Opinion

COMMENTARY: Time for president to tell truth about troops’ combat role

When the president is in open disagreement with the secretary of defense and the chairman of the Joint Chiefs of Staff on one of the most critical issues our nation faces — whether to send our sons and daughters into combat — it should be cause for significant national concern. President Obama has repeatedly told the American people that U.S. troops are not in combat in the Middle East. In 2010, he announced that “our combat mission is ending” in Iraq. He used the same words in 2014 regarding Afghanistan. More recently, he said that our mission in Syria “will not involve American combat troops fighting on foreign soil.” Yet last week in a Senate Armed Services Committee hearing, I asked Defense Secretary Ashton B. Carter and Joint Chiefs Chairman Gen. Joseph F. Dunford Jr. if our troops in the Middle East, including in Syria, are engaged in combat. Both unequivocally said yes. To our members of the military serving overseas, Carter and Dunford were stating the obvious. Indeed, recent reports in The Post and the Military Times describe up to 200 Marines at Fire Base Bell in northern Iraq firing artillery daily in support of Iraqi troops and killing Islamic State terrorists. Our soldiers serving as part of the Joint Special Operations Command in the Middle East conduct regular counterterrorism missions to kill and capture terrorists. Since 2014, our brave pilots have dropped approximately 40,000 bombs in Iraq and Syria in close-air-support missions focused on killing Islamic State members and destroying their infrastructure and supply operations. An additional 1,200 bombs have been dropped supporting the coalition fight in Afghanistan combating the Taliban. Some of our service members have been killed conducting these operations, while others have been wounded. All of this is the very definition of combat. To Carter’s credit, he said at the hearing: “These people are in combat . . . and I think that we need to say that clearly.” Apparently, the White House didn’t get the memo. This week, when asked about a Navy SEAL killed in a fierce firefight involving U.S. Special Operations forces, Kurdish commandos and Islamic State fighters, White House spokesman Josh Earnest told reporters that “the relatively small number of U.S. service members that are involved in these operations are not in combat but are in a dangerous place.” Why do Obama and his White House continue to peddle the fiction that U.S. forces are not engaged in combat? Perhaps the commander in chief is truly unaware that they are, which would be troubling indeed. More likely is that because he’s told the American people repeatedly that he will end wars and won’t send combat troops to the Middle East, the word contortions coming from the White House are part of a twisted attempt to salvage and protect the president’s legacy. But by spinning the truth for political purposes, the president is coming perilously close to leaving a legacy of dishonesty when it comes to our military involvement in the Middle East. And much more worrisome, such dishonesty comes with costs. First, it diminishes the service and sacrifice of our troops and their families. Americans serving in Iraq, Syria and Afghanistan know they’re engaged in combat operations. The commander in chief needs to acknowledge this fact and the bravery it entails, not disguise the true nature of their duty. Second, it further undermines the administration’s tenuous foreign policy credibility regarding its stated goal of degrading and destroying the Islamic State. While this is the correct goal, a series of missteps in the Middle East, including the president’s failure to enforce his own red line when it was crossed by Bashar al-Assad in Syria, have brought us to the point where our adversaries and our allies question U.S. credibility and resolve. Islamic State terrorists know that they’re in combat against U.S. forces, but when the president says otherwise, it signals a lack of conviction, making it harder to defeat these terrorists. Finally, the dishonesty about the role of our troops allows our presidential candidates to duck a tough issue. Hillary Clinton repeatedly has been allowed to say, unchallenged, that she would continue the president’s policies of not sending combat troops to Syria and Iraq. Forty-five years ago, future Secretary of State John F. Kerry, then speaking as a veteran of the Vietnam War, urged the incumbent administration to be honest about the roles our men and women in uniform were playing in Vietnam. Testifying before the Senate Foreign Relations Committee, he said, “We veterans can only look on with amazement on the fact that this country has been unable to see there is absolutely no difference between ground troops and a helicopter crew, and yet people have accepted a differentiation fed them by the administration.” The theater has changed, but Kerry’s words still resonate. For the betterment of our troops, and our country, he called for honesty then — just as we all should call for honesty now. Dan Sullivan, a Republican, represents Alaska in the U.S. Senate and is a member of the Armed Services Committee. He is a lieutenant colonel in the U.S. Marine Corps Reserve.  

AJOC EDITORIAL: Dead horses: Feds’ King Cove hypocrisy & the LIO fiasco

Sometimes a dead horse really does need another beating. On May 4, we received a fresh reminder of the federal government’s rank and callous hypocrisy regarding the emergency access road from King Cove to Cold Bay. Earlier in the week, we were treated to more of the rudderless Legislature’s trademark blend of incompetence and dysfunction that goes together like a jar of Goober Grape. Before getting to the Republican-led Legislature’s ongoing and pathetic attempts to extricate itself from the embarrassment of its Downtown Anchorage office building, up for the first whack is the U.S. Interior Department led by Sally Jewell and a new rule proposed by its Fish and Wildlife Service agency. The rule released May 4 allows for the killing of bald and golden eagles by wind farms and nearly quadruples the annual limit for killing bald eagles first proposed in 2009; it also acknowledges that human-caused mortality of golden eagles may be unsustainable because studies since 2009 indicate the population may be in decline. The new rule out for public comment would allow the killing of 4,200 bald eagles nationwide by wind farms compared to the limit of about 1,100 proposed in 2009. The limit on golden eagle kills remains zero, but the Fish and Wildlife Service knows that windmills will still be causing mortality and therefore it has come up with “compensatory mitigation” workarounds so that companies may pay some sort of fee to a conservation bank to make up for killing golden eagles. This is the same Fish and Wildlife Service that denied approval — and was upheld by Jewell — for 11 miles of one-lane road to complete a connection between King Cove and Cold Bay through the Izembek Wildlife Refuge based on hypothetical impacts on Trumpeter swans and Pacific black brant geese whose populations have no conservation concern. FWS estimates there are about 143,000 bald eagles in the U.S., with half of those in Alaska, and it believes as much as 5 percent or more of local area populations can be killed annually without impacting the species as a whole. Of the Pacific black brant geese, about 160,000 gather in Alaska annually and thanks to warmer temperatures as many as 50,000 stayed through winter in 2014 to continue feasting on abundant eelgrass in the refuge lagoons. Of the Trumpeter swans, 13,000 of the 16,000 or so in the U.S. reside in Alaska with Lower 48 populations raised mostly by eggs transplanted from here. Examples of the federal government’s arrogant abuse of discretion can be found on a daily basis, but few could be more egregious than Jewell’s heartless disregard for 1,000 mainly Alaska Natives living in King Cove while giving special treatment to a favored “green” industry such as wind power to kill thousands of eagles every year even when her own data show one of those species may be in decline. The proposed road would do no such harm, as Alaskans have a long history of building infrastructure in sensitive areas. And in any case, putting a few birds at risk cannot begin to outweigh the risks to residents with medical emergencies and the members of the U.S. Coast Guard who are called upon to rescue them. The press release from the FWS regarding the new eagle kill rule — which it describes in Orwellian fashion as “eagle management” — commits sins of omission by not including the number of eagles it will allow the wind industry to kill every year. You have to read into the 162-page proposed rule to find that information. Even more galling, though, is FWS Director Dan Ashe’s comment in the release that, “Eagles hold a revered place in our nation’s history and culture, particularly that of Native Americans.” Frankly, it is disgusting that Jewell, Ashe, et al, can pretend to be concerned about Native Americans’ feelings when it comes to eagles while coldly disregarding their feelings about access to emergency medical care. No more proof is needed that the federal government’s care for its trust responsibilities to Alaska Natives goes no further than the extent to which it aligns with its own agenda. LIO saga continues On May 2, the Legislative Council voted 12-1 to attempt to buy another office building in Anchorage for $12.5 million currently owned by Wells Fargo and rescinded its offer made just a month ago to buy the current Legislative Information Office for $32.5 million. In an ironic twist, Wells Fargo was one of the construction lenders along with Northrim on the Downtown LIO and prepared an appraisal of $44 million that was used to justify the now-voided lease being below market value at some $3.3 million per year, which means it might end up getting a double payout from this whole fiasco because those notes were eventually consolidated into a longterm loan by EverBank. The Legislature isn’t going to get away from its mess in Downtown Anchorage by moving to Midtown. The Legislature is going to get sued by the developers and their lender and based on Alaska Supreme Court precedent they’re going to have a good chance of recovering their costs at a minimum regardless of the fact the lease was voided by a Superior Court judge. This bunch in Juneau couldn’t boil water without messing it up, but then again, they can probably get a lobbyist to do it for them. A microcosm of Republican leadership’s cluelessness was Senate President Kevin Meyer’s statement about letting lobbyists for the LIO owners buy his dinner at the same time he’s getting $213 in per diem. “We could pay for our own way,” he said to the Alaska Dispatch News. “I’m just trying to think how that would work.” They sure know how to eat. They just don’t know how to pay.

