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]

FISH FACTOR: Legislators learn hatcheries are a self-sustaining salmon program

Commercial fishermen pick up the tab for just about anyone who catches a salmon in Alaska that started its life in a hatchery. That was a finding that wended its way to the surface during a hearing last week of the House Fisheries Committee on the state’s hatchery program. The program began in the mid-1970s to enhance Alaska’s wild salmon runs. Unlike meetings that are top heavy with fishery stakeholders, most of the committee members are not deeply familiar with many industry inner workings and their interest was evident. “Who funds the hatchery programs?” asked Rep. Jonathan Kreiss-Tomkins, D-Sitka, referring to the 25 private, non-profit associations that operate in Prince William Sound, Southeast Alaska, Kodiak and Cook Inlet. Turns out, it’s commercial fishermen. “In each region where there is an aquaculture association, commercial salmon permit holders have levied a salmon enhancement tax upon themselves from one to three percent,” said Tina Fairbanks, executive director of Kodiak Regional Aquaculture Association. Fishermen also catch and sell returning adult salmon to the hatchery, which operators use to pay operating expenses, a process called cost recovery. In 2017 cost recovery fish, which fetch a lower price for fishermen than selling to processors, accounted for 79 percent of hatchery income. There have been discussions about sport charter operators contributing, but it’s not really needed, said Steve Reifenstuhl, executive director of the Northern Southeast Regional Aquaculture Association. “Because of the mechanism we have for doing cost recovery there is not really a need to bring in additional money,” he said. “That’s very refreshing to hear right now that you have adequate revenue. That is not something we hear very often,” said Rep Sarah Vance, R-Homer. “So thank you to all the fishermen who contribute and make it sustainable.” “The hatchery programs truly represent one of the most successful public/private partnerships in the state’s history,” Fairbanks said. “These facilities produce salmon for sport, subsistence, personal use and commercial fisheries at no cost to the state of Alaska. The revenues generated through commercial landings and fish taxes go back into the communities and state coffers and represent a great return on the state’s initial investment.” “It’s very uncommon,” said Dan Lesh, an economist with the McDowell Group. “It is quite impressive that it produces such large economic benefits with no cost to the state.” “It seems to me that the commercial fishing industry is paying out millions of dollars through foregone revenue in cost recovery and enhancement revenues that benefit Alaskans collectively,” responded Kreiss-Tomkins, adding that he would like to see an analysis done. “It’s paying for all Alaskans in a sense by underwriting this common benefit.” Alaska’s hatchery harvest in 2017 of 47 million fish accounted for 21 percent of the statewide salmon harvest valued at $162 million to fishermen, which was 24 percent of the statewide value. That was the lowest percentage of hatchery fish in the overall catch since 1995, and due largely to a wild stock harvest that was the third-highest in Alaska history. An additional 194,000 Alaska hatchery fish were caught in the sport, personal use and subsistence fisheries. Fish differences Americans have very different perceptions on wild versus farmed fish, and whether it is grown in fresh or saltwater. In a new report called Aquaculture/Mariculture, US Market Insights and Opportunities, food industry trackers Changing Tastes and Datassential surveyed 1,500 consumers and 400 restaurant operators about their preferences for America’s three favorites: salmon, tuna and shrimp. Nearly half of consumers and 40 percent of restaurateurs said they prefer wild fish and shellfish because it has better flavor, quality, texture, is free of antibiotics, pesticides and other chemicals. For salmon, 57 percent of consumers said they prefer wild caught; it was 64 percent for restaurants. Both believe less than half of the seafood we eat today comes from aquaculture. Overall, land based and near-shore aquaculture operations got much lower marks across the board. Water pollution and impacts on water quality were listed as the top concerns by 66 percent of consumers for land-based fish farms and 58 percent for near-shore. Water concerns jumped to 80 percent among buyers. The use of antibiotics and pesticides in fish farms ranked as the second concern by 64 percent of consumers and 68 percent for restaurant operators. Consumers and buyers believe a substantial amount of seafood is already farmed in the deep ocean, and one quarter believe that