Naomi Klouda

Latest assessments show poor results for state students

Results from spring 2017 testing throughout Alaska school districts showed more than half of all students from grades three to 10 aren’t up to proficient levels in math, English and science. School districts’ scores throughout the state indicate even the largest schools lag behind while some smaller ones excel. About 70,600 students took part in the English language arts and math tests. Of those, 25,300 took the science assessment, which covered three grade levels. The Department of Education and Early Development released the spring 2017 testing results from a new test tool known as PEAKs on Aug. 30, but embargoed the results until Sept. 1. This gave DEED a chance to explain through a webinar the new tests, its scores and what lays ahead in new plans under the Every Student Succeeds Act, or ESSA. In English language arts, or ELA, grade 6 took the highest scores at 45.3 percent proficiency, while grade 10 performed the lowest at 32 percent. In math, again, 10th graders performed poorly with an overall score of 14.7 percent proficient. Grade three came up with the highest math scores at 44.5 percent. Only grades 4, 8 and 10 were tested in the science portion. Grade 10 scored highest at 54.7 percent, while 8th graders came in at 46.9 percent and 4th grade at 39.7 percent. Here are the findings: • Overall in ELA more than 60 percent scored below proficient: 30.8 percent scored “far below proficient,” while 30.7 percent were proficient. Only 7.7 percent were “advanced” and another 30.8 percent were “below proficient.” • Overall in math, 68.1 percent scored below proficient: 51.1 scored below proficient, while another 17 percent far below proficient. Only 3.9 scored at advanced in math while 27.9 percent were deemed proficient. • Alaska students did better in science, though 53.5 percent were either far below proficient or below proficient. Of all students tested, 19.9 percent were advanced and 26 percent were proficient. Education Commissioner Michael Johnson was asked if these scores worried him. “The story it tells is really no different than it was at the beginning of the Alaska Education Challenge,” Johnson said. “We have to be dissatisfied with current results. We have more opportunity now to address those challenges than we’ve ever had before. This is baseline data. It leaves a lot to look forwards to.” The spring 2017 scores will now constitute the new base line for improvement, Johnson said. “This works into the two education initiatives: the Alaska Education Challenge and ESSA,” Johnson said. Both of those carry prescriptive actions for increasing student scores in all areas. Johnson also said, “it’s important to be clear: some schools and districts are doing quite well when we look at PEAKs.” The aggregate scoring doesn’t capture the schools or the individuals who did exceptionally well, he added. And it is just one tool when looking at academics throughout the state: • One school district that stood out among others was the tiny Unalaska School District’s 231 students. They came in with 52 percent ranking as advanced or proficient in ELA and 46 percent advanced or proficient in math. That’s about 10 percentage points above the statewide average. • Among the largest school districts in Fairbanks, Anchorage, Kenai and Mat-Su schools, the Mat-Su School District led with 47.5 percent advanced or proficient in ELA but lagged at 37 percent proficient or advanced in math. • The 4,500 Mat-Su students tested came out equal to the Kenai Peninsula’s 2,300 students in math scores: 37 percent but better than the ELA score of 46.9 percent. • Anchorage School District tested about 27,000 students. ELA scores came in at 40.2 percent proficient or advanced and math at 35.6 percent proficient or advanced. • Fairbanks North Star Borough School District stayed in the same vicinity at ELA scores of 40.5 advanced or proficient, and 37.4 percent advanced or proficient in math. • Bristol Bay School District’s 40 students tested also scored higher than the state average at 45 percent in ELA and 40.9 percent in math. • One consistent and curious detail about the testing results is that 10th graders almost universally came out with the lowest math scores compared to 3rd-9th graders. Anchorage 10th graders averaged only 16.7 percent proficient in math; in Fairbanks, 16 percent; Kenai 17 percent; Mat-Su 16.4 percent. • In the Yukon-Koyukon School District, only 4.4 percent of 10th graders tested advanced or proficient, leaving 95 percent below proficiency in math. The Performance Evaluation for Alaska’s Schools differed from the previous testing known as AMPs or the Alaska Measures in Progress, said Brian Laurent, the data management supervisor for the Department of Education. “But any comparison is inappropriate,” he added, because that tool held a number of problems. AMP was a disappointment as a measuring tool. Reports had to be corrected and then, in the end, there wasn’t a sufficient level of information on student performance, according to the DEED presentation. A different vendor, Data Recognition Corp, which had previous experience with test creation for Alaska, created PEAKs, . In April 2016, DEED canceled general and alternate assessments in ELA, math and science after a construction incident in Kentucky interrupted the computer-based testing. So in November of that year, the U.S. Department of Education waived the requirements to give the test and subsequent reporting of results. But even after the results were known, Johnson told those gathered at the Aug. 30 Webinar that he is pleased with PEAKs as the tool to use going forward. “We’re very satisfied with it,” Johnson said. “We’re looking forward to continuing its use in years to come. It hits home for me that the context here is very different: we have urban versus rural and the geographic scope of schools across the state. It has an Alaska-specific infrastructure and comes from a vendor who can recognize those challenges.” PEAKs supplies only one primary piece of information on how schools and districts are doing. It does supply a blueprint for where to target improvement efforts, Laurent said. And it puts all students on an equal footing for measuring their understanding in vital subjects. The road ahead now, for all the school districts, will come through guidance from the Department of Education through the two initiatives of ESSA and the Alaska Education Challenge. ESSA set standards and goals. It outlines plans for how to hold schools accountable when their students perform poorly. But instead of penalizing, as happened under ESSA’s predecessor No Child Left Behind Act, it gives them more resources, Laurent said. “We hope the public takeaway from the public test results is showing that we have a transparent system. We’re honest about our results,” he said. There are five essential questions that get answered. The test gets at whether students “know what we want them to know, and know how to do it.” It also helps teachers focus on those questions and then gauges whether the effort succeeds on both sides. These test results track with other statistics on Alaska students, such as an internal study by the University of Alaska that found more than 52 percent of its incoming freshmen needed remedial courses in English and math before they could proceed to the required courses. Another dismal statistic is that Alaska is below the national average in high school graduation rates at 71.6 percent, Laurent acknowledged. The PEAK results also mirror the results of the National Assessment of Education Progress or NAEPs test that are given every other year, he said. To address the persistent issues that show Alaska is indeed far below the national average in several key grading areas, five committees are at work in particular areas and will be issuing a report to the Alaska Legislature and Gov. Bill Walker, Laurent told the webinar group. The committees are each composed of 20 members tasked with the five strategic priorities expressed in the Alaska Education Challenge. They are made up of stakeholders including parents, teachers, the business community, tribal leaders, and others who are work on five specific challenges: to amplify learning, inspire tribal and community ownership of education, modernize the education system, ensure excellent educators and promote safety and well-being. On Oct. 4 they will present their findings at the Dena’ina Civic and Convention Center as the Alaska Education Challenge Wrap Up. “The goal is to bring all of these committees and the state board together to present their transformative presentations, and the public is invited,” said Erin Hardin, information officer for the Department of Education. Naomi Klouda can be reached at [email protected]