COMMENTARY: Reinbold’s budget analysis omits critical information

Rep. Lora Reinbold recently wrote an editorial taking on her colleagues in the Legislature for not cutting the budget enough. Her analysis reflects a fundamental misunderstanding of the state’s budget and omits critical data to make decisions on the budget deficit. She criticizes them for focusing on “unrestricted general fund” cuts that have been fairly substantial, and not cutting “designated general funds” and “other state funds.” What do these terms mean? “Unrestricted general funds” come from resource rents and corporate income taxes. They are used to provide services available to all Alaskans. Services like State Troopers, education funding, plowing the roads, the courts, prison systems and Pioneer homes. “Designated general funds” are funds paid by Alaskans and Alaskan businesses for the specific services that they receive from government. When you buy a driver’s or business license, your fees pay for that employee working there. When a bank is audited for solvency to protect your deposits, the bank pays for that audit. When a fish plant is inspected to make sure it is not producing tainted food, they pay for that inspection. The amount that Alaskans pay for these services is huge, amounting to $877 million in 2016. When you pay for these services, you expect them to be provided. If you quit providing the service, you would also lose the revenue so you wouldn’t have done anything to address the budget deficit. The percentage of department budgets that are paid by these fees for services would surprise you. Department of Commerce: 80 percent. Department of Environmental Conservation: 80 percent. Department of Labor: over 80 percent. Fish and Game: 90 percent. In fact, almost the entire regulatory structure of the state is paid for by fees from the regulated community. Rep. Reinbold made a number of amendments on the floor attempting to reduce the fee for service budgets of these agencies, even though it would have done nothing to solve the budget crisis. Every one of these amendments was voted down by a bipartisan vote of 37 to 1, which I guess shows you that at least the rest of the Legislature understands this. “Other state funds” are contractual obligations of the state such as school bonds and other debt. The state can’t cut these without defaulting on our loans. These amount to $342 million per year which when combined with fee for service designated funds adds up to a whopping $1.3 billion per year. This is why the Legislature has had to focus on cutting unrestricted general funds which will amount to about a 20 percent reduction for this year and last. Rep. Reinbold asks: “When you talk about the budget for your household, wouldn’t you balance total expenditures against your total income?” Well not really. Consider this example: You have a regular job that provides most of your family income but you also have a side business cleaning homes after work. You also have a house payment. If you took Rep Reinbold’s approach you would say, “Well lets just cut all of our expenses for our house cleaning business.” Well… you could do that but you would also lose all the revenue. Likewise you could say “Well let’s just quit paying our house payment.” but your house would be foreclosed and you would be out on the street. The reasonable approach would be to make your spending match your revenue from your job, keep the house cleaning business and make your house payment. So yes, the state will have to make additional cuts and look for efficiencies, but we are down to core services with a few exceptions. If we only keep drawing from our savings accounts to fill the budget deficit and can’t draw from Permanent Fund earnings or institute general tax measures such as a sales or income tax, those savings accounts will be gone and we will really be up a creek without a paddle. We can’t cut the services that people are paying for. A sales or income tax would only provide a small percentage of the budget shortfall. We must turn our savings into revenue generating assets to have any chance of maintaining the core functions of government: public safety, education, transportation and health. If we don’t, these will be the first to go. Paul Fuhs is the former Mayor of Dutch Harbor and former Commissioner of Commerce and Economic Development for Gov. Wally Hickel.  

AJOC EDITORIAL: Gov’s union contract is a joke, and so is GOP response

Gov. Bill Walker has a funny way of showing that he’s looking everywhere for solutions to the state’s current $4.1 billion deficit. In addition to reducing the Permanent Fund Dividend by redirecting earnings into paying for state government, he’s proposed raising taxes on oil and gas, fishing, mining, tourism, alcohol, cigarettes, fuel, and personal income. He made a big show in January of claims he’s instituted a hiring freeze and restricted employee travel, although he couldn’t provide any estimate of how much money it would save. Meanwhile, his Department of Administration was negotiating with the labor unions that represent about 87 percent of the employees covered by collective bargaining arrangements. About 11,000 of the 14,400 or so employees covered by the current negotiations are members of the Alaska Public Employees Association and the Alaska State Employees Association. Coincidentally, both unions endorsed Walker for governor in 2014. Also coincidentally, its members are giving up next to nothing in the contracts being presented to the Legislature for approval. All together, the Administration Department estimates the current contracts tentatively agreed to will save a whopping $6.5 million in the next fiscal year from a couple furlough days per employee and a minimal contribution to the health insurance from the current 0 percent to 5 percent. To put that in perspective, $6.5 million in savings represents about 0.5 percent of total state payroll of about $1.2 billion. Zero-point-five. Out of the total deficit, $6.5 million is 0.1 percent. Zero-point-one. In the accounting world these amounts are known as rounding errors. Out of the $457 million in higher taxes proposed by Walker — which amounts to more than 10 percent of the deficit — $6.5 million is 1.4 percent. The furlough days, minimal as they are, generate even less when Administration estimates that about three-quarters of employees will cash in leave rather than take an unpaid day. What remains are escalating and generous pay increases for “merit” and what is simply known as a “step” increase of 3.25 percent every two years. The definition of merit, under the state’s current contracts, is “acceptable or better.” Under this definition, according to Administration Commissioner Sheldon Fisher, about 95 percent of employees qualify for the 3.5 percent “merit” raise for each of their first five years on the job. To be fair, the Administration has removed the cost of living allowance increases, or COLA, from the current deals. A 2.5 percent COLA for the current fiscal year totaled about $30 million, which the Legislature offset with a corresponding cut to executive branch budgets. That is difficult to count as “savings,” though, as elimination of the COLA will be more than offset by the near-automatic merit and step raises still in the contracts. It is also worth noting that the Consumer Price Index has increased by just 0.5 percent and 1.6 percent in Anchorage in 2015 and 2014, respectively, thanks largely to the collapse in oil prices that is driving the deficit. The most fantastic statement in the Department of Administration’s presentation to the House Finance Committee on March 14 was from the slide titled “Bargaining Priorities” that read “Current fiscal climate requires modest reductions.” Modest? We know Juneau is off the road system but until now it wasn’t clear that it is actually on another planet. As usual, though, the Republican-led majorities are botching their response. Rep. Craig Johnson, R-Anchorage, introduced House Bill 379 that would eliminate the merit and step increases until oil reaches $90 per barrel for a full fiscal year. It would also change the qualification for a merit increase from “acceptable” to “good.” This is in direct opposition to a legal opinion from the Legislature’s own attorneys that declared unequivocally it is outside the body’s constitutional powers to engage in collective bargaining, which Johnson’s bill clearly does with its specific requirements for a labor contract. The memo concludes that the Legislature holds the power of the purse, and can simply refuse to appropriate money to fund raises if it doesn’t approve of them. All it should take is some firm statements from legislators to the Administration Department that they will not fund raises if they’re included in a contract. Instead they are taking what appears to be an unconstitutional path to achieve what they already have the power to do by other means. It’s no wonder the majorities find themselves in their current mess. Andrew Jensen can be reached at [email protected]

COMMENTARY: 40 years after Magnuson-Stevens, not all promises kept

The Magnuson-Stevens Fishery Conservation and Management Act turned 40 last week and federal and state fishery managers marked that event with an opinion piece in the Alaska Dispatch News on April 12 extolling the successes of the Magnuson-Stevens Act and its implementation in Alaska as a “global model of sustainability.” As the authors point out, the Magnuson-Stevens Act sets up a “transparent governing process” intended to ensure that “science is behind every fishery management decision” in Alaska. Indeed, the Magnuson-Stevens Act sets up national standards ensuring that all fisheries are managed to achieve “optimum yield from each fishery” with management decisions “based on the best scientific information available,” and guided by carefully considered fishery management plans. We can all find common ground in recognizing the benefits associated with management under the Act, as well as many of the successes of the North Pacific Fishery Management Council (the council) and NOAA Fisheries in ensuring the long-term stewardship of Alaska’s fisheries. The problem is that many important fisheries have been left out of the fold of the Magnuson-Stevens Act. The Cook Inlet salmon fishery is a prime example. Every year, some 10 to 30 million salmon pass through federal waters in Cook Inlet, in route to their native streams. These are some of the largest wild salmon runs in the world, and they go largely unharvested. But the North Pacific Fishery Management Council and NOAA Fisheries plainly don’t want anything to do with Cook Inlet salmon fisheries, despite their obligation under federal law. The council never took an active role in managing the fishery, and in 2012, with approval from NOAA Fisheries, removed Cook Inlet from the council’s Fishery Management Plan, despite the objections of the commercial fishing industry. The result is that the benefits of Magnuson-Stevens Act have never come to pass in Cook Inlet. Cook Inlet does not get the benefit of “drawing on NOAA’s environmental intelligence to improve stock assessments and assess the impact of climate change on fish population.” Cook Inlet does not get to draw upon the Magnuson-Stevens Act’s “transparent governing process” or the robust “public-private management process founded under MSA.” Cook Inlet does not get to draw on the Magnuson-Stevens Act’s promises of optimum yield for each fishery, or the promise that “science is behind every fishery management decision” in Alaska. Instead, Cook Inlet is left with the Board of Fisheries. Regardless of whether you believe those who claim the Board of Fish “isn’t broken” (ADN commentary March 16, 2016) or others who believe it certainly is broken (ADN commentary March 30, 2016), no one can reasonably argue that the Board of Fisheries process can match the transparency of the council, or claim that “science is behind every fishery management decision” made by the Board of Fisheries. There should not be any real doubt, of course, why the council doesn’t want to deal with salmon management in Cook Inlet. The resource disputes between user groups are contentious and longstanding. But the need for the scientific rigor and transparency that the council can provide has never been greater. The Board of Fisheries has made no real effort to find solutions to managing Cook Inlet salmon fisheries in light of poor returns of some stocks, the identification of several “stocks of concern,” impacts from invasive species, and growing habitat problems from both urbanization and climate change. The result in recent years has been sport and commercial fishery closures and restrictions, the loss of millions of unharvested salmon, the loss of tens of millions of dollars to the regional economy and the loss of millions of dollars to the State treasury. All Cook Inlet salmon fisheries would plainly benefit from coordinating the State’s long-standing salmon management experience with the council’s transparent, science-based process. This is precisely what the Magnuson-Stevens Act contemplates. Hopefully, the sport and commercial fishermen and the coastal communities in Cook Inlet won’t have to wait another 40 years for the promises of the Magnuson-Stevens Act to be fulfilled. David Martin is the president of the United Cook Inlet Drift Association.  