open ocean mariculture is better for the environment than wild capture fishing. The report concludes that as more Americans shift to eating seafood, the share with no established preferences for wild versus farmed increases. Fish bits Gov. Michael J. Dunleavy has nominated Nicole Kimball, vice president of Pacific Seafood Processors Association, and Cora Campbell, CEO of Silver Bay Seafoods, to seats on the North Pacific Fishery Management Council. They would replace two current members whose terms expire this summer: Theresa Peterson of Kodiak and Buck Laukitis of Homer. The NPFMC oversees more than 25 fisheries in federal waters off Alaska, meaning from three to 200 miles out. The North Pacific Fishery Management Council meets April 1-9 at the Anchorage Hilton. On the agenda: Navy war game plans for May in the Gulf of Alaska. Comments on any items can be made through March 29. For its upcoming meeting cycle, the state Board of Fisheries is accepting proposed changes to subsistence, personal use, sport and commercial and statewide fisheries at Kodiak and Lower and Upper Cook Inlet through April 10. Tariffs on U.S. imports from China will continue indefinitely the Trump Administration announced last week. The trade war, which began last July, has hit the seafood industry on both sides. SeafoodSource reports that Trump said he plans to “leave them on for a substantial period of time.” ^ Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Our children must read by 9

Right now, Alaska’s public-school children are ranked dead last in the nation in fourth-grade reading proficiency, a key indicator used to measure academic success. In terms of school years, they are up to a full year behind their counterparts in other states. This means many of our fourth graders cannot read Charlotte’s Web or The Lion, The Witch, and The Wardrobe. While it may seem like such a simple, basic issue, the ability to read is actually the foundation of a child’s educational success; the value of reading cannot be stressed enough. By not guaranteeing that grade-school students become proficient readers, we are failing our children. We must do everything in our power to ensure that every child is able to read well enough so that when they enter middle school and begin learning harder material, they can read to learn. Through the third grade, students learn to read. As they enter the fourth grade, they read to learn. If a child does not develop this skill, he or she will also fall behind in social studies and science. Word problems in math will be unsolvable, navigating the rich world of literature impossible, and communicating complex ideas in written and spoken word unthinkable. Students who cannot read well almost never catch up and their future is in peril. Statistics compiled by groups like ExcelinEd are sobering. Students who cannot read by the end of the third grade are four times more likely to drop out of high school. High school dropouts make up 75 percent of food stamp recipients and 90 percent of those on welfare. Nearly 85 percent of teenagers in the juvenile justice system cannot read to learn and seven out of 10 adult prisoners cannot read above a fourth-grade level. Evidence-based research shows that a strong reading initiative can make a big difference. The Alaska Policy Forum supports a “Read by 9” policy which provides a common sense and proven solution. It starts by making sure kindergartners know the ABCs and the sounds they make. Strategies, guided by science, focus on developing critical skills through the third grade so students can read with ease, understand the material, and are starting to think critically. We need to implement a system of instruction that places a heavier emphasis on making sure our children leave third grade with the ability to read. We want each child entering the fourth grade to do so with confidence and with the skills he or she needs to learn. As a final safeguard, students unable to read proficiently at their grade level may be retained and given an extra year of enhanced instruction so that before promotion to the next grade, they can learn to read well. Because learning to read is so important and catching up so difficult to do, students must be proficient readers before they move on to more difficult materials. Regardless of where they go to school, every child deserves the opportunity to reach his or her full potential and to fully embrace the American dream. Let’s work together: parents, teachers, administrators, and policymakers to ensure that Alaska implements the Read by 9 reading initiative so that all our children can read to learn and love to learn. Jodi Taylor is an Alaska Policy Forum board member, a life-long Alaskan that attended public school, an entrepreneur at heart, and mother of five children.