Trustee recommends Chapter 7 liquidation after Dispatch sale

A new filing in the Alaska Dispatch News bankruptcy case is an Aug. 30 request to liquidate Alice Rogoff’s corporate holdings after the purchase agreement moves forward to save the ailing newspaper from the financial brink. The motion by the U.S. Trustee is to convert the case to a Chapter 7 bankruptcy, after the sale is approved, expresses concern that the people and businesses owed money won’t receive any compensation, said Attorney Kathryn Perkins, acting for the U.S. Trustee Office. She makes the case that after the Sept. 11 sale closes, Rogoff “will face no reasonable likelihood of rehabilitation,” or legalese for restoring payments to those owed money. U.S. Trustees are Justice Department officials who are responsible for overseeing bankruptcy cases and whose mission is to protect all stakeholders including the debtors, creditors and the public. Chapter 11 is filed in cases when a business intends to reorganize and keep operating as a plan is developed to repay creditors. A Chapter 7 bankruptcy calls for liquidation of assets with the proceeds distributed to creditors. Under a deal struck between Rogoff and the Binkley Co., Rogoff is selling assets related to operating the ADN for $1 million. Bankruptcy Judge Gary Spraker is expected to approve the asset purchase agreement in a hearing set for Sept. 11. But Ryan Binkley, his siblings and partner Jason Evans are only buying a portion of the corporation owned by Rogoff, as spelled out in filings so far. The $1 million purchase price matches the $1 million in loan financing Spraker approved from the Binkley Co. to keep the paper operating until the sale closes. Because the purchase price matches the loan, there will be no proceeds from a sale left to pay more than a hundred unsecured creditors owed millions unless another buyer steps forward. According to her own financial filings on Aug. 28, Rogoff estimates $11.8 million worth of property assets. Of that, $4.7 million is estimated as the value on equipment that includes printing presses the Binkley Co. has no interest in buying. This, and other assets that are not part of the sale, are the focus of the latest filings by the U.S. Trustee. Meanwhile, Rogoff estimates she owes more than $10 million in unsecured claims to an array of businesses from ink and paper suppliers to electrical contractors. “It is unclear who will take control as debtor-in-possession after the Sale Hearing,” Perkins wrote in her motion to U.S. Federal Bankruptcy Judge Gary Spraker. “The United States Trustee presumes that Binkley’s manager (Jerry Grilly) will not remain in control of the debtor-in-possession after the sale, and it is unclear if Ms. Rogoff will step in to liquidate any remaining assets.” The best-suited person to liquidate any remaining assets would be a chapter 7 trustee, Perkins argues. This has the benefit of bringing in another level of oversight. Chapter 7 trustees are private individuals, not government employees, who are appointed by the U.S. Trustee to administer Chapter 7 bankruptcy cases, said Jane Limprecht, the public information officer for the U.S. Trustees. To support her argument, Perkins lays out the fact that new owners, the Binkley Co., made it clear that they do not want to purchase all the assets of the Dispatch, namely the two printing presses currently housed at the warehouse at 5900 Arctic Blvd. They also declined to renew the lease on Arctic and declined renewing the $47,000 monthly lease at the current offices on C Street. The purchase asset agreement is meant to leave the Binkley Co., “unencumbered” of Rogoff’s debts, according to filings. “Rogoff… made it clear that (she) lacks the financial capability to immediately fund any activities beyond the sale hearing,” Perkins wrote. “Thus, absent an increase in the proposed purchase price sufficient to generate a return to the estate, the debtor will lack sufficient capital to fund the removal of any remaining equipment from the leased premises in order to liquidate it for the benefit of creditors.” This inability to remove the Arctic Boulevard printing presses and other equipment, or in the case of Northway Drive landlord GCI’s inability to access that equipment until after Oct. 11 under the terms of the GCI stipulation, “diminishes the value of that equipment to the estate because inaccessible equipment would be substantially more difficult to market and liquidate for the benefit of creditors,” Perkins argued. But if a Chapter 7 is granted, the value of the unpurchased assets could at least be potentially preserved, she added. A Chapter 7 trustee would be able to negotiate with GCI for the removal of all remaining assets for liquidation, she wrote. Also, “as a trained bankruptcy professional, that person would have bankruptcy knowledge to ensure maximum recovery for all creditors involved.” A hearing is set for Sept. 22 before Judge Spraker to consider Perkins’ motions. Her filings show there’s a legal choice to either convert the case to a Chapter 7 or to outright dismiss the bankruptcy. But Perkins argues against dismissing outright the Chapter 11. “If the case were dismissed, it would be unlikely that the creditors would see any recovery,” she wrote. Naomi Klouda can be reached at [email protected]