AJOC EDITORIAL: Final week cramming won’t produce sustainable solutions

As legislators attempt to cram their final week with major changes to how the state pays oil credits and uses its Permanent Fund earnings while filling the budget deficit with savings accounts, they may be tempted to go home to seek reelection feeling like they did their jobs. Public polling conducted by Dittman Research for the Alaska Chamber in the last week of March suggests they won’t face a lot of citizens who’d agree. When asked whether they had a favorable opinion of various state industries including oil and gas, tourism, mining and timber, the only segment of the economy to receive a negative rating was state government with just 42 percent having a “very” or “somewhat” favorable opinion. The Legislature fared even worse, with only 33 percent having a favorable opinion. That may not make the difference in the makeup of the body next year in Juneau, as voters in Alaska aren’t much different than those around the country that routinely give Congress a sub-20 percent approval rating yet more than 85 percent of incumbents are typically reelected. “Everybody else is an idiot, but my (fill in the blank) is OK,” seems to be the sentiment, which calls to mind an expression by Alaska pioneer Clem Tillion that goes along the lines of, “Nothing will make you think worse of your neighbors than seeing who they elect to represent them.” What Alaska’s fiscal crisis has exposed is how poorly so many state government functions and programs perform. In fat budget times not many in Juneau were overly concerned with throwing money at capital projects, prisons, education and oil tax incentives. Now that they have been forced to examine all spending — and as their constituents who’ve gotten hooked on it lobby to preserve the status quo — it’s clear that oversight and accountability have been sorely lacking.  Starting with oil credits, the Legislature is missing a huge opportunity to fix the program beyond simply reducing outlays. While some tweaks to credits at low prices are not unreasonable, it is indisputable that oil companies have responded to Senate Bill 21 passed in 2013 and upheld by referendum in 2014. Daily production for this fiscal year is now forecast to be about 520,000 barrels per day compared to 500,000 barrels per day last fiscal year. That’s a real number that can’t be disputed by those legislators who criticize SB 21 to this day with the same tired talking points they’ve belched out for the last three years. Even next year, knowing BP plans to shut down some rigs at Prudhoe, the forecast is for 507,000 barrels per day. In the fall 2012 Revenue Department forecast, production in fiscal year 2017 was supposed to be only 484,000 barrels per day. The 2012 forecast was for just 8,300 barrels per day in Cook Inlet. We’re now nearly 10,000 barrels per day greater than that. One Hilcorp platform that was producing just 600 barrels per day when the company took it over is now paying $6 million per year in royalties to the state and as a producer of more than 50,000 barrels per day it is no longer eligible for many of the credits it is advocating to preserve. The Cook Inlet Recovery Act and SB 21 worked to reverse declines on both the Slope and the Inlet. They aren’t perfect, but looking at the bottom line of production, SB 21 has far outperformed ACES, which had its own issues with declining output and ballooning credit payments that were on pace to top $1 billion per year before the overly generous 20 percent capital expenditure credit was repealed under SB 21 and replaced with credits tied to barrels produced and not merely money spent. That ACES cap-ex credit would have put the state on the hook for $800 million at Point Thomson alone, which is greater than the entire proposed fiscal year 2017 appropriation for tax credits and incentives. Transparency measures have been stripped out of the current oil tax credit bills, and that’s a shame. Keeping confidential credits related to actual tax liability and production is understandable. Keeping confidential the rebates paid out to companies exploring that have no tax liability is not. A simple fix would be to set an annual appropriation amount the state is willing to invest in exploration projects. Companies would have to seek pre-approval for projects, and therefore know what they can expect in rebates, and the state would know what its outlays will be and whether a prospect is worth exploring based on input from the Natural Resources and Revenue departments. Companies have been quite willing to disclose what they expect from state rebates to secure private investor funding, so if they want the state’s help they should have to do it on the state’s terms. That should mean the public knows the projects the state is investing in. It’s impossible to defend a program you can’t explain, and House Speaker Mike Chenault couldn’t be more wrong when he says the average Alaskan doesn’t care where the money is going. The state needs companies investing and exploring at times of low prices so that when the inevitable price rebound occurs the state will be positioned to benefit. But instead it once again appears poised to chase out companies with its never-ending quest to find a “heads we win, tails you lose” tax policy that jacks up taxes at times of both high and low prices. The education lobby wants funding preserved for K-12 and the university system, but there has been precious little examination of what the state is getting for its money despite spending more per pupil than every state other than New York. The idea of defunding the Alaska Performance Scholarships in order to pay for retired teacher pensions appears backward on its face — cutting spending on the future in order to pay for promises of the past — but it has shone a light on the shortcomings of the state education system. A full 50 percent of students enrolling in the University of Alaska system need remedial education, including 20 percent of the students who receive scholarships, and three out of four students who enroll at the UA won’t graduate within six years. Neither of those numbers are acceptable, yet nothing that’s happening in Juneau is addressing the chronic problem of poor results at every level of education. Critics are harping on subsidies for the oil industry that pays the freight for virtually everything in Alaska (and is once again being called to pay more), yet few have questioned the wisdom of subsidizing unqualified students and therefore the tuition rolls of the University system. On Medicaid reform, a great irony of the bill headed for passage is that most of the savings come from more federal dollars for Tribal care. The Legislature is also quietly funding the expanded class of Medicaid recipients the majorities are currently suing the governor to overturn. For the most part, legislators are papering over problems with the apparent main goal of preserving the PFD at $1,000, an amount greater than the 2012 and 2013 payouts, which were $876 and $900, respectively, in the hopes they can return to Juneau next year. A better example of election year politics is hard to imagine than setting a minimum PFD that is actually larger than recent year payouts at a time of multi-billion-dollar deficits. If lack of leadership creates a vacuum, Stephen Hawking should be studying Juneau for its resemblance to a black hole. Andrew Jensen can be reached at [email protected]

COMMENTARY: Confidence in state govt. plunges amid budget concerns

A $4 billion spending gap isn’t the only crisis facing lawmakers and the governor this year. Elected officials are also facing a crisis of confidence. Each year the Alaska Chamber conducts a statewide poll to gauge voter perception of business and the economy. The results this year clearly show all eyes are on Juneau, and Alaskans are increasingly pessimistic that we are on the right path toward a balanced budget. Juneau, we have a problem... The state’s inability to restructure government to a sustainable level is reflected in Alaskans’ perception of the economy. Last year, most Alaskans held state government in relatively high regard, with 64 percent reporting a favorable or better opinion. The number of Alaskans with faith in state government has plummeted over 20 points in 2016. We’ve also heard increasing concern regarding the state’s money troubles impacting Alaska’s economy as a whole. In 2015, Alaskan’s were well aware that state spending had ballooned to unsustainable levels. More than half of voters polled recognized the budget was a problem; one-fifth said state spending was a crisis. But this year the number of Alaskan’s concerned about state spending is overwhelming. Voters declaring the budget as a crisis have more than doubled, climbing to 49 percent in 2016. What’s behind these big swings in public concern? Rewind to early 2015. Alaska had a new governor with tough talk on spending. Legislators were arriving in Juneau with commitments to make the difficult decisions needed to prune a $6 billion spending habit down to a sustainable level. Now — 15 months, two legislative sessions, and a bewildering collection of special session activities later — Alaskans no longer believe the state is willing to make lasting changes to spending. A universal concern When asked what the most important issue the Alaska Legislature should tackle this year, Alaskans resoundingly answered, “fix the budget.” In 2015, balancing the budget was already the most mentioned expectation for lawmakers. The issue eclipsed constants like education funding and even spending cuts; those two priorities were tied in second place. This year, however, 48 percent of Alaskans polled want the state budget deficit dealt with. The second most commonly volunteered priority is cuts to spending. Funding state services like economic diversity initiatives, and even education funding, are in the single digit percentages. These numbers illustrate a dramatic uptick in public concern. Last year, Alaskans were bullish about the economy, even while acknowledging that public spending was an item of concern. This year the number of Alaskans stating the economy is good or very good dipped below 50 percent. Correspondingly, 71 percent of Alaskans now believe that Alaska is on the wrong track, up from just 32 percent in 2015. So what do Alaskans believe is the solution to the state’s budget woes? More than anything, Alaskans want deeper cuts to state spending. More than any option, including new taxes or tapping into Permanent Fund earnings — more even than a combination of taxes and cuts — voters want a state government that Alaska can afford. And they are correct in wanting this. Efforts in Juneau this year are focused predominantly on “new revenue;” fees, cutting industry incentives, new taxes, and increases to existing taxes. But while debates over these catch-what-we-can revenue initiatives are dominating discussion, they fail to address the budget crisis. Using the fiscal notes from the Office of Management and Budget, all new revenue measures combined generate $855 million. That’s enough money to fund state government for a little over a month. Alaskans are concerned about the other 11 months of each year. The Alaska Chamber believes spending must be brought in line while Alaska savings are still available as a resource. To that end, we support efforts to reduce the state’s operating budget to a sustainable level by creating an endowment model or similar framework to use Permanent Fund earnings to support essential services. Only then should we explore new, broad-based taxes, if needed. Alaskans are aware of the problem. They’re accepting of the necessary solution. They’re just waiting for leadership with the discipline and resolve to get the job done. Curtis W. Thayer is lifelong Alaskan and serves as president and CEO of the Alaska Chamber.  