Gov: Budget reset needed to save economy

Gov. Michael J. Dunleavy’s underlying message about the State of Alaska budget deficit is much the same as his predecessor’s, but his plan to address it is vastly different. Dunleavy stressed throughout a nearly two-hour talk in Anchorage March 26 that without major, durable spending reductions to close the $1.6 billion deficit the Permanent Fund dividend will disappear within three years. He and members of his administration presented their budget plan alongside members of the conservative political group Americans for Prosperity, which sponsored and hosted the event at the 49th State Brewing Co. Former Gov. Bill Walker’s message, starting in late 2015 when he unveiled his long-term fiscal plan, was that the dividend formula needed to be adjusted along with spending cuts and various taxes to preserve the payouts in some form. The current governor campaigned largely on restoring the PFD to its statutory payment calculation, which if followed is expected to generate dividends in the $3,000 per person range this year. That money, he insists, is best spent individual Alaskans rather than using part or most of it to close the budget gap. He also emphasized that long-term reductions to state spending would not dramatically harm Alaska’s currently fragile economy, which many of the state’s economists have said is ready to come out of a nearly four-year recession late this year barring major unforeseen events. Numerous economists have said the nearly $3 billion of cuts that have been made since 2014, largely from reducing the capital budget to little more than enough to generate federal matching funds, have deepened and extended the recession that was triggered by the sustained fall of oil prices late that year. The majority of jobs lost in the past four years have been in the oil and gas and construction industries. Dunleavy noted that Alaska already has the highest unemployment rate in the country even with current state spending levels. “We feel, for the sake of the private economy, to get that back on its feet and growing, what we need to do is reduce the government side of the economy, so that’s why you have our budget before you,” he said, adding that his budget plan would cost Alaska 600 to 700 jobs. The Office of Management and Budget has calculated that Dunleavy’s budget proposal would eliminate 714 state positions. However, economists routinely stress that Alaska’s economy is largely supported by government spending whether it comes from state or federal sources, which is common for relatively young economies. The Anchorage Economic Development Corp. estimates that about 20 percent of the jobs in Alaska’s largest city are tied to government. Economists for the University of Alaska Anchorage Institute of Social and Economic Research project the administration’s budget would result in roughly 7,000 additional jobs lost across employment sectors; those losses would be on top of the 12,300 jobs Alaska has lost since 2015, according to the state Labor Department. Other economists have calculated that the plan to cut more than $700 million from the state’s Medicaid program would result in 8,000 job losses alone . The administration’s chief economist Ed King testified to the Legislature in early March that the budget plan would likely mean about 5,000 fewer jobs statewide, but he said the losses would reset the state’s economy to a sustainable level. Dunleavy echoed that sentiment March 26, saying that government money had inflated the size of the state’s economy. “We get this budget under control, we’ll get more investment and we’ll get more revenue,” he said. Walker often pointed to the fact that without a statewide tax, which Dunleavy rejects, economic growth is a drain on state services if it does not come in the form of oil revenue to state coffers. OMB Director Donna Arduin said the administration is focused on cutting spending this year and reforming the state departments and programs hardest hit by budget cuts — K-12 education, the University of Alaska, Medicaid and the state ferry system — in the future. She specifically said omnibus education reform legislation would be introduced in the coming weeks. The governor acknowledged that reaching his goals would be challenging, adding that his three proposed constitutional amendments are needed to make it effective long-term. The amendments are to adjust the current spending cap, which Attorney General Kevin Clarkson said would be $10 billion this year, enshrine the PFD as a transfer payment rather than an appropriation, and require public votes for tax increases. Adding those items to the state Constitution would give Alaskans a stronger voice in such major policy decisions, he said. “I have a lot more faith in the people of Alaska than some of the special interests that don’t want you near a constitutional amendment,” Dunleavy said at the event. Elwood Brehmer can be reached at [email protected]