Murkowski: Health care debate to return, tax reform on tap

The “right fight” starts next week in Congress when the Senate will take up health care again in hopes of reworking the system to bring down its enormous costs, Sen. Lisa Murkowski told an Anchorage Rotary group Aug. 29. Murkowski spent much of the August break back in Alaska tour-guiding cabinet members and senators. The most recent visitor was Secretary of Health and Human Services Tom Price, who followed a visit by Secretary of Transportation Elaine Chao. “Instead of Alaska importing the experts, they are coming and learning from us — how we do things — and I’m proud of what’s going on,” she said. After Price’s visit, he touted Alaska’s system for Alaska Native health care. Chao took her first tour of the Trans-Alaska Pipeline System and announced an agreement with the State of Alaska to take the lead role on permitting transportation projects. The first week after Congress resumes from its summer recess, Murkowski anticipates taking up the gauntlet of replacing or amending the Affordable Care Act. On Sept. 6, the first rounds of talks begin before the Senate Committee on Health, Education, Labor and Pensions, known as HELP, of which she is a member. “We’re going to take a targeted approach through working a process,” Murkowski said. “This is the way I have wanted to do it all along: follow the legislative process.” State insurance directors will testify first, including Alaska’s Lori Wing-Heier. Then a panel of governors will answer questions for HELP. Murkowski said everywhere she goes in Alaska, the insurance conversation brings an outpouring of emotion she hasn’t witnessed before during her years serving in the U.S. Senate. “I’ve never seen an issue like this in my 15 years serving in the Senate where every single member was engaged. Because, health care is meaningful, it’s emotional, and it’s personal; maybe not personal to you but to your mother or your child or the family,” she said. At home in Alaska, conversations continue as people tell her “in tears” that they can’t afford the insurance they do have or that they are grateful because they didn’t have health insurance until the ACA came along. Murkowski intends to proceed in two specific ways, in addition to committee work. She has joined with Sen. Ted Cruz, R-Texas, “who I normally have little in common with” to address changes to the health savings accounts, or HSAs. Cruz, who voted to repeal the ACA, is nonetheless interested in protecting HSAs, which allows pre-tax contributions to a savings account that later can be used for medical expenses. “We need to reduce the cost of health care, so that that insurance costs will be more manageable,” Murkowski said. That’s also one point of commonality she shares with Cruz: “If you don’t know your knee procedure’s cost, how do you know if you’re spending your HSA wisely in the first place?” A second area is to set a one- or two-year plan for payments on cost supports for insurance. Cost sharing reduction, or CSR, payments have been authorized on a month-to-month basis by President Donald Trump, which “doesn’t do very much to stabilize the markets,” she said. Murkowski wants the process of CSR payments to return to a congressional appropriation. After a legal challenge during the Obama administration in U.S. House of Representatives v. Burwell, a federal judge agreed that only Congress has the power to appropriate funds and declared the CSR payments illegal, but stayed the ruling pending the appeal, which allowed the payments to continue under both Presidents Barack Obama and Trump. Trump has held back on the appeal and continued to make the CSR payments in the hopes that Congress would repeal or repair the ACA. Murkowski would like to see that put back in the hands of Congress to help stabilize the ability of the insurance markets to set rates that then keep insurance costs for individuals down. But she emphasized that in the long term, moves have to be made to bring down the cost of care. “I would like to see a provision in the short-term piece that begins to address the cost of care,” she said. “Not of insurance, but the cost of care.” High cost pharmaceuticals may prove one place to start, Murkowski said, but she “isn’t sure what the realm of possibilities is there.” On tax reform, Murkowski said hearings are scheduled for the first week in September as well. The American tax code hasn’t seen an overhaul since 1982, she said. “Alaskans want a process that is simple, particularly the small business community wants to reduce the corporate rate,” she said. After being thrust into the national spotlight during the health care vote when she was among three Republican senators that voted against repealing the ACA, Murkowski said she isn’t comfortable in the glare. She said “Trump is a man with an agenda who wants some wins under his belt, so I think he’s impatient,” and advocated more work through an open process. Addressing a half-dozen news reporters in the Dena’ina Civic and Convention Center after the Rotary luncheon, she said, “You’re about as much press as I want.” The past few months have been “more than a little bit crazy in Washington,” because of the near constant stream of press inquiries and interviews. “I’m not a camera seeker and I don’t set out to do things that generate headlines. I get up to do my job and do not do self-promotion. In that way, I’m probably a bad politician,” she said. “I do think that where we are right now in health care, and the pause we’ve taken these past few weeks, is that we have an opportunity to engage in back-to-regular order. That’s a good place for us as a governing body. I welcome that because that’s where I have my strength is in that legislative space.” She acknowledges Alaska can benefit from the scrutiny, but wished it were from energy policy and not from health care. “It does give you some leverage if people start to say, ‘look, you better go talk to Lisa about this’ — that’s not a bad thing,” she said. “It’s not about power seeking… my colleagues saw that even in a difficult position where you chose not to follow your party, but to follow a process that allows people to have some voice here, that proves to be positive.” Murkowski said she’s not a bomb thrower. “But I’m not afraid of the fight,” she said. Naomi Klouda can be reached at [email protected]