COMMENTARY: Touted cuts not reducing total size of government

State government is simply too big and the state Legislature has not made adequate progress in reducing the burden of big government. According to the State of Alaska Office of Management and Budget, only minimal reductions in the total operating budget have been achieved in the last two years. Note that the fiscal year 2015 operating budget was off trend and higher because of an extraordinary $3 billion dollar direct appropriation for the state retirement liability. Comparing fiscal year 2014 and fiscal year 2016 total operating costs, a reduction of only 4.2 percent was achieved in two years! And for fiscal year 2017, don’t hold your breath, preliminary budgets recommended by the governor, and proposed by the House and Senate are projected to remain at historical highs. Surprised? Despite the budget cutting rhetoric coming out of Juneau, little progress has been made on real cost reductions. The numbers are clear, the impact is real, and this level of spending on state government is unsustainable. It is time to fundamentally change the cost structure of government before we take more hard earned money from the citizens of Alaska, or raid the Permanent Fund, the savings account which fortunately is protected by our state Constitution. So, why are the numbers so different? The House and Senate claim 10 percent cost reductions in proposed fiscal year 2017 Unrestricted General Fund, or UGF, expenditures. And similar budget reductions have been reported for the current fiscal year 2016 budget. Here’s the problem. Reporting a reduction in expenditure from only this one funding source is misleading. The UGF is only a portion of the state operating budget, albeit a significant portion. The total state operating budget is comprised of expenditures from the Unrestricted General Fund (UGF), Designated General Fund, other state funds, and federal receipts. When we talk about the cost of government, shouldn’t we talk about the total operating cost? When you talk about the budget for your household, wouldn’t you balance total expenditures (total operating cost) against your total income (revenues)? If you look at the total operating cost there is a clear reality — we have not reduced the massive footprint of big government. While the Legislature works to cut UGF, our savings accounts are being quietly depleted to back-fill reductions in the UGF. Also, when supplemental budgets are implemented they offset reductions reported in prior budget years. This is evident in fiscal year 2016, where a supplemental spending request of approximately $185 million is pending in Legislature. We must fundamentally change the way we construct the yearly state operating budget. Currently, the budget is constructed from the top down. We start with last year’s budget and the governor’s request, and ask, “Is there anything we can cut?” We hold hearings where department commissioners vehemently defend their budgets, and special interest groups intensely lobby for their pet funding. Every potential budget cut has a constituency, and potentially a lobbyist, arguing passionately to keep their funding. Human nature and politics usually prevail, which make it very difficult to cut funding after programs and benefits have been established. Unfortunately, we grew state government during the good times, because again, human nature prevailed, i.e. it’s easy to give away someone else’s money to make someone happy. There are many people and organizations coming to Juneau pleading for us to not reduce funding. However the reality is we cannot afford to continue to spend at historic levels. The problem is that this bad behavior has left us in a difficult situation with difficult choices. While making these budget decisions we must never forget about the valued constituency, the businesses, the people and the next generation that will be asked to pay for these Denali-sized budgets. In my opinion, we, the State of Alaska, need to go through every department, every function, and every state owned entity, and ask, “Do we really need this function?” and “Is it government’s role to provide this service?” Secondly, we need to benchmark the cost of state government, by comparing the total operating cost for state government in Alaska to other states across the nation. As a starting point, we should target operating our state government at the national average. So here’s the bottom-line. State government is still too big, too costly, and too inefficient. Gov. Bill Walker should take the lead and restructure his departments, improve operating efficiency, and demand accountability. Benchmarking costs would provide a standard and a goal for achieving cost efficiency. We must not tax Alaskans and draw from the Permanent Fund before we first ensure that Alaska is paying only for essential government services and delivering those services efficiently. Rep. Lora Reinbold represents District 14 in Eagle River.  

GUEST COMMENTARY: Sustainable budget doesn’t require onerous taxes, PFD cuts

The Fairbanks North Star Borough Assembly just passed a resolution asking the Legislature to implement a sustainable budget. I voted against it since it specifically asked for taxes, and those aren’t helpful or necessary for the present situation. During the testimony it was shown that there were a lot of misconceptions about our state budget situation, so I wanted to clarify some of the details. First, the state will be entering an economic downturn, or recession. It has nothing to do with the legislature making cuts; the state spending more dollars will not stop the recession. We should all be prepared for this natural response to low oil prices. Please understand that the lingo about “don’t cut too much or we’ll get a recession” is just a political ploy by big spenders in the legislature who don’t want the gravy train to stop. They’ll use it in the elections the next few years to try and sell the voters that any legislator that made cuts caused the recession. Please think for yourself and don’t buy it. Remember, if taxes or Permanent Fund Dividend cuts go into effect, that money will be taken out of the economy. So any government spending from that was with money already withdrawn from the economy, so it gives no help to the economy. Actually, it makes it worse because government can’t redistribute money without using some, so less gets back to the economy than came out of it. Second, most of the proponents of taxes or PFD cuts are targeting a goal of having a zero deficit. This isn’t needed, and in fact goes against having a sustainable budget, since it has a mindset that we should spend all we get. Since the large money started coming in from high oil prices the state has budgeted based on high oil. The governor’s plan is now reacting to that and budgeting based on low oil. To achieve a sustainable budget, we need to realize that oil prices are cyclic, the will rise and fall over and over again. We can therefore create a budget that is the same (indexed for inflation) ongoing by knowing that fact. Once you get to this sustainable budget number (around $4.3 billion now), you can have a structured deficit in the lean years, and build your savings back up in the good years. Isn’t that why we have savings accounts, to handle unexpected crises? Third, a sustainable budget plan I’ve described has already been worked out by Economist Scott Goldsmith with ISER (University of Alaska Anchorage Institute of Social and Economic Research). It is based on using our two current primary revenue streams, oil and investment income. With that revenue and cutting to a sustainable budget number, we won’t have to implement onerous taxes or PFD cuts. Fourth, the investment income is mostly put into the Earnings Reserve of the Permanent Fund. It doesn’t affect the Permanent Fund, and it doesn’t have to touch the PFD at all. We can completely protect the PFD while implementing this plan. I agree that we need to appeal to the Legislature to implement initiatives to achieve a sustainable budget, and I would encourage everyone to do that. Please remember when doing so, that it can be done with a structured deficit, without taxes or PFD cuts, by using our existing revenues. I was here in the late 1980s when we had our last big recession, and while it was miserable, we survived, and we can do it again. Hopefully this time we learn our lesson and stop increasing government spending constantly in the future. Lance Roberts is a member of the Fairbanks North Star Borough Assembly.

FISH FACTOR: Economist: Many factors involved in retail salmon prices

If a fisherman gets 50 cents a pound for his reds, how can the fish fetch $10, $15 or more at retail counters? “It’s all the other stuff that happens after he sells the fish. A lot of costs, margins and profits are included in that retail price,” said Andy Wink, a fisheries economist with the McDowell Group in Juneau. It’s an “apples and oranges” comparison when it comes to using weights paid for the raw goods and the end product. A lot of weight is lost going from a whole fish, which fishermen are paid on, to a fillet at retail counters. “Most sockeye fillets amount to 40 to 50 percent of the round fish weight. If fishermen sold sockeye at $0.50 per pound, there’s about $1.10 of raw material cost in a $10 per pound fillet sold at retail,” Wink explained. “This might seem like a high mark up, but it’s a decent reflection of all the costs and acceptable margins built into the product.” The average wholesale price Alaska processors received for sockeye salmon (round) at the end of 2015 was $2.40 per pound, according to the state Department of Revenue; and $5.73 per pound for fillets. Costs add up as the fish makes its way to retail counters, where most will tout a “full retail price,” and then tweak it throughout the year using discounts and promotions. “A retailer will run sockeye promotions of say, $9.99 a pound. That way they can say they have discounted the product $8 so it looks like a big saving for the consumer. Instead of promoting the fish for four weeks, maybe they will run it for 10 or 15 weeks out of the year. It just depends on how much success they have with it,” he explained, adding that processors and distributors often have to pay (or reduce their prices) to get a retailer to promote product at a discounted price. The increased supply of sockeye from back to back bumper years at Bristol Bay also has had a big impact on what buyers are willing or able to pay. The big harvests mean more of the reds must be sold through discounts; that leads to a lower wholesale price, which affects the exvessel (dock) price. “Promotions and discounts are a double-edged sword,” Wink said. “They lead to lower prices, but are a necessary tool to move larger volumes of product through the supply chain. Without them, inventories would swell and product would go to waste.” Grundens for gals Grundens, the go to brand for heavy-duty rain gear, has launched a line for women. “Women would send us emails saying, ‘We love your gear, we wear it all the time, but it’s built for guys, said Eric Tietje, Global Product Director. “Either the sleeves are too long or they are too big in the shoulders. It was really just uncomfortable and cumbersome for women to wear.” Tietje credits a push by the social media site Chix Who Fish, for getting the new gear rolling. “All these women really banded together and became a loud voice, telling retailers that they are a market that is not being served,” he said. “We heard from lobster women in Maine, female marine researchers, and women in Alaska.” The result: Sedna Gear, designed for a fishing woman’s dimensions. The new line of rain gear has brought a wave of good responses, beyond the better fit. “The women have told us that by creating this product, it recognizes and validates what they do in the industry, and that means something,” Tietje said, adding that it’s made a big difference on deck. “It’s not just a piece of clothing,” he said.” We view these as pieces of equipment that people use to do their job.” Coming soon from Grundens: light weight gear and base layers for women, ceramic coatings on outer gear for added safety, and fabrics using Alaska crab shells that absorb sweat and eliminate odor. (That product is produced by Juneau-based Tidal Vision LLC.) ComFish flash Big names, hot topics and fish competitions are headlining the 36th annual ComFish Alaska trade show, hosted March 31-April 2 by the Kodiak Chamber of Commerce. In the line up: Alaska Senators Murkowski and Sullivan both are scheduled to hold open meetings; as are state commercial fisheries director, Scott Kelly, and Rep. Louise Stutes (R-Kodiak), who also chairs the legislative Fisheries Committee. Gunnar Knapp, director at the Institute of Social and Economic Research at the University of Alaska/Anchorage, will discuss salmon markets and how the state’s fiscal crunch might affect fisheries. Alex Stone of the Washington, D.C.-based consulting firm Booz Allen Hamilton will provide updates on Navy training exercises in the Gulf of Alaska. Presentations also include: impacts of ocean acidification on crab fisheries, slow growing halibut, better trawling methods, new fishing vessel safety regulations, the “graying of the fleet,” challenges in access to Alaska fisheries, a cannery history and much more. ComFish wraps up on April 2 with the annual fish-filleting contest organized by Ocean Beauty Seafoods. It includes contestants from each of Kodiak’s seven processing plants who are timed and judged on fillet and trimming speed, form and quality. New to the ComFish line up is an Alaska Sea Grant Fishermen’s Showcase featuring contests in knot tying, net mending, hook throwing, coiling and more. The ComFish dates are March 31-April 2 in downtown Kodiak. www.comfishalaska.com. Visit www.alaskafishfactor.com or contact [email protected] for information.