Anchorage airport officials pursue cargo transfer development

Officials at Ted Stevens Anchorage International Airport are angling for help to maximize the benefits of the unique freedom from some trade laws the airport offers. Anchorage is one of very few airports in the world where a foreign cargo can be transferred from one aircraft to another without being subject to customs and other trade requirements. Anchorage Airport Manager Jim Szczesniak said cargo transfers are being done on a small scale and he believes part of the reason it hasn’t grown is there isn’t a good place for it. As a result, airport leaders are looking to help someone develop a large cargo transfer facility there. “People aren’t going to come up here and leave a couple pallets of iPads sitting on the ramp waiting for another plane to show up,” Szczesniak said. “If they have a facility where they can take fish, fruits, electronics, engine machinery — high-value stuff — and securely store it out of the weather they can wait for that flight that goes (to the proper city) and get things there more directly.” The airport is already the fifth-busiest cargo hub on Earth at a volume of roughly 2.8 million tons of freight per year, but that’s mostly due to its geography that makes it an advantageous refueling stop for cargo flights between Asia and the North America. The Anchorage Economic Development Corp. estimates the airport generates 1 out of 10 jobs in the city. Few cargo companies have regularly utilized the unusual but potentially significant opportunity — particularly given Anchorage’s geographic location — that in theory could make their operations more efficient. For example, a foreign-flagged carrier could deliver cargo from Asia to Anchorage on a Boeing 747 and transfer it directly to smaller aircraft destined for multiple cities across the Lower 48. Additionally, domestic freight forwarders can purchase space on flights and act as the domestic carrier because they “own” the cargo. Almost all of the dedicated cargo traffic headed to the Lower 48 through Anchorage is destined for another major cargo hub such as Chicago, New York City or Los Angeles. From there, the goods are sent out by land in a web of distribution networks. The same options are available at the Fairbanks airport; however, Anchorage has more capacity to handle large aircraft. Airport officials and general Alaska trade advocates have said the open shipping options have not attracted business in part because shippers are often skeptical they’re actually allowed; in most places such cargo transfer would be cabatoge, a federal crime. Airport officials surveyed cargo carriers last fall to gauge the interest in a potential cargo transfer facility and the response was positive enough to investigate the idea further. Szczesniak added that produce going from Latin America to Asia and e-commerce shipments have increased of late alongside the traditional cargo going from Asian manufacturing centers to North American consumers, so the facility could offer more than simple warehouse space if it is requested. “We’re also trying to maximize the airport’s ability to process Alaskan goods. We’ve got high demand for live king crab, obviously salmon, and peony flowers are quite popular,” Szczesniak said. He noted the project, likely in the tens of millions of dollars, could also be phased to best match demand from carriers or forwarder companies. A large parcel on the northern part of the airport adjacent to FedEx’s hangar has been identified as the best location for the facility. While the project would rely on a private developer, the state-owned airport would collect lease revenue; more cargo flights would also mean more landing and other fees for the airport, which generates all of its own revenue. Total revenue from all sources was about $147 million in the 2018 fiscal year. Szczesniak said the plan is to issue a request for qualifications to potential developers in late spring and if the RFQ generates interest, a formal request for proposals, or RFP, could follow in late summer or fall. “We want to make sure that we maximize the airport’s ability to attract business and it’s beneficial to the airport, too, because if we have the facilities that help cargo customers keep their planes full that keeps them at our airport,” Szczesniak said. Elwood Brehmer can be reached at [email protected]

Anchorage Assembly seeks fresh look at port cost estimate