UAA professor gets $75,000 investment for startup

An incontrovertible fact of Alaska life means black ice can spin cars out of control and winter snow dumps take up precious asphalt space meant for cars. At least, that’s the accepted normal. A new invention market-tested by University of Alaska Anchorage professor Joey Yang shows promise for help. Called Tundra Tape, it’s a technology buried in concrete that melts ice before it has a chance to form on sidewalks, parking lot pads and highway corners known as the most egregious culprits of black ice. Tundra Tape, now with a $75,000 private investment infusion from the Alaska Accelerator Fund, is being marketed under the newly formed Arctic Heat Technologies Inc., formerly called CFT (Carbon Fiber Tape) Solutions. Yang formed CFT in 2013 as a startup, but found as a fulltime engineering professor he couldn’t also serve as a fulltime CEO. His invention had turned into a business idea and in order to have a go at market success, it would need a new corporate structure. The new investment allows just that: a business infrastructure to respond to market demands. Now construction contractors and others will be able to order Tundra Tape kits for specific projects. “People were calling me left and right,” Yang said. Even with a graduate student’s assistance, he wasn’t able to respond to the market inquiries that flooded in over the past two years. Under the new corporate structure, Tim Allen will be president of Arctic Heat Technologies. He brings worldwide industrial product and marketing experience. The initial board of directors will include Yang and UAA Vice Provost Helena Wisniewski along with Forrest Nabors, UAA assistant professor and Alaska Accelerator Fund member, and Carl Swanson, accelerator fund investor, who recently retired from Davis Constructors. Yang’s invention, the Tundra Tape, is a carbon fiber based tape that can be placed beneath concrete to heat surfaces via a power grid. The tape is installed in two UAA campus walkways: the main entrance to the new Engineering and Industry Building, and the north entrance at University Lake Annex. The carbon fiber’s unassuming black gunny-sack like appearance belies its endurance. “This is what strengthens columns in a seismic event. It’s used in airplane construction that needs to be lightweight and strong. It’s used in bike frames,” Yang said. “It has a high strength-to-weight ratio. It can conduct electricity when connected to a power grid.” The power source hooks to alternative sources, wind and solar, or traditional gas and electric, and with time-temperature devices, can automatically turn-on. Because it’s made of carbon, it doesn’t corrode or age. Yang sheathed it in an insulating sleeve to isolate the tape from the environment. He uses multiple parallel lay-down patterns: narrow for a sidewalk, broader distribution across a giant pad meant for melting a snow dump, or rounded for highway curves prone to black ice. “They would then be reconfiguring the assembly, which has flexibility,” Yang said. Cook Inlet Housing Authority used the tape for a melting pad at its senior housing complex on Peck Avenue. “Snow takes up a lot of space when it’s stored. You see it all over town in the winter. The Municipality (of Anchorage) is considering it for snow management,” he said. The Alaska Department of Transportation is excited about the possibilities on heavily-trafficked winter highway corridors. “DOT is also looking at cross walks, ramps, bridges — anywhere black ice is a problem. It can save lives and all the time and money society has to absorb when the highways shut down,” Yang said. Other sidewalk heating technology is dependent on expensive energy systems and hardware such as piping that runs underground pumping glycol and water. Some public buildings throughout Alaska have used that type of system. The lifespan is typically shorter because frost can disturb piping. “One problem is bursting pipes. When glycol seeps into the ground, it’s toxic. Glycol is expensive. That system has a lot of moving parts and piping; you can’t afford to lose glycol into the ground,” Yang said. “Carbon fiber is more stable. It’s not as expensive and it should last many years with no maintenance.” Yang’s expertise is in geotechnical and earthquake engineering. He has maintained an active research program with particular interests in cold regions. But it was a family visit that turned his attention to finding a solution for slick sidewalks. “In the winter of 2009-2010, my mother and father-in-law were visiting from China,” Yang said. “My father-in-law went outside to take our daughter to school and it was right after a freeze-thaw-freeze cycle of weather. He fell down on the ice and broke his thumb.” Fortunately, it wasn’t worse. “I thought there has got to be a solution for this, and the many winter accidents. That’s when I started looking at carbon fiber,” Yang said. The fabric is composed mostly of carbon atoms. To produce it, the atoms are bonded together in crystals that are more or less aligned parallel to the long axis of the fiber. Several thousand carbon fibers are bundled together to form a “tow,” a textile industry term for pre-woven fiber, which may be used by itself or woven into a fabric. Business of startups That UAA has startup companies of its own may come as a surprise. Business ownership is a new development at the university. UAA launched Seawolf Holdings in 2012, establishing a pathway toward commercialization of UAA research. To date, UAA has 50 invention disclosures, with 52 patents filed and 11 patents issued. Arctic Heat Technologies is one of four startups formed in Alaska based on the research of UAA faculty. The move is thanks to the efforts of Dr. Helen Wisniewski, the UAA vice provost for research and graduate studies. She now serves as president of UAA’s Seawolf Holdings LLC, and arranged and negotiated the deal for Tundra Heat Technologies with Ky Holland, one of the Alaska Accelerator Fund’s managers. Wisniewski was hired in 2012 from Stevens Institute of Technology, a private university in Hoboken, N.J., established in 1870 that focuses on inventions and technology. There, she served as vice president for university research, responsible for $22 million that went into the university’s budget from the sale of startups she helped get off the ground. Stevens alumni invented IMAP, a modern form of email, and bubble wrap. Another, Frederick Reines, received the Nobel prize after discovering the neutrino, which validated the “Big Bang” theory of the universe’s creation. Wisniewski, whose PhD is in mathematics, also served in the CIA as well as for the Lockheed Corp., and Titan Corp. When Wisniewski came to UAA, it had no startups. “We now have four,” she said. “There were two patents pending; now there are 52. A lot of talent was here, professors and students were involved in a lot of research projects, but no one was taking the time to commercialize, to package the products.” Holland, one of the managers of the Alaska Accelerator Fund and an Alaska Pacific University assistant professor of business administration management, helped connect Wisniewski to the invesment for Arctic Heat Technologies Inc. The company recently received $75,000 investment by the Alaska Accelerator Fund, with another $225,000 under consideration. Wisniewski calculates the fund’s management team will enable the startup to grow more rapidly. Profits from the startups then feed into funding more university research, she said. “Now (the tape) is in the production stage in California, but manufacturing is planned to be done here in Anchorage,” Yang said. “When you see something coming out of your lab and going to the community and new markets, it’s very satisfying. In this case, it has potential to save lives.” Yang’s research projects moved on, however. Working with Phillippe Amstislavsk, he has created insulation for housing and other construction made of fungus and wood chips. Under another UAA startup, Rhizoform LLC, Yang and Amstislavsk fully developed and engineered a system to manufacture ASTM-rated insulation board and other bio-insulation products locally. They are now licensed for manufacture and marketing. That meant yet another startup was created: Rhizoform LLC. Yang and Amstislavsk recently won Best in University System Startups Award for Rhizoform, awarded by the National Council of Entrepreneurial Tech Transfer, and up against projects from John Hopkins University and Princeton. At a time when the University of Alaska system struggles to fund programs after absorbing $25 million in budget cuts over the past three years, such innovations have the potential to do a couple of things. Since 2013, UAA has experienced growth in research and commercialization. Its fiscal year 2016 total grant awards increased to $40.2 million, up from $38 million in 2015. “And we can use innovations as a recruitment tool to reach potential students who want to come to here and join us in experiential learning. They can take part in innovation projects that eventually go to market,” Yang said. The university receives a portion of profits from startups it forms, and it shares profits with the inventors. Even graduate students share in the financial benefits of projects they patent. Correction: The dollar amount investment so far is $75,000, with another $225,000 investment applied for and not yet received by Tundra Technologies. The headline and story were updated to reflect this.   Naomi Klouda can be reached at [email protected]