The Bookworm Sez: Be the best at being your own boss

Another desk at the office is empty this week. Another co-worker packed up, leaving the place short-handed. Another downsize, and another reason for worry. What will you do if you’re next? You can’t just start over but you can’t retire yet, either. So read the new book “Be Your Best Boss” by William R. Seagraves, and see if you have what it takes for a new beginning. William Seagraves likes to drive. When he’s with friends or colleagues, he’s always the first to offer his car, which is a good metaphor for his worklife: he likes to be in the driver’s seat in business. Yes, he enjoyed some autonomy in his last position, but he says, “I could not stand (the) lack of control.” Seagraves left his corporate job and tried his hand at being an entrepreneur (“That scary twelve-letter word”) in a few different ways before he discovered something he liked. Today, he runs a successful company that helps entrepreneurs get started; in this book, he offers guidance on deciding if owning a business is for you. First: what’s your pain? Are you being forced out by younger workers? Downsized? Or are you disillusioned with corporate life? What are your passions? Knowing answers to those questions will help winnow your options and overcome the “Yeah, Buts.” Look at your skills and experiences and understand that you’ve already won half the battle. You know how to play nice with others. You’ve grown a thick skin, “practiced making money,” and learned the rules of a lot of games. Many of the traits you’ll need to be an entrepreneur are inherent in you now. Next, take the quiz Seagraves includes and understand that “size matters.” Are you more of a “Company of One” kind of person? Would you be better as “Boss of a Few”? Is a “Business of Many” more your style? And what about a franchise? Know the pros and cons of these entrepreneurial methods, take things “one step at a time,” keep in mind that change is the “only constant,” and remember that “… a smart business owner always plans for the exit, and there are more options than you might think.” Self-employment: the most frustrating, irritating, horrible, wonderful, awesome, terrific thing you’ll ever do for yourself. Are you ready? “Be Your Best Boss” will help you decide. As you might expect, author William R. Seagraves is mostly encouraging in his book. There’s a lot of surface positivity here, but entrepreneurial readers with a mindset of doing it will absolutely find the help they need to do it right. I was happy to note plenty of quizzes to guide future business owners into the kind of endeavor that best fits their personality and work-style, and the Pros and Cons pages here are invaluable. While younger entrepreneurs might appreciate this book, it really seems to be more for older readers who’ve been in the workforce awhile. Corporate life may have soured for Boomers and early Gen-Xers, but “Be Your Best Boss” won’t leave them empty handed. Terri Schlichenmeyer is the author of The Bookworm Sez, which is published in more than 200 newspapers and 50 magazines throughout the U.S. and Canada. Schlichenmeyer may be reached at [email protected]

AJOC EDITORIAL: Read their lips: No new taxes

With operating budgets passed in the House and Senate but not yet funded, at least one thing is now clear: Gov. Bill Walker’s proposals to raise taxes on individuals and businesses by nearly $460 million in the next fiscal year aren’t going anywhere. Senate Finance Co-Chair Pete Kelly, R-Fairbanks, couldn’t have been more blunt — or, frankly, rude — in response to a question about how the Legislature plans to pay for the fiscal year 2017 spending that figures to outpace revenue by $3.7 billion. At a Finance Committee press conference March 15, Kelly took the opportunity of a question that did not mention taxes to state unequivocally that he has no intention of plumbing a well to the private sector to fill whatever gap remains once some means of drawing from Permanent Fund earnings is chosen. Kelly noted he was speaking for himself, but with all but one of Walker’s proposed tax hikes still sitting in committee or yet to receive a hearing, there can be little doubt his opinion represents the Republican majorities. The only tax proposal that has moved out of its original committee is the doubling of the fuel tax from its current national low of 8 cents per gallon that is projected to raise about $49 million per year. The increase has received a large amount of support from stakeholders in the transportation industry who recognize the importance of maintaining the infrastructure on which their livelihoods depends. Of all Walker’s tax proposals, it’s also the fairest and most broad-based, especially at today’s depressed fuel prices. The Legislature still has a heavy lift ahead to select a means to use the Permanent Fund earnings and because it won’t raise additional revenue through taxes, the majority in the House is going to have to cut some deals with the minority Democrats in order to draw from the Constitutional Budget Reserve, or CBR. And just as an aside, Kelly and fellow Finance Co-Chair Anna MacKinnon, R-Eagle River, attempted to argue that a budget paid for with the Earnings Reserve and the CBR is “balanced.” A budget is balanced when revenue covers expenses. A budget that relies on savings is funded. There’s a huge difference, and as far as spin goes it can’t turn a pinwheel in a hurricane. Nevertheless, the majorities are correct that it is far better to make a relatively small draw from the CBR than it is to kick Alaska’s economic drivers in the guts while they’re down. The oil industry that’s propped up Alaska’s government spending for nearly 40 years is always a juicy target — for this governor in particular — but no knowledgeable observer could look at the daily stream of news about layoffs, delayed projects and idled rigs and think raising taxes on its members by some $100 million as Walker has proposed is anything but a terrible idea. Alaska’s most valuable fishery with the greatest number of workers — salmon — is in the midst of its own price crisis yet Walker wants to extract $18 million out of the industry by raising every fish tax. Minerals prices have also trended lower, and global sluggishness is reducing demand along with other factors such as transitions away from coal that caused Usibelli to halt exports last year. The governor and his Revenue Department asked the University of Alaska Institute of Social and Economic Research to study the effects of budget cuts on the broader economy. That ISER’s original analysis did not consider the impacts of private sector job losses was a glaring omission that still managed to be revealing. What we can see from the ISER study is that government job losses have a multiplier effect of less than one. A loss of 900 government jobs results in a loss of about 700 indirect jobs. ISER may not have looked at private sector losses and their multipliers, but the McDowell Group has done plenty of work in this arena over the years. What McDowell Group has found is that every direct job in oil production creates an additional nine in the private sector. When the role of oil taxes are accounted for, each oil industry job pays for another 10 state and local government jobs. Mining and fishing have 2-to-1 job multipliers according to various McDowell Group studies. Breaking it down, the Legislature’s priorities should be clear: Preserving private sector jobs is more important than preserving public sector jobs. As a business publication, we don’t want anyone to lose their job, but this is the tradeoff the state faces. Walker may not like it — and he’s certainly welcome to go out and advocate for taxing Alaskan incomes at a $400 million annualized rate — but refusing to raise taxes during an economic downturn is the right call from the Legislature. Andrew Jensen can be reached at [email protected]  

FISH FACTOR: Salmon permit values sink; halibut quota prices spike

Firesale salmon prices last year and a dim outlook for the upcoming season have caused the value of Alaska fishing permits to plummet. To another extreme, the prices for halibut catch shares have soared to “unheard of levels.” Starting with salmon permits: “A lot of people had disastrous seasons last year, whether it was drift gillnet or seine permits, and the values have declined dramatically,” said Doug Bowen of Alaska Boats and Permits in Homer. At Alaska’s bellwether fishery at Bristol Bay, a base sockeye prices of 50 cents per pound helped push drift gillnet permit prices into the $98,000 range, down from $175,000 last spring. “That may be the bottom; they seem to have come up a bit,” Bowen said, “but it’s still way below what they were trading for at this time last year.” The lower prices have spawned little interest in Bay drift permits; likewise, for salmon seine cards across the state. Seine permits at Prince William Sound are priced in the $150,000 range, down from over $200,000 a year ago. Kodiak seine permits have sunk into the mid $30,000s, and a Cook Inlet drift permit is valued in the $60,000 range. Bowen doesn’t expect the tide to turn anytime soon. “I’m afraid a lot of the same factors that contributed to the low prices we saw last year are pretty much the same this year. It’s not an optimistic outlook for salmon, and that is depressing the market for permits, and also the boats,” he added. “There are lots on the market, lots of sellers, not that many buyers. “There’s not a lot of extra money floating around in the salmon industry. So folks wanting to upgrade their vessels or pick up permits in another area, we’re just not seeing that happening.” The situation is slightly better in Southeast Alaska, where driftnet permits are getting a plug of interest. “More than I thought compared to all the other salmon areas,” said Olivia Olsen of Alaskan Quota and Permits at Petersburg. “We started at $78,000 in November and drifts now are going for $85,000 and they may creep up from there. Same with power troll permits. They’ve been pretty steady sales at about $35,000, which is down about $6,000 from last year, but still a pretty good price when you listen to all the talk about bad salmon prices. Hand troll permits also are on the upswing to $12,000.” Both brokers said salmon permit prices tend to tick upwards the closer it gets to salmon season. “I think the main issue is what we are going to see for prices, Bowen and Olsen said. Halibut share shocker This year’s small increase in halibut catches combined with hopes of a repeat of $6-$7 per pound prices was enough to send quota share prices skyrocketing. “There was a big rush after the halibut numbers were announced in late January,” said Olsen at Alaskan Quota and Permits in Petersburg. For the first time in nearly two decades, the coast-wide halibut catch was increased by 2.3 percent to nearly 30 million pounds. Alaska’s share of 21.45 million pounds is up 200,000 pounds from 2015. “I would say quota prices shot up $10 a pound since December,” Olsen said of Southeast shares. “We have current sales pending at $63 and $65 per pound, with rumors of going higher. Those prices are just unheard of, and to jump up that high in that short period of time — oh, my golly!” Are people buying at those nosebleed prices? “There’s a lot of people drawing the line, but there are a few who have bought. They’ve been waiting a long time for it and are just going to bite the bullet,” Olsen said. The same holds true for quota prices in the Central Gulf, Alaska’s largest halibut fishing hole. “Those are bumping up to $60,” said Doug Bowen of Alaska Boats and Permits in Homer. “We’ve had offers of $59 but no takers. Quota shares for the Western Gulf have increased by around $5 and are in the $40s if you can find it. There is strong interest there and also in Bering Sea regions. But it’s the same scenario: more buyers than sellers and the market is really tight.” Olsen added: “It will be interesting to see if these prices will last.” Got ice? A grass roots push is underway in Kodiak for a self-pay icehouse and crane at Oscars Dock at its downtown harbor. “It’s common in fishing communities throughout Alaska and the nation,” said Theresa Peterson, a fisherman and outreach director for the Alaska Marine Conservation Council. “It’s kind of strange that Kodiak doesn’t have this facility, being that we are the No. 2 port in the nation, and home to the largest and most diversified fleet in Alaska.” The need and benefits go far beyond commercial fishing, Peterson stressed. It would serve Kodiak’s five outlying villages, whose residents travel by boat to town and load/offload provisions, sport charter operators, recreational anglers and hunters. Fisherman Darius Kasprzak, who calls Kodiak’s lack of a public icehouse “flabbergasting,” is worried that a lack of it will drive the island’s fleet of small salmon boats out of business. “More processors are requiring RSW (refrigerated sea water) systems and are phasing out all the ice boats. Only a few processors are still accepting fish iced in holds, and most of those are grandfathered in,” Kasprzak said. “So all these little boats that don’t have room for RSW or don’t have the money are walking on pins and needles. But if there’s public ice that will change things dramatically.” Boat owners with RSW also would like to be able to grab ice so they could shut down the systems at night “and not have to listen to it,” he added.  “It’s worth it to buy some ice and chill off the top of the fish and not have to buy fuel and put wear and tear on the RSW,” he explained. Kasprzak said there is another reason ice is even more important for a water faring community. “Our waters are warming. Right now temperatures are at 7 degrees over normal. Last summer the water at Prince William Sound reached 60 degrees. Our RSW systems aren’t built to handle those temperatures. The Kodiak processors didn’t have enough ice for boats last salmon season because it was so hot. There’s more of a need now for a community ice house than ever.” The Kodiak City Council will hear the issue on March 15. Weigh in on water The Alaska Department of Natural Resources is considering revising its water management practices and wants input from the public. It includes regulations on water rights in streams, lakes, wells and other bodies. A DNR announcement said: “The department is soliciting feedback and comments from the public on how they would change or improve the existing regulatory framework related to water management or for suggestions and proposals which would improve the regulations related to water management before the formal process of drafting any proposed changes begins.” Comments are accepted through March 18. Send via email to [email protected] Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

