades — the deal changed. Walker unilaterally cut dividends at the worst possible time and without direct input from the people. If given the opportunity to serve, mending the trust deficit created by Walker will be my top priority. It’s no secret that I am the only candidate in this race who supports protecting the traditional PFD formula. But I also believe the people of Alaska should settle this issue directly, which is why I support going to the people for an advisory vote before any changes are considered to the PFD — at minimum — and ultimately believe the people should have the opportunity to vote on protecting the PFD in the state constitution. In our system of government, the people are sovereign, and no change to the Permanent Fund would long survive without their direct consent. Such a vote would restore trust between the people and government officials, and the outcome would be respected on all sides. If the people were wise enough to establish the Permanent Fund and a spending limit, then there’s no reason to doubt their wisdom in dealing with today’s challenges. Despite the failed leadership of the current governor on this and many other issues, he wants another four years, and is vying with lifelong politician Mark Begich for the chance to accelerate a tax and spend agenda. In every town hall, forum and debate, Walker and Begich are in vigorous agreement. They say we must cut the PFD to save it, that new taxes are inevitable and state spending has been cut to the bone. They’re convinced that wise decision makers in government know how to spend your money better than you do. But Alaskans aren’t buying it. We know the PFD isn’t broken and state government spends roughly three times the national average per person. That’s why Alaskans support more reductions to state spending, oppose new taxes and know the enemy of the budget isn’t the PFD — it’s out-of-control spending. Unless we get spending under control, government will consume the other half of Alaskans’ PFDs, and no amount of new taxes will be enough. That’s the path my opponents will take us down. I hope to lead us down a different path. If the best predictor of future behavior is past behavior, then Alaskans can be confident I will remain true to my word. I voted on behalf of my constituents against a budget that didn’t pay Alaskans a full dividend, because I knew there was a better way. Alaska is blessed with an abundance of natural resources and enough financial assets to get us through this challenge. With the right leadership and policies in place, we can resolve the budget deficit without PFD cuts and new taxes. If we control state spending and maintain a competitive, stable business climate, Alaska will grow its way out of the deficit. Elections are about trust. With your help, together we can restore trust in our government and ensure everyday Alaskans have a voice in the big decisions ahead. Mike Dunleavy is a candidate for governor of Alaska. A public school teacher, principal and superintendent for more than two decades in Koyuk, Kotzebue and the Mat-Su Valley, Dunleavy served on the Mat-Su Borough School Board and in the Alaska State Senate. Editor’s note: The Alaska Journal of Commerce will publish up to two op-ed submissions from the candidates for governor between now and our Oct. 21 edition.

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