State release draft plan for Every Student Succeeds Act

The chance to comment on enacting provisions of the new Every Student Succeeds Act ends at a Sept. 15 deadline, a month after the Alaska Department of Education and Early Development put its draft plan out for review. The state Education Department will also make a major announcement Sept. 1 on statewide assessment results from the spring 2017 exam. The individual test results were sent to parents on Aug. 3, but the announcement Sept. 1 will be the first look at how well students did by district as the department sought to retool its assessment of students’ proficiency in math, English and science. The new tool, PEAKS, stands for Performance Evaluation for Alaska’s Schools and is used to target overall performance. Alaska educators are moving into the new requirements under Every Student Succeeds Act, which replaces the old No Child Left Behind Act. According to the executive summary of Alaska’s ESSA plan draft, it allows more flexibility and authority to schools. But it also, like the NCLB, requires states to develop plans that address standards, assessments (such as PEAKS), school and district accountability. According to the ESSA draft summary: • States may design an overall accountability system based on multiple indicators for all schools, rather than a system where a school with one subgroup that misses a target for academic achievement is determined to not make adequate yearly progress. • States may include one or more indicators of school quality and student success. • States may set their own long-term goals and measures of interim progress in academic achievement and graduation rates, rather than expecting 100 percent proficiency or graduation rates. • States have some flexibility in how to designate schools needing the most support. • States have more flexibility in determining appropriate consequences and supports for those schools needing support. Nevertheless it’s a time of confusion for how that plays out in the classroom, said National Education Association-Alaska Chapter President Tim Parker. Under the NCLB Act, too much emphasis was placed on testing, which robbed schools of learning time. “With ESSA, most educators are not super familiar with the details of the law,” Parker said. “They understand the concepts—testing, accountability, and equity—but they don’t know precisely how the federal government will implement these concepts.” ESSA was signed into federal law on Dec. 10, 2015. The Education Department has worked for the past two years on the public process of drafting its plan. The final draft was submitted to Gov. Bill Walker’s office for a 30-day review period Aug. 17 before the submission deadline, as required in the law. States must submit plans to the U.S. Department of Education by Sept. 18, to show how they will implement ESSA. Alaska’s state plan for ESSA was formed after a year’s worth of stakeholder input and discussions. The plan, an executive summary, and feedback form are available at Parker, speaking for NEA-Alaska and the 13,000 members around the state, said he likes certain aspects of the new act. “Yet, we are concerned that limits will be put on schools about which potential improvements will meet the new law,” he wrote in an email. “Even though ESSA is supposed to allow for communities to make choices and not have solutions dictated from Washington, D.C., or Juneau, many school districts will likely be reluctant to propose creative and innovative solutions that fit their communities out of fear that they will be rejected. This is the legacy of NCLB.” There was plenty of complaint about how the No Child Left Behind Act didn’t fit Alaska’s education system, Commissioner Michael Johnson has acknowledged. That’s why a fresh look, through ESSA, has met with statewide enthusiasm as work groups bite off chunks to work on. He also promises to take teachers’ ideas for success and give them a broader base through his Alaska Education Challenge. Yet, much of the testimony so far on the ESSA plan addresses how schools are scored. The accountability indicator, for example, allows schools to receive a score from 0 to 100 on an index. K-8 grades are awarded points based on achievement in English language arts, or ELA, and math, and points for growth in ELA and math. That’s important because it measures improvement, according to the report. Grades 9-12 are scored as a school on achievement in ELA and math, but there isn’t a score for improvement between years. Those schools are scored on their graduation rates. To ease teachers’ concerns as he visits school districts this month, Parker said he’s addressed the ESSA questions in quite a few discussions. One reminder he gives is that tests aren’t meant as a sole indicator for evaluating a student or teacher or school. “They are used to figure out the quality of your system at the 30,000-foot level,” Parker said. Testing took on a greater importance during the NCLB. “Tests were used in a way not intended,” he said. “Under NCLB, they were sometimes used to test individuals students, individual teachers and individual schools. And tests are not very good for that.” Parker visited Metlakatla schools last week and gave the high school as an example. Metlakatla High reached a 100 percent graduation rates this year with 90 students, an accomplishment many schools would likely envy. That is one of four primary measures of the new ESSA plan, and he makes the point it covers a lot of territory on a school that’s doing things right. Alaska’s overall graduation rate has hovered at 70 percent between 2013-2016. A study at the University of Alaska level found that 52 percent of high school graduates need remedial education in math, English, or both, when they reach the UA system. One real success test is whether high school has prepared students to move on to college success and vocational/technical programs, Parker said. “One of the Metlakatla graduates was accepted at Dartmouth University; another one to Stanford. Others were accepted at vocational-technical programs,” Parker said. “That’s a measure as a school we sit down and look at that the end of the year.” NEA-Alaska members were able to impact the ESSA plan, Parker noted. Thanks to more than 200 comments from members submitted last spring, certain concerns were addressed. The definition for “ineffective teacher” was narrowed, and is no longer based on the number of days a teacher misses during the school year, he said. “In other good news, the new draft plan includes provisions for mentoring and teacher leadership. While we would have liked to see an even wider selection of school quality and student success indicators in the plan, we also understand DEED’s choice of three success indicators, and think this draft plan is a step in the right direction,” Parker wrote. “As educators, we remain concerned that test scores are overemphasized even in this latest draft ESSA plan,” he warned. “An overreliance on test scores — especially if the tests themselves are weak — drives schools to limit curricular offerings and put time and resources into test prep instead of real learning opportunities for students.” Naomi Klouda can be reached at [email protected]