EYE ON WALL STREET: A volatile month for stocks; eying Fund earnings bills

After a rocky start to the year, the financial markets settled down mid-February with oil and U.S. equities rebounding in the latter half of the month. The foreign equity markets have rallied a bit, but are still in a funk. Bond yields remain at historic lows. The 10-year Treasury yields 1.8 percent, which looks positively mouthwatering compared to Japanese and German government bonds that are flirting with negative yields. Dipping into the Permanent Fund As everyone knows, Alaska is facing some difficult fiscal decisions as a result of plunging oil prices and declining production. Approximately 90 percent of general fund revenue is directly tied to oil. Oil is just over $30 a barrel and the Department of Revenue is assuming $60 a barrel for budgeting purposes. At the $60 level, the state faces a $3.5 billion budget deficit both this year and next. We are spending $5 billion and taking in $1.5 billion. At current spending levels it would take a price of $115 per barrel to balance the budget. What to do? Well, we can’t just cut out $3.5 billion. The state’s annual domestic product, or GSP, is around $50 billion so $3.5 billion is 7 percent. Reducing spending by 7 percent of GSP (even forgetting about multiplier effects) would be disastrous. The Great Recession of 2008 saw the U.S. economy fall just over 4 percent and that was pretty scary, pushing unemployment up to 10 percent. The state has saved a lot to help us get through this current crisis, something we didn’t do in front of the economic crisis in the late 1980s. But we’re burning through that savings quickly. At current rates it would be gone in several years. There are three plans for addressing the budget crisis that are currently being debated in Juneau. I won’t go into the details, but all three draw on the Permanent Fund. The Governor’s plan (SB 128) is a bit more complicated (and comprehensive) than the other two (SB 114 and HB 224). Let’s ignore that in the interest of simplicity. Callan Associates, the longtime consultant for the Permanent Fund, was in town a few weeks ago and analyzed what these three plans would mean for the Fund. The firm analyzed the impact on the Fund of drawing roughly 4 percent to 5 percent net out of the Fund (actually the Realized Earnings Reserve) each year, depending on the plan. The Fund’s expected return over the long run is 6.9 percent, so that seems doable and would leave enough room for the fund to grow, albeit slower than before. To get a handle on how market volatility would affect the analysis, Callan ran Monte Carlo simulations over several thousand future market scenarios to look at the dispersion of results over 10 years for each plan. (APCM uses this technique for modeling balanced accounts and the probabilities of reaching horizon goals. It’s standard operating procedure in the asset allocation business.) Guess what? It looks like all three plans are reasonable and leave the Permanent Fund with a median real value of just over $50 billion at the end of 10 years — about where it is today. Each plan can withdraw at least $2 billion per year from the get-go to help with the budget deficit. A combination of cuts and tax increases would need to be debated and adopted to close the remaining $1.5 billion deficit. While tapping the Permanent Fund is not a perfect solution, doing so would buy some time to consider other options. What about the Permanent Fund Dividend? The Governor’s plan provides for a $1,000 dividend this year, followed by modest declines as oil production decreases over time. The other two plans allow for the existing dividend formula to play out for a year or two and then it will probably be up to the Legislature to decide if future dividends are feasible. If it is decided that the Permanent Fund should be used to help close the budget deficit, using the current payout method for the annual dividend would likely prove unsustainable. Under current laws the Legislature can only distribute earnings from the Fund for any public purpose (including dividends). However if there are no earnings reserves it would require a constitutional amendment (and vote of the people) to make a principal distribution. There is no easy or perfect answer in this situation, but moving forward with a plan that balances the budget over time is best done sooner rather than later. Jeff Pantages, CFA, is the chief investment officer for Alaska Permanent Capital Management, a $3.5 billion investment management and advisory firm located Anchorage.

GUEST COMMENTARY: Higher taxes on oil industry won’t fix fiscal gap

It was just 18 months ago that Alaskans voted for more oil production when they soundly rejected Ballot Measure 1, which sought to repeal Senate Bill 21, the More Alaska Production Act. That vote has paid big dividends to Alaska, with forecasts projecting an additional 50,000 barrels of new oil per day through the Trans-Alaska pipeline System by 2020, and stabilizing the flow rate this year for the first time in many years. In 2015, some 185.6 million barrels flowed through the pipeline, a mere 1 percent decline from 2014, and a sharp reversal of historic decline rates of 7 percent or more. North Slope production averaged 508,446 barrels per day, just 1 percent less than the year before. These are encouraging numbers, especially for an industry that has suffered record losses due to plummeting oil prices. North Slope oil now sells for less than it costs to produce, leading to huge losses and negative cash flows. In spite of these losses, the industry continues to invest heavily in Alaska. We must be very careful not to punish this investment behavior by raising taxes during these difficult times. The risks to Alaska of discouraging investment through increased taxes are extreme. The oil and gas industry still supports one-third of the entire state economy and has provided 88 percent of all state revenues since statehood. Even in these times of mounting losses, Alaska will collect 67 percent of its revenues from the oil industry through property taxes, income taxes, production taxes and royalties. And it’s important to remember that the State is collecting more under SB 21 than it would under ACES. We are already witnessing the negative impacts of $30 per barrel oil — a price that, when adjusted for inflation, is the lowest since the crash of the 1980s. While Alaska is still attracting investment today, most oil provinces are not. We are very fortunate to be living and working in Alaska than in oil locations elsewhere. Despite these sobering times, the industry has upheld the commitment it made when the Legislature passed — and Gov. Sean Parnell signed — SB 21, the More Alaska Production Act. It pledged to increase investment, and it did, to the tune of $5 billion. Legislation recently introduced dramatically changes the tax system established by SB 21 by raising the minimum tax by at least 25 percent for some fields and imposing a new tax for others. It also repeals and alters tax credits, many of which provide an investment in Alaska’s future and encourage exactly the type of private spending that keeps our Alaska economy strong. This legislation was introduced despite the fact that it will do little to solve our fiscal crisis but will greatly harm an industry that’s already on its knees. The legislation ignores the fact that the voters spoke loud and clear, as did Gov. Bill Walker, who said, “I do not intend to offer changes to SB 21”. This legislation would mark the sixth major tax change in 11 years. Attracting investment requires a fair and stable tax structure. Tax credit policy should not be a whipsaw for filling the budget deficit; it should be a thoughtful approach to a stable and growing economy. As Caelus warned last year, “Every time there is a cough in Alaska about changing the oil tax structure, that cold goes all the way to Manhattan.” Caelus, a Texas-based independent, is one of the North Slope’s most active explorers. We all know that taxes on our resource industries are politically easier than taxes on our residents. But our resource industries are the last place we should look for tax revenue today, as they are swimming in an ocean of red ink and unable to continue investment if we raise taxes while they are losing money. Our state is facing a massive fiscal crisis unseen in more than 30 years. We applaud the governor and legislators who are willing to put Alaska’s long-term economic future ahead of short-term politics. There is nothing more important for our state than to solve our budget deficit and build a sustainable economic future for our state, but we can’t do it on the backs of an ailing industry that already pays most of Alaska’s bills. Fortunately, we have the financial resources to not only survive, but prosper. What we need now is the courage to responsibly continue to drive down the cost of state government and utilize the Permanent Fund as intended: to fund state services. We may eventually need to pay taxes ourselves; however, the last place we should look for new revenue is to unfairly tax the very industries that drive our economic future. If we push them away, our economic future will be hopeless. This is a time for Alaskans to support responsible fiscal policy. Marc Langland and Jim Jansen are co-chairs of KEEP Alaska Competitive, a coalition of businesses and individuals who support a fair and competitive resource tax policy to increase investment, production and jobs to secure Alaska’s economic future. Langland is the founder and former CEO of Northrim Bank, and Jansen is the CEO of Lynden Inc.