The Anchorage Assembly is seeking help to determine once and for all if it really needs to spend roughly $1.9 billion to rebuild the city’s deteriorating port. Assembly member Christopher Constant, who has started a reexamination of the Anchorage Port modernization program as co-chair of the Assembly’s Enterprise and Utility Oversight Committee, summed up reaction to the potential price of the port project at a March 21 Assembly committee meeting. “We need to look closely to figure out if there’s cost savings. Sticker shock doesn’t even get near the level of shock,” Constant said of the $1.9 billion estimate to replace and upgrade the port’s cargo, petroleum, cement terminals and other facilities. Modernizing the Anchorage port — officially renamed the Port of Alaska by the Anchorage Assembly in 2017 to highlight the statewide importance of the city-owned infrastructure — was initially pegged at just less than $500 million in 2014. That cost estimate grew to more than $700 million in 2017 and was updated to approximately $1.9 billion earlier this year. There is no questioning of the need to substantially rehabilitate the Anchorage port, which is the primary hub for goods entering Alaska. Some sections of the pile-supported docks have been in place since 1961 and have far exceeded their initial 35-year design life as the saltwater they stand in has gradually taken its toll and badly corroded the steel support pilings. The Assembly on March 19 unanimously approved spending up to $100,000 from the port’s operating funds to hire experts to evaluate the overall cost of the current plan as well as whether or not the remaining development from the first, failed port project is usable. Constant said the money could be split into two or more contracts to satisfy the economic and engineering aspects of the review. He also noted the Assembly could approve additional funding for the consulting work if $100,000 isn’t enough. The Assembly specifically wants to know why the expected construction costs have nearly quadrupled over five years; ways the work can be modified or sequenced to lower costs; what facilities and equipment long-term port users truly need and are willing to pay for; and what are the best avenues for funding the project, whatever the final price ends up being among other aspects of the project. A key caveat is that any firm hired to perform the consulting work will not be eligible for future work on the large port construction project. CH2M, recently purchased by Jacobs Engineering Group, evaluated the design for the original port expansion project and determined — in addition to problematic construction techniques — the underlying engineering of the proprietary Open Cell Sheet Pile dock design did not meet the challenging seismic stability requirements for the port. CH2M detailed its findings in a lengthy report released in early 2013. Officials in former Mayor Dan Sullivan’s administration then recommended to the Assembly in early 2014 that CH2M lead management of the next iteration of the port overhaul given the company’s knowledge of the situation. The Assembly in 2014 approved CH2M to manage the downsized port modernization project, which calls for using more traditional pile-supported docks. However, some current Assembly members have expressed frustration over the fact that a firm first hired to conduct an independent analysis of the construction issues at the port was subsequently offered additional work based on the findings in its report. A large part of the new consulting work would be evaluating CH2M’s findings. Representatives from PND Engineers Inc., the Anchorage-based company that designed the sheet pile dock, have contended for years that the first port project failed because of faulty construction and not problems with its proprietary dock design that has been installed elsewhere in the state at ports in Kodiak and Dutch Harbor. PND President Jim Campbell told the Assembly committee in late February that he believes two new cargo terminals could be built off of the remaining sheet pile for a little more than $300 million versus the roughly $1.4 billion CH2M estimates it will cost to remove the sheet pile and much of the land behind it before building new cargo terminals. Port officials have generally said increased foreign steel tariffs; building to high seismic criteria with a 75-year working life; the logistical complexities of keeping the port open during construction; and removing much of the 30 acres of fill that created a large area of backlands at the north end of the port during the expansion project have added to the project’s costs. CH2M project manager Jeff Bool said March 21 that any firm hired to analyze the current project should also have experience with federal permitting requirements, specifically those for the National Marine Fisheries Service, as marine mammal protections related to endangered Cook Inlet Beluga whales add significantly to construction costs. With the prospect of state funding uncertain as lawmakers continue grappling with resolving the state’s large budget deficits and federal support unlikely at least until the city’s lawsuit against the federal Maritime Administration over management of the first construction is closed, city officials have said raising import tariffs at the port is one of few remaining ways Anchorage can pay to rebuild the aging docks. The municipality is contemplating increasing fees on fuel and cement to finance the reconstruction of the terminal that handles those goods using revenue bonds. However, the port customers and many other observers worry the five-fold or more tariff increases that would be needed for Anchorage to self-fund the work would drive business away from the port and raise the cost of basic goods such as fuel and groceries to the point that Alaska’s overall economy could suffer as a result. Elwood Brehmer can be reached at [email protected]