Young hosts Western Caucus on Alaska trip

Rep. Don Young brought four U.S. representatives and their staffs on an Alaska tour Aug. 15-20 to show them firsthand Alaska’s economy at work on the North Slope, the Fort Knox Mine near Fairbanks and elsewhere. When the visitors sat down to hear from industry leaders on Aug. 17, Reps. Paul Gosar, R-Ariz., Daniel Newhouse, R-Wash., Aumua Amata, R-American Samoa, and Bruce Westerman, R-Ark., heard consistently of regulatory changes wanted most: • Certain agencies and officials consistently hold up regulatory processes and drag out the “human costs” of economic development in Alaska. • Streamlining is needed to eliminate contradictory agency rules and a more centralized oversight in what is now a fragmented, multi-agency process, perhaps from Congress itself. • Eliminate some time, and therefore certain expenses, it takes to get a project to its start date. The visit was organized by Young, with the Western Caucus Foundation convening a roundtable discussion on Aug. 17 at the Dena’ina Center. These included state and federal officials and industry representatives for oil and gas, mining, timber, fisheries and Native affairs. Sarah Erkmann Ward of the Alaska Oil and Gas Association urged the lawmakers to give better investment certainty to Alaska’s oil and gas industries through cutting red tape in the permitting process on federal lands. The oil industry suffers the most from the fragmented, contradictory regulatory process, Ward said. This deters investment because companies won’t know ahead of time if they are sinking money into a project that will proceed forward in a timely manner. Nicole Kimball, vice president of Pacific Seafood Processors Association, said that industry “shares a lot in common with oil and gas companies” when it comes to regulations. “The Endangered Species Act severely restricts access, particularly smaller boats and therefore smaller businesses,” Kimball said. The ESA is used to limit access to areas even before an animal is listed as endangered, she said. She wanted to see more local voice control in fisheries management issues as opposed to “cookie-cutter management” from far-off federal agencies. “Alaska’s famous fisheries management success stems from a transparent regulatory council process” that gives citizens and local knowledge the power over fisheries, she said. Examples of these are the International Pacific Halibut Commission, the North Pacific Fishery Management Council, the Alaska Board of Fisheries and its stakeholder advisory committees around the state. During the timber-U.S. Forestry Service segment of the discussion, Young repeatedly challenged the presentations by Chris Maisch, director of Alaska Division of Forestry, and Beth Pendleton, regional forester with the US. Forest Service, over being slow to offer timber sales to the flailing logging industry. On State of Alaska forested lands, 65 percent of available 12.1 million board feet is put on the market, Young has said. But the U.S. Forest Service in the Tongass National Forest has sold only about 12 percent of its 267 million board feet annual allowable cut.   Maisch and Pendleton explained the regulatory process for putting young, medium and old growth trees up for bid to logging companies. Currently, 35 million board feet is under contract, Pendleton said. “Why so little?” Young asked. “The reason I bring that up is that at one time there were 1,300 jobs in Ketchikan, Wrangle, Sitka — once viable towns like Craig and Klawock now no longer are because you haven’t allowed the timber to be harvested. These communities are in dire straits. They are dying.” Pendleton responded that by law, the Forest Service timber sales are required to be economic. More timber sales are coming up that will go on the market and create jobs. But Congress ultimately decides how money gets spent by the Forest Service and a lot of the budget is eaten up in fighting fires the past several years, she told the representatives. The “Roadless Rule” of wilderness designations also dictates certain closures in forests. Young made an aside speech to his colleagues about “hundreds of miles of old logging roads put to sleep by the Forest Service” that could be used by recreational users and sport fishermen to access wilderness areas. “They used our tax dollars to build and then closed the roads to the public,” Young said. “You can ask anyone in Juneau what they think of the Forestry Service, and they will tell you. It is not positive,” Young continued, addressing Pendleton and Maisch. “That tells me you’ve failed.” But Young noted that the problem didn’t originate during this presidential administration, or the previous one. A state timber sale takes abut 18 months to plan and offer, as opposed to five years for the USFS, largely due to NEPA.  “It took 30 years to get to this point, and many administrations,” he said. Maisch pointed to obstructing National Environmental Protection Act requirements on the age maturity of old growth cuts and other “cumbersome laws that prevail on timber sales.” “That’s where you could help us out,” Maisch said. The Forest Service found sympathetic ears when it came to the discussion about NEPA and forest fires consuming more time, money and staff over the past several years. Reps. Gosar of Arizona and Newhouse of Washington noted the many challenges on their states, in addition to the fires in neighboring states Oregon, Nevada and California that they assist. Gosar is the chairman of the House Natural Resources subcommittee on Energy and Mineral Resources as well as the vice chairman of the House Oversight and Government Reform Subcommittee on the Interior. The representative from Arkansas’ presence raised questions about why that state is part of the Western Caucus. Arkansas was “once the west,” Westerman told the group. But in addition, Westerman has a unique background as a forester, the only one is Congress, noted Young’s spokesman, Matt Shuckerow. In fact, he has a master’s of forestry from Yale University and is eager to help shape public policy to help better manage the nations forests. At the end of the discussion, the five representatives acknowledged they share a lot in common as their states fight “onerous federal requirements” on federal lands. They also share concerns about climate change, the devastation of the bark beetle and the increasingly occurring wildfires. The representative from American Samoa, Amata, echoed Young’s sentiment that climate change is a “man-made” problem. Amata also sympathized with fisheries hurdles and indigenous issues expressed earlier by Alaska Native groups. “We thought federal policies had negatively impacted us and we are outnumbered by people who don’t know or care” about the result, Amata said at the end, during questions from the press. “But this visit reinforces the bond of the organization of the Western Caucus and we realize how much we share in common.” Newhouse said he wanted to take back to Washington the message that the west is over-regulated and the time it takes to get a project off the ground carries “a human cost factor” that the U.S. economy can’t afford. ^ Naomi Klouda can be reached at [email protected]