FISH FACTOR: Arrowtooth flounder study focused on food competition

Fish stomachs could help solve the mystery of why Alaska halibut are so small for their age. Halibut weights are about one-third of what they were 30 years ago, meaning a halibut weighing 120 pounds in the late 1980s is closer to 40 pounds nowadays. One culprit could be arrowtooth flounders, whose numbers have increased 500 percent over the same time to outnumber the most abundant species in the Gulf: pollock. Fishermen for decades have claimed the toothy flounders, which grow to about three feet in length, are blanketing the bottom of the Gulf, and many believe they are out-competing halibut for food. A study being done by researchers in Southeast Alaska aims to find out. “People think that potentially arrowtooth is competing with halibut for space and/or prey which is limiting the growth of Pacific halibut,” said Cheryl Barnes, a PhD student at the University of Alaska Fairbanks who is working out of the National Oceanic and Atmospheric Administration’s Auke Bay lab in Juneau. Since last summer, Barnes and her adviser Dr. Anne Beaudreau have been studying spatial and dietary overlaps between the two species. Along with analyzing Gulf of Alaska bottom trawl data, the team is doing field studies in fishing areas around Juneau where no trawling occurs. Barnes said they are looking at two things: space use and the composition of prey within their stomachs to try and get answers using a concept called “resource partitioning.”  “The thought is that if you see areas where halibut and arrowtooth are overlapping in space, you might expect to see that they are not eating the same things as a way to alleviate competitive effects. They are partitioning their resources in that way,” she explained. “Whereas if they are in an area where there is not much spatial overlap between the two, they might be eating roughly the same things because they are part of the same niche and the goal is to eat those prey items that are more optimal for their growth. And they are more able to do that if both species are not found in the same location.” Barnes is studying the contents of over 1,000 halibut and arrowtooth stomachs collected last year from sport anglers, and she hopes to collect at least that many through September. She said her diet study dovetails with other others being done that focus on environmental factors and impacts of fishing.  “Especially size selective fishing — the idea that we have been removing the larger, faster growing individuals, and it just kind of brings that average size at age down,” she said. If the project proves that the two species are competing for food, it will fall to managers to find creative solutions. That could prove problematic in terms of increasing arrowtooth catches to leave more food for halibut. “One of the problems is that arrowtooth aren’t really marketable because when you heat them up the flesh turns into a mushy fish smoothie. The other is that there is a lot of bycatch associated with arrowtooth catches since they share the same habitat,” Barnes explained. Meanwhile, Barnes wants to get more donated stomachs of both species, either fresh or frozen, along with information that includes fish length, body weight, and where it was caught. While the project, which is funded by the Pollock Conservation Cooperative Research Center, now centers on fishing areas around Juneau, it could expand to other regions. “We are considering it a pilot project,” Barnes said, “and if we find that we are able to find some answers on the potential for competition around Juneau, there is opportunity to expand it to other areas of the Gulf of Alaska.” Got stomachs? Contact Barnes can be at (907) 957-4893 or [email protected] Salmon sales slump Salmon sales data from last year show what everyone already knows: lower prices across the board. The Alaska Department of Revenue’s Tax Division tracks sales of six different salmon product forms by region, including frozen, fresh, roe and cans. The latest report shows data from the busy sales season from September through December. Here’s a sampler: By far, the bulk of Alaska’s salmon goes to market in frozen, headed and gutted form. The average wholesale price for sockeye was $2.40 per pound, compared to $3.13 last year. For cohos, the price was $2.20 compared to $2.53 per pound; pinks averaged $1.07, down 26 cents, chums sold at $1.25, down 23 cents, and frozen chinook salmon averaged $3.85 a pound, compared to $4.28 at the same time last year. Fresh and frozen sockeye fillets wholesaled for $5.73 on average, down from $6.19 a pound. Pink salmon roe averaged $4.16 per pound, down from $6.95; chum roe at $10.30 was a drop of $2.50 per pound from 2014. Cases of 48 tall cans of sockeye took a huge nose dive to $126.53 per case, a drop of nearly $70. Cases of canned pinks were wholesaling at $76.86, down $4. The market could get some relief from less salmon being available to buyers this year. A toxic algae bloom continues to kill millions of farmed salmon from Chile, where production is pegged to fall way below expectations. “The upshot is that Chile’s production may fall by 40,000 to 50,000 tons, or 13 percent below what was expected from the inventory of fish in the water taken at the end of December,” said market expert John Sackton. Salmon catches on the West Coast also are projected to be down by half at Puget Sound and on the Columbia River due to low coho numbers. Likewise, chinook salmon populations along the coast are in even worse shape, and fishing will be severely restricted this year. Officials blame the overall declines on record warm ocean temperatures and poor river conditions following years of drought. Lower salmon numbers also are projected for several Alaska fisheries – notably, for pink salmon in Southeast and at Prince William Sound. Bristol Bay’s sockeye forecast calls for a catch just under 30 million fish, well below harvests of the past two years. Fish watch March means a couple thousand Alaska fishermen will start gearing up for halibut, which opens a bit later this year on the March 19. For the first time in decades the total coastwide catch increased by 2.3 percent to just under 30 million pounds. Alaska gets the lion’s share at about 21.5 million pounds, a boost of 200,000 pounds from last year. The year’s first roe herring fishery at Sitka Sound could kick off around the same time. A quota of nearly 14,941 tons is a 70 percent increase. Last year the Sitka fishery opened on March 18 and managers planned to begin surveys this week. Fishing for cod, pollock, flounders and other groundfish continues in the Bering Sea and Gulf of Alaska. Likewise for crab: Bering Sea snow crabbers have taken 70 percent of the 36.5 million pound quota with less than 11 million pounds left to go. Less than 3 million pounds remain in the Tanner crab quota of nearly 18 million pounds.  A new law requiring life rafts for fishing boats has been delayed. The new rules would have applied to any vessel operating more than three miles from shore, even small hand trollers or halibut skiffs. Currently, only boats 36 feet or larger, or those carrying four or more people, are required to have so called ‘buoyant apparatus.’ Word came after the Feb. 26 deadline that Congress chose to repeal the requirement, and opted instead to go through the formal rule making process before implementation. That could take at least a year, said Steve Ramp, a Coast Guard Commercial Fishing Vessel Examiner in Sitka. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

EDITORIAL: University of Alaska isn’t to blame for state budget woes

Last week, the University of Alaska faced a barrage of skepticism from legislators unlike any the institution has seen in years. In hearings by the House Finance Committee’s subcommittee on the university budget, chairwoman Rep. Tammie Wilson put forth a mammoth cut that would have represented a loss of nearly a fifth of all state funding. She and other members of the majority told university officials to justify the state money being spent on all university functions outside of basic classroom instruction. Their explanation must not have been satisfactory, as the subcommittee voted to send forward a university budget with $50 million in cuts from last year’s funding level, an amount that would hit the institution like a sledgehammer as it enters its 100th year. In the hearings, Rep. Liz Vazquez said the university hadn’t done enough in its budgeting to prepare itself for the oil price collapse now hampering state revenues. But if legislators want an answer for why the university wasn’t better prepared for less funding, they need look no further than the nearest mirror. The governance of Alaska’s university has long been an arrangement causing friction in the halls of the Legislature. The Alaska Constitution established the Board of Regents as the governing body of the University of Alaska. But in practice, the Legislature holds considerable sway over the university’s direction, because it holds the purse strings for the state funding that makes up close to half the institution’s budget. What’s more, legislators have often included intent language in the university’s budget allocation in a bid to restrict or control how some funds can be used. The university has been forced to rely on state general funds far more than it should have in the decades since statehood, as legislative misadventures from 1959 onward resulted in the institution never receiving more than a fraction of the land grant that would help it be a self-sustaining organization. Even the land grant travesty and the Legislature’s control over a substantial chunk of the university budget would be far less problematic were it not for legislators’ tendency to micromanage the university’s mission. Certainly, oversight and direction can be beneficial. One example of this was the Legislature’s recognition in the mid-2000s that the state was in need of more nurses and engineers, when they directed the university to focus resources on producing more of each. Accordingly, the Fairbanks and Anchorage campuses expanded the pre-medical nursing program and engineering programs. The university was successful in attracting students to the programs, which — particularly in the case of engineering — highlighted the need for new and expanded facilities to provide a modern education. In pursuit of the goal of producing more engineering graduates, the Board of Regents planned for new engineering buildings in Fairbanks and Anchorage. The state’s burgeoning oil wealth and the concentration of legislators in Anchorage made the $78 million UAA engineering building a relatively easy sell — its construction began in 2013 and was finished two years later, complete with an enclosed skybridge to the adjacent Health Sciences building. The Fairbanks facility, however, was another matter. Legislators chose to allocate $109 million to an Anchorage sports center the Board of Regents didn’t see as needed or wanted — thanks to an existing deferred maintenance backlog of hundreds of millions of dollars, the regents were painfully aware of the ongoing operating costs a new building entailed. The Legislature opted for the sports arena anyway, fully funding it and providing piecemeal funding to the much-needed UAF engineering building. When the oil crash hit, construction of the half-finished engineering building stalled; the UAA arena was already complete. The Legislature has made no plan to provide funds to finish the engineering building, an asset that could help students immensely. Now, with budget pressure coming from all directions, some legislators are heaping scorn on the university for not being more prudent with its funds. The truth of the matter is that the Board of Regents’ priorities have been far more prudent than those of the legislators who now, in an ironic twist, are cutting university athletics funding, threatening to shutter the costly sports center that they so eagerly voted to fund only a few years prior. Legislators should know better than to give the university lectures on fiscal responsibility.