Sturgeon prevails again at Supreme Court

An Alaska moose hunter whose case against the federal government made a rare second trip to the U.S. Supreme Court prevailed on March 26. The ruling marks a win for Alaskans unhappy with federal “overreach” on some public lands but doesn’t topple rural subsistence rights as some feared it might. John Sturgeon sued the National Park Service after rangers on the Yukon-Charley Rivers National Preserve in 2007 ordered him off the hovercraft he used for moose-hunting trips through the shallows of the Nation River near the Canadian border. The park service claimed the right to manage navigable waters inside parks and preserves. The state maintained that management of those waters was clearly left to the state, which allows hovercrafts. U.S. Supreme Court justices in this week’s decision ruled unanimously that the Nation River doesn’t qualify as “public land” for the purposes of the Alaska National Interest Lands Conservation Act. The sweeping 1980 law created 10 new national park units following natural boundaries rather than federally owned lands, adding more than 18 million acres of state, Native and private land. Nor does the park service have authority to regulate Sturgeon’s activities on the part of the river that falls within the preserve, according to a ruling authored by Justice Elena Kagan for the court. “That means Sturgeon can again rev up his hovercraft in search of moose,” Kagan wrote. Sturgeon, reached in Anchorage a few hours after the ruling, said he planned to do just that in September. “I’m really happy with the decision,” he said. Sturgeon cheered the restored access to once-secret hunting grounds on the Nation that he’d visited since 1971. But he also expressed gratitude that the Supreme Court ruling upheld the so-called Katie John decisions that underlie Alaska’s federal subsistence fishing rights. “Katie John was a casualty that I didn’t intend on,” Sturgeon said March 26. “I’m glad they said it doesn’t disturb Katie John.” He said he called Alaska Federation of Natives president and CEO Julie Kitka March 26 and they agreed it was a good outcome. Sturgeon said AFN and he, along with U.S. Sen. Lisa Murkowski, had worked unsuccessfully on a compromise solution that would have left Katie John intact but “this was just as good.” “Alaska is different by law,” he said. “Alaska is different, our parks and preserves and refuges are not managed like they do down south. I think that’s pretty important.” A park service spokesman said the agency is reviewing the Supreme Court decision to “determine what changes will be necessary to bring existing policy in line with today’s ruling.” Ruth Botstein, the assistant district attorney who successfully argued the case last year on the state’s behalf, was one of numerous at-will employees dismissed by Gov. Mike Dunleavy last fall when he came into office. The ruling is the second time the court had heard the case — and generally ruled in Sturgeon’s favor. Justices in 2016 ordered the 9th U.S. Circuit Court of Appeals to take another look at the case, particularly the provisions about ANILCA exceptions. The unanimous decision of all eight justices declared the 9th Circuit had taken a “topsy-turvy” approach to the law when it said a National Park Service rule banning hovercraft in the Lower 48 must be applied to Alaska. It ordered the lower court to reconsider the issue in light of ANILCA, which created an “Alaska exception” to many of the normal rules applied to national parks, wilderness areas, refuges and other preserves. Over time, the case grew more complicated since that first visit to the Supreme Court. The lawsuit grew into a potential test of the legal precedents, named for the late Ahtna elder and litigant Katie John, which for two decades have provided the legal underpinning of federal subsistence fishing rights in Alaska. Federal rules give priority to rural subsistence families in times of shortage. The Supreme Court decision this week does not undermine the Katie John precedents, said Heather Kendall-Miller, an Anchorage-based attorney with the Native American Rights Fund who drew up a brief in the case for the Alaska