Bankruptcy court approves $1 million loan to keep ADN going

Alaska Dispatch News will be able to pay its most immediate bills — health insurance and employee paychecks — after a federal bankruptcy judge gave approval for a $1 million debtor’s loan to owner Alice Rogoff at an Aug. 21 hearing. Other bills among the $2.5 million owed to unsecured creditors will have to wait until later in the process, said Judge Gary Spraker as he ruled in favor of three motions filed by Rogoff’s attorney. His rulings allow Rogoff to take the $1 million and spread it out over the next several weeks paying debts that include past-due rent payments. “There is a whole host of unanswered questions here,” Spraker acknowledged in the ruling. “Parties remain able to compromise on amounts (owed) to the extent that you can do that.” Whether the judge will approve the actual sale of the newspaper to the Binkley Co., will have to wait until a Sept. 11 court hearing at U.S. Federal Bankruptcy Court, Alaska Division. The deal worked out between Rogoff and the Binkley Co. was initially not acceptable to several creditors who objected that they needed to protect their own interests in eventually getting paid. GCI and Arctic Partners, who are the landlords for two buildings housing ADN printing presses, the Municipality of Anchorage, lien-holder M&M Wiring and Birket Inc., all removed their objections once they received assurances that their interests were to be protected. Rogoff struggled to fund daily operations while encountering financial distress over the past year related to a number of factors. In filing for bankruptcy on Aug. 12, she laid open company books showing her budgetary plight. Now she must obtain bankruptcy court approval before any final sale of the Dispatch, and for any bills to be paid. Concurrent to the bankruptcy ruling, an eviction notice brought by GCI in Alaska Superior Court on Aug. 11 also is being worked out. A day prior to Rogoff’s bankruptcy filing, GCI sought to evict the Alaska Dispatch from the Northway Drive building, claiming $1.4 million in unpaid rent and utility bills. Now GCI has been working with ADN and the Binkleys to reach an agreement, which would allow the proposed financing and sale to proceed and keep the paper in production. “We received a commitment from Ms. Rogoff,” said GCI spokesperson Heather Handyside. “We (had been) waiting for Ms. Rogoff’s commitment to guarantee payment of the costs of removing ADN’s press from GCI’s building. With her commitment, the Binkley financing can go forward. This isn’t a new term—Ms. Rogoff committed to pay the costs of removing ADN’s press in the 2014 lease of the Northway Drive facility.” Rogoff filed a motion for expedited approval of the commitment with GCI on Aug. 22. The stipulation agreement on Aug. 22 states that Rogoff will pay GCI $101,500 for rent and utilities for use of the property from Aug. 12 to Sept. 11. Then, an additional $101,500 will be paid on Sept. 11. “If either of the payments … is not timely paid (time is of the essence), GCI is authorized to pursue all of its remedies in the eviction proceeding,” according to GCI’s agreement with Rogoff filed by her attorney Christianson. “After Oct. 11, there would be another agreement, pending what happens with the purchase,” Handyside said. “If the purchase is successful, there could be a new lease negotiated for up to 16 months during the transition.” At the same time, GCI is working on an agreement with the Binkley Co., which could allow them to remain in the premises for up to 16 months. “However, the deal has not been finalized yet,” Handyside said. The other two printing presses owned by Rogoff at a warehouse owned by Arctic Partners were a source of contention at the Aug. 21 hearing as attorney Jason Kettrick fought for the right of his client to sell them both if Rogoff doesn’t remove them by Sept. 30. “The problem is that (the press) is humungous and completely consuming the warehouse’s space,” Ketrick said. But the U.S. Trustee Kathryn Perkins didn’t want the judge to allow Arctic Partners to do away with the press, either by selling it or scraping it. “That is collateral that I don’t think we should let out of our reach,” she said. If value is determined, it could be sold to pay debts, especially if the bankrupcy goes to Chapter 7 liquidation. Perkins is a Justice Department employee who is looking out for the stakeholder interests in this bankruptcy. Cabot Christianson, Rogoff’s attorney, also didn’t want to discuss the presses at that hearing. “It falls outside the scope of what we are here to decide today, the motions,” Christianson told the judge. Spraker agreed, and encouraged Arctic Partners to be patient on the outcome. Arctic Partners is scheduled to receive payment of $31,589 the first week of September, and another $32,938 payment on Sept. 15, according to the Binkley Co., attorney Erik LeRoy. Rogoff has agreed to be out of the facility by Sept. 30. Those payments are far less than the estimated $143,000 Arctic Partners says it is owed. Making sense of the ADN’s struggles Among those interested in the outcome of the Alaska Dispatch News bankruptcy case were a handful of people attending court proceedings the past weeks who had their own life history tied in with the publication. One was Patrick Dougherty who worked at the Anchorage Daily News for 34 years, retiring as the editor of the Anchorage Daily News just as the newspaper changed hands. He pinpoints several causes for the paper’s “financial meltdown.” “The most important,” he said, “is that she overpaid for the paper.”  For example, he said, the much larger Boston Globe and the Worcester Telegram (about the same size as the ADN) together sold for $77 million in 2013-2014. Paying $34 million for ADN was too much, Dougherty contends. “The other thing is that, as it turns out, Alice Rogoff couldn’t afford it; that’s something I understand now that I know more about her finances,” he said. “Alice didn’t have enough money to do the purchase. She could only swing it by selling the building (for $15 million).” That set off a chain of unfortunate events. A newspaper separated from its prime real estate — the press and its offices — created a lot of unnecessary expenses. Rogoff had to find new offices for staff, acquire a new building for the press and warehouse and install the press, a complicated and expensive process. “That set a stage where she could never make it. She had too much debt. She had forced herself into all these new expenses,” Dougherty said. Rogoff’s claims that Alaska’s economic downturn and newspaper industry trends are the principal causes for the paper’s bankruptcy are wrong, Dougherty said. “It was the initial circumstance that doomed the thing. And then she mismanaged the hell out of it.” McClatchy wasn’t trying to sell the two-time Pulitzer Prize-winning paper, he said. A few years before the eventual sale, Rogoff had approached McClatchy about buying the paper or its website, McClatchy CEO Gary Pruitt told her McClatchy would not separate the paper and the website, and the price of the two could be $60 million or more. Rogoff walked away. In the following years, ADN revenues continued to decline and the paper underwent four separate rounds of layoffs and other expense reductions. A few years later, when Rogoff approached McClatchy again and offered $34 million, McClatchy had to seriously consider the offer. “If someone comes to you and offers to pay you so much … more money than (the paper) is worth, (a publicly traded company has) a fiduciary responsibility to sell. In that context, they kind of had to do it,” Dougherty said. “The paper was profitable. It was making money. It wasn’t broke. It wasn’t on the edge of going out of business, unable to pay insurance premiums. It was a solid business. The problem with the newspaper (was) that it was way less profitable than it had been, but it was still profitable,” Dougherty said. It had stayed that way by trimming expenses. “The scary thing was we didn’t know if we had hit bottom or not. Once income and expenses are in line and stabilize, then you can start re-building it,” Dougherty said. A third issue, he said, was that when she purchased the paper, Rogoff shouldn’t have increased expenses one penny without increasing revenues first. She immediately combined the staffs of the Daily News and Alaska Dispatch — a nearly 50 percent increase in the cost of the newsroom alone. Rogoff co-owned the Alaska Dispatch website with its editor Tony Hopfinger. The website, established by Hopfinger and Amanda Coyne in 2008, sold a majority interest to Rogoff. Rogoff bought out Coyne’s 5 percent for $5,000. As she was buying the Daily News, Rogoff agreed to pay Hopfinger $1 million for his 5 percent interest, according to a deal memorialized on a napkin. An ongoing lawsuit between Hopfinger and Rogoff, in which he seeks to collect the final $900,000 she says she doesn’t owe him, is still making its way through the courts. Other new overhead was incurred in renting offices at 300 West 31st Street for the staff. Like the newsroom, the staff in the publisher’s office alone eventually reached seven, which Dougherty said is more than double what it was under McClatchy. Paying for a Goss Urbanite press, including transportation from the Midwest and installation, cost a reported $1.8 million, another large expense that wouldn’t have been necessary if the ADN building hadn’t been sold, Dougherty said. More expenses were piled on: monthly rent for the original press in GCI’s building, $600,000 in modifications to a new building and cost overruns, according to the filings of another landlord, Arctic Partners, this one at 5900 Arctic Boulevard. “It didn’t make sense to sell the building (at 1001 Northway Drive) to GCI,” Dougherty said, “but that’s the only way she could afford it. The mystery to me is how she could have worked 10 years as the chief financial officer for US News &World report and understand as little about finances as she did.” Rogoff failed to take advice from experts inside and outside the paper, Dougherty said. For example, he said, she didn’t rely on the expertise of Ken Carter, her own printing and press manager. “Instead she put some guy who’d been in charge of remodeling her home in charge of the press (project), which has become a very expensive mess,” he said. She also reduced revenues by eliminating the online subscription “paywall” immediately upon taking over. “That was not insignificant subscriber revenue,” Dougherty said. Newspapers across the country are depending more on consumer revenue —like online subscriptions — in this age of declining ad revenue. “That’s another example of how poorly decisions were made at the very beginning of her ownership. It laid the foundation for what’s happening now,” he said. Overall, Doughtery said, he’s most concerned about the people still working at the ADN and for the community. “The newspaper is perhaps the largest manufacturing business in Anchorage. If it goes out of business and 212 people lose those jobs, that’s a major blow to the Anchorage economy,” he said. “It’s a bad consequence for all those people and it’s bad for the community. In order to have functioning democracy, you have to have a strong journalism component.” Naomi Klouda can be reached at [email protected]

Northrim sells insurance subsidiary for $4.6M

Northrim BanCorp Inc. has sold its Northrim Benefits Group to Michigan-based Acrisure and the new company will be rebranded as RISQ Consulting. In a deal announced Aug. 14, Northrim BanCorp sold most all of the assets associated with Northrim Benefits for $4.6 million and the new company will combine services and workforces with Acrisure subsidiary Insurance Brokers of Alaska to form RISQ Consulting. Acrisure, a national insurance brokerage company selling insurance and risk management services, is the 12th-largest insurance agency in the United States with more than 120 affiliated agencies. Northrim Benefits Group will be Acrisure’s second acquisition in the state after the company purchased Alaska USA Insurance Brokers Commercial Insurance and Employees Benefits in December 2016. The move gives the new company a wider range of tools to help small, medium and large businesses manage their employee health care benefits programs, said Joshua Weinstein, president and employee benefits consultant at Northrim Benefits Group. It also gives access to greater options in risk management and workmen’s compensation, the full suite of required insurances for companies to operate. “With our strategic partnership and expansion into employer services over the last year, and our new holistic approach to how risk is identified and managed, we feel this new brand is a better reflection of the products and services that we will provide,” said Weinstein. “You will receive consulting and support from the same individuals you know today, and our office location and phone number remain unchanged.” RISQ Consulting will be also able to assist with the sales and service of business insurance that isn’t part of an employee benefit plan such as property and casualty coverage, surety and bonding. “We purchased our ownership in Northrim Benefits Group in 2005 to provide additional financial services to our growing customer base,” said Northrim BanCorp President and CEO Joe Schierhorn. “Today, we believe there are benefits for Northrim Benefits Group to align with Acrisure, as the health insurance industry continues to evolve.” Northrim’s $4.6 million sale generated a net profit after taxes of $2.7 million, or $0.39 per share, in the third quarter of 2