The Bookworm Sez: Simple steps to success for newbies

Your to-do list doubled overnight. That seems to happen once or twice a week, and it never gets any better. Tasks are finished and something else replaces them, which is what you’re told happens when you’re an entrepreneur — but if you read “The 100” by Tom Salonek, it might help you keep the list to a manageable status. If only your business grew as quickly as your to-do list, right? When you’re running a new company, there’s always something to remember, which is where Tom Salonek can help: since starting his Minneapolis business in 1991, he’s been keeping track of things that work to make a business operate successfully. At the top of the list is happiness. While you’re undoubtedly putting in a lot of hours now, it’s important to have a work-life balance that makes you happy. Step away occasionally to reassess yourself, and be sure to offer the same happiness opportunities to those who work for you. Learn the power of doing less, which is really just a method of time management. This book can help you have more effective meetings, and it can help you with employee retention. Two keys to the latter are knowing the difference between engagement and silly perqs, and giving employees a bit of scheduling autonomy. Use this book to know exactly how to get new hires up to speed faster. Then, show them the way to strong job satisfaction through encouragement, guidance, and praise for a job well done. Hire smart, hire slow, but fire fast when you need to. That goes for employees, as well as for vendors. Once you’ve got your best team, ask them for input on the important aspects of your business. Hold internal town-hall sessions, and determine your business’ core values, so you can help your employees to fully embrace them. Finally, relax. Use each point of this book individually, piecemeal, slowly. You’re in this for the long haul. Take your time to get there. “The 100,” I have to say, is a little rough around the edges. Author and Intertech owner Tom Salonek jumps into his list with no fanfare, save but a quick introduction that doesn’t really help set the tone of what’s to come and causing not just a little confusion. There’s a lot of repetition here, a lot of too-enthusiastic U-Rah-Rah-ing, plenty of commonsensical advice, and many things that will make established businesspeople roll their eyes. But that’s okay. This book doesn’t seem to be for them anyhow. The real appeal here, I think, is for business newbies who need bullet-points to guide them through the storminess of start-up. “The 100” is very methodical, it covers lots of steps in small bites, the final chapter consists of a list of helpful websites, and it’s relatively quick to read. That all adds up to a book that seasoned businesspeople will probably find redundant in their work lives, but that entrepreneurs may need to live by for awhile. And if you lean toward that second category, then put “The 100” on your growing to-do list. Terri Schlichenmeyer is the author of The Bookworm Sez, which is published in more than 200 newspapers and 50 magazines throughout the U.S. and Canada. Schlichenmeyer may be reached at [email protected]

GUEST COMMENTARY: Time for another approach on gasline fiscal certainty

Alaskans have just been told that gasline contract negotiations have not progressed satisfactorily and thus there is no time left to get a constitutional amendment allowing a vote on fiscal certainty on the 2016 ballot. The proposed constitutional amendment would provide the producers with the necessary assurances that the State would not arbitrarily increase the tax rate over the life of the LNG project. The producers have told the state for years that unless they had fiscal certainty on taxes they would not spend the large sums of many (around $4 billion) required for front- end engineering and design, or FEED. Putting off fiscal certainty until the 2018 elections and the resulting delay in beginning FEED should be unacceptable to all parties — both the state and the producers. To suggest that there may be another market for Alaska gas overlooks the fact that a good portion of Alaska gas has been leased to the producers. Any effort to take it back will result in extended litigation and more delay. A few months ago, I proposed a solution which I sent to each legislator and the Alaska media. I believe my proposal has merit and if adopted addresses the two major concerns of each of the parties. Certainly for the producers as well as neutralizing the risk to the state if the pipeline is never built. In 2005-2006 when my administration was negotiating with the producers on the natural gas line fiscal certainty was a major issue and a “must have” for the producers. We did not seek a constitutional amendment regarding Alaska’s tax alienation authority because we were not turning over Alaska’s taxing authority to someone else. We were simply entering into a good faith contract “fixing the tax rate for the life of the project (subject to certain escalation based on inflation) etc. We agreed that the state and the producers could rely on that part of the Alaska Constitution that protects the “sanctity of contracts” and each side would be bound by its terms. In order to avoid the threat of a constitutional challenge to such a contract the Legislature could require that any constitutional challenge would have to be brought directly in the Supreme Court within 90 days of the Legislature’s approval of the contract. Why not agree to similar contract terms and move on? It was satisfactory then, why not now? With the delicate state of the Alaskan economy, we must take advantage of every opportunity to market our resources in a sound and prudent manner in the best interest of all our citizens. It is not in the interest of the state or the producers to delay. Frank Murkowski served as Alaska’s governor from 2002-06, and as U.S. senator from 1981-2002.

GUEST COMMENTARY: Completing Port Mac rail extension will expand economy

I’m sure columnist Charles Wohlforth felt a genuine lump in his throat as he pedaled for miles on the Port MacKenzie Rail embankment, worried about the sinking Alaska economy and casting blame on an unfinished rail project in his Feb.1 column. On his bike seat, overlooking an arm of Cook Inlet, he retreated to the safety of income taxes as a solution for our fallen oil prices and state deficit, rather than to what needs to be done: diversifying the economy beyond oil. Resource development is going to return hundreds of millions annually to the state of Alaska. The quicker we are to develop the natural resources, the quicker we generate revenue. We share his earnest concern for our state’s future. But our views diverge there. Where Wolhforth saw a railroad ending in forest, consuming dollars, we see a rail embankment 75 percent complete, awaiting steel wheels on iron rail, the most efficient and affordable transportation for bulk materials since the Industrial Revolution. We see investment in transportation infrastructure — a fundamental requirement for resource development and economic growth — just as the building of the Parks Highway was an investment in the ‘70s. It connected Southcentral Alaska with Fairbanks and brought economic opportunity to towns and businesses along the corridor. Port MacKenzie Rail will shorten the trip of a 100-rail-car train between tidewater and the mineral wealth of the Interior. Each Alaska port has its valuable role to play in Alaska’s economy. Port Mackenzie — with rail — will be the least expensive path for exporting natural resources to tidewater. Here’s why: • When finished, Port Mac Rail is 32 rail miles closer to water from the Interior than the port of Anchorage, and 140.7 rail miles closer than the port of Seward. The dollars saved per ton-mile can be the tipping point to development for projects with narrow profit margins such as mineral development. Saving a million dollars per shipload can determine whether a company exports at all. • It has 14 square miles of staging grounds. There’re no constraints on space at Port MacKenzie. The laydown area for large projects is massive. • A 100-rail-car loop will provide the longest industrial loop in the State with efficient handling of bulk materials. Trains will offload materials and circle a mile around for the trip north. Trains do not have to be broken apart. • It connects to a port with deep waters, 60 feet at low tide, that accommodate the largest ocean-going vessels in the world. Bigger ships mean lower export costs for bulk materials. • It avoids costly and unsafe congestion of road crossings on the mainline. Longtime Alaska prospectors like Ed and Ann Ellis know the importance of cheaper transportation. Their company, Diamond Gold Corporation, just put Port Mac Rail in their operating plan with the Alaska Department of Natural Resources. For 19 years, they’ve been developing a gold-silver-copper deposit and gems in Yenlo Hills, 45 miles northwest of Willow. Ed Ellis plans to export super sacks of sand-like concentrate of precious metals to a smelter in Asia. Port Mac Rail’s role in Ellis’ profit margin is “huge,” he said. Exporting by truck costs three times as much. Will it pan out? We don’t know yet, but we do know that transportation is at the heart of success for this company and for larger ones. Columnist Wohlforth ignored how critical rail is to mineral development. In fact he made fun of rail, calling it a “white elephant.” If the builders of the Transcontinental Railroad had shared that opinion, the West would not have been opened up until long after the Civil War. Wolhlforth is the author of several books, so it’s strange that he saw no opportunity in transportation infrastructure when he wrote: “In 1915, the Alaska Railroad itself was expected to open vast new mineral and agricultural development, which never happened.” In his column, Wohlforth forgot about Fairbanks, a town built on mining and the railroad. He forgot about Fort Knox Gold Mine, which could not have happened at low gold prices if it weren’t built close to rail. The Interior has produced more than 18 million ounces of gold. Pogo Mine, alone, has yielded more than three million ounces of gold. Fort Knox has paid some $2 billion to the Fairbanks’ economy over 19 years. In 2014 alone, Kinross Gold, the owner of Fort Knox, paid $17.1 million in state taxes and fees. Both those companies—Kinross at Fort Knox and Pogo’s Sumitomo Metal—have written letters of support for Port MacKenzie Rail in previous years. Fort Knox spends some $5 million on transportation costs annually. Reducing the costs of importing materials, they say, will help them be more competitive and give better opportunities for expansion and longevity. Right now, there’s exciting news on two large mineral occurrences near Fairbanks, a promising copper, molybdenum, gold accumulation at Shorty Creek, some 70 miles northwest of Fairbanks. Recent drilling results cause UAF Geological Engineering Professor Paul Metz to think that this single mine could yield $385 million per year to the State in taxes, royalties, and fees because it’s potentially a high grade, large deposit. There’s also a large gold occurrence near Fort Knox Gold Mine, and a gold deposit, Money Knob, near Fairbanks. Port MacKenzie Rail would help those projects increase profit margins. The mines would need to haul in by rail hundreds of millions of dollars in freight. The low grade gold needs cheap transportation for operating materials. The copper mine would haul out copper concentrates, first by truck, then by rail to Port MacKenzie, where the sand-like material would be loaded onto large ships for smelting and refining overseas. Mining does take years to get off the ground, but so does the Alaska LNG Pipeline. Both are worthy investments critically linked to rail. In addition to mining, Port Mac Rail provides infrastructure for these large projects: •  Moving Cook Inlet gas to Fairbanks via rail. The Alaska Railroad recently became the first railroad in the nation allowed to transport LNG. Salix, Inc. is vying to be AIDEA’s pick for an LNG plant with expansion capability of up to 400,000 gallons of liquefied natural gas per day. If chosen, the company could connect to Port Mac Rail at Ayrshire Road. • Providing construction support to the Alaska LNG Project. Port Mac Rail would save the project $100 million over other ports by staging and transporting pipe north by rail through the closer Port MacKenzie. • Hauling low-sulfur diesel to Fairbanks by Central Alaska Energy, a company leasing property with completed pad, seeking funding for construction of a tank farm at Port MacKenzie • Moving supplies to support continued petroleum activity at Prudhoe Bay • Hauling limestone from Globe Creek’s 1.6 billion ton deposit near Livengood, as agriculture lime and for mines such as Red Dog or the proposed Donlin Creek Mine and ultimately cement exports • Exporting liquefied natural gas from Port MacKenzie to Japan. The natural resources development company, REI, is doing due diligence on a $1 billion liquefaction facility and power plant at Port MacKenzie. The Japanese company would export Cook Inlet gas to Japan. REI Vice President Mary Ann Pease calls Port MacKenzie “the best port in Upper Cook Inlet for LNG exports to Japan in a timely manner.” REI is still committed to a 2020 timeframe for exports to begin. The next year or more is going to be challenging. But now is not the time to let our entrepreneurial muscle atrophy as Wohlforth suggests. The returns on resource development and on infrastructure like Port MacKenzie Rail will be far more than the original investment. Let’s get to it. Vern Halter is Mayor of the Matanuska-Susitna Borough and a dog musher who took first in the 1,000-mile Yukon Quest International Sled Dog Race in 1990 from Fairbanks to Whitehorse, Yukon.

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