Federation of Natives. “The Katie John cases remain the law of the land,” Kendall-Miller said. Just one footnote about halfway through the 46-page ruling makes the ruling’s precision clear: the Katie John provisions are “not at issue in this case, and we therefore do not disturb the Ninth Circuit’s holdings that the Park Service may regulate subsistence fishing on navigable waters.” AFN released a statement March 26 congratulating Sturgeon on the ruling and saying the decision was also a victory for subsistence users. “This is good news for the Alaska Native community and for rural Alaskan subsistence users,” Kitka said in the statement. “Our Board previously approved two principles related to the case: private landowner’s access to — and use of — inholdings within conservation system units; and no net loss to subsistence rights. This ruling accomplishes both.” Alaska’s congressional delegation in 2015 submitted an amicus brief in support of Sturgeon. The delegation welcomed the Supreme Court decision as upholding “promises made to Alaskans in ANILCA” that the park service doesn’t have expansive rights over state and native lands. “During its inception, Senator Ted Stevens and I worked hard to make ANILCA fair to sportsmen, Native communities, and energy developers,” Rep. Don Young wrote in a statement. “Our legislation was intentionally written so that the Alaskan people wouldn’t need to ask the Federal government for permission to use the lands they had been stewards of for generations.” Young and Murkowski also praised the ruling for not disturbing the Katie John decision. Members of the state senate majority cheered the decision that the Nation River is state rather than federal land and navigable inside Alaska national parks. Sen. Bert Stedman, R-Sitka, also referenced the Taku and Stikine rivers in Southeast as “clearly navigable waters and the domain of the state, not the federal government.” The Supreme Court decision includes a concurring opinion from justices Sonia Sotomayor and Ruth Bader Ginsburg recognizing the ruling raises uncertainty about the park service’s authority over navigable waters in Alaska’s parks. “Many of Alaska’s navigable rivers course directly through the heart of protected parks, monuments, and preserves. A decision that leaves the Service with no authority, or only highly constrained authority, over those rivers would undercut Congress’ clear expectations in enacting ANILCA and could have exceedingly damaging consequences,” Sotormayor wrote in the opinion. Congress, through ANILCA, intended for the park service to protect and regulate Alaska rivers. If so, she continued, it’s up to Congress to “clarify the broad scope of the Service’s authority over Alaska’s navigable waters.” The National Parks Conservation Association, involved in the case as a “friend of the court” supporting the park service, called the ruling disappointing but said the concurring opinion “makes it clear that the park service still has the authority to protect park lands from resource damage.” “Yukon-Charley Rivers National Preserve was created in part to protect the rivers and lakes that run through this wilderness,” the group’s Alaska regional director Jim Adams said in a statement. “Eliminating the hovercraft rule in Alaska is a loss for the ‘wild’ that makes these places special to people.” Sturgeon said the ruling probably doesn’t mean hunters in hovercraft will descend on the Nation, which is so sprawling and shallow that it’s hard to travel without extra support. He put his own now-famous hovercraft into his two-car garage and rebuilt it from scratch with new engine he tested just last Saturday. “I started it up and broke the engine in,” he said. “I did it all myself and was very surprised when it actually ran.”

Banks reinvesting boost in profits from 2017 tax reform

Though the fate of Gov. Michael J. Dunleavy’s budget looms over Alaska’s economy, federal tax reform and some positive trends are boosting bank leaders’ morale. “The future looks a lot better than it has,” said Wells Fargo Pacific Northwest Business Banking Division Manager Joe Everhart. Alaska’s financial institutions are reaping the benefits of a federal tax change put in place by President Donald Trump’s administration in 2018. Trump signed the the tax reform bill passed by Congress at the tail end of 2017. Among changes both to individual and corporate tax structures, the law lowered the corporate tax rate to 21 percent to more closely match the global average of 25 percent. Nationally, the change brought about record bank profits. According to the Wall Street Journal, national banking profits spiked in 2018 after the new tax law took effect. According to the Federal Deposit Insurance Corp., banking profits jumped 44 percent from 2017 to 2018 for a record profit of $236.7 billion. For the first time since 2006, no American bank failed during 2018. Alaska’s banks proved no exception to the national trend. For the five Alaska-based banks, net income rose an average 43.8 percent between the fourth quarter of 2017 and the fourth quarter of 2018, or right on par with the national average. Cumulatively, the five Alaska-based banks saw their net income increase from $60.9 million to $87.6 million. Alaska-specific information income from the FDIC isn’t available for national banks Wells Fargo, which has just more than 50 percent of state deposits at nearly $6 billion, and KeyBank, which is fourth in Alaska deposit market share with $1.2 billion. Banks welcome the chance to spread the good news. Wells Fargo is sinking the extra money back into the company and into philanthropy. “We raised the minimum hourly base pay for team members in the U.S. to twice the federal minimum wage, and we increased philanthropic support for our communities by 55 percent in 2018 to $444 million,” said David Kennedy, Wells Fargo Alaska’s public information officer. Everhart takes the tax change as a boost in what has been a gloomy few years for an Alaska economy beset with cash flow problems related to the 2014 crash in oil prices. Everhart said the new tax law accompanies some notable oases on the state’s economic horizon. North Slope oil development has picked up, giving both the promise of revenue and jobs. The Trump administration approved ConocoPhillips’ $1 billion drill site, at Greater Mooses Tooth-2, which began construction this winter, and its sister site Greater Mooses Tooth-1 began producing oil ahead of schedule this past September. Tourism could produce a jump in cashflow for the state economy. Cruise Lines International Association predicted cruise ship tourism will increase by 16 percent in 2019 with about 1.3 million cash-laden visitors. Northrim Bank topped the list of the Alaska-only bank beneficiaries of the new tax law in net income growth. Net income climbed 49 percent from 2017 to 2018 for Northrim, which has $1.22 billion in deposits, from $14 million to $20.9 million. First National Bank Alaska, second in deposit market share with $2.4 billion in deposits, had net income jump 48.5 percent from $36.4 million to $54.1 million in the same period. Mt. McKinley Bank in Fairbanks saw net income grew from $3.8 million to $4.7 million. The new tax law isn’t the only element pushing numbers up, either. Alaska banks also increased their loan portfolios across the board by an average 5.5 percent. McKinley Bank increased net loans and leases 9.5 percent from fourth quarter 2017 to fourth quarter 2018 — a good signal for an area still anticipating a financial boost from an incoming wing of F-35 fighter jets to Eielson Air Force Base. Northrim Bank President and CEO Joe Schierhorn agreed with both with the cheerier-than-normal economic outlook and means to reinvest it. Schierhorn said he can’t remember a time since the late 1980s when a tax reform yielded this kind of fiscal boost, and like Wells Fargo Alaska, has spread the cash around. “There are three ways of thinking about how to use extra income,” Schierhorn said. “You can return it to shareholders, invest back in infrastructure, or invest in employees. We did all three.” Northrim gave wage and pension bumps and additional education opportunities to employees, aa record-breaking dividend increase to its shareholders, and opened a new branch in East Anchorage. Like Everhart, Schierhorn points to increased production on the North Slope and to the cruise line forecast as hopeful elements in the 2019 outlook. “The projected tourism increase will be big,” Schierhorn said. “When you think about the shore-based business that cater to that segment, it could be significant economic driver.” Even though 2019 is beginning with good omens, bank leaders are still looking critically at Alaska’s political situation. Despite the profits and promise, Dunleavy’s cut-laden budget makes banking leaders uneasy. “When Dunleavy’s budget came out, it created a sense of cost,” said Everhart. “It came with $1.6 billion of cuts. You think about that, and in reality every $100,000 of cuts is one job. That $1.6 billion is 1,600 jobs we could lose.” Everhart’s tone and message adds to a widespread concern over Dunleavy’s budget from state employees and public unions in healthcare and education, but he clarified Wells Fargo isn’t making any moves till the Legislature hashes out the budget. Clearly, however, he seems to believe in better solutions to the Permanent Fund dividend question than budgets slashes. “We have a cash flow problem, not an economic crisis,” Everhart said. “The state still has levers to pull without the deep cuts currently proposed. The legislative process has still not taken place. It’s hard to ring the alarm bells until the legislative process completes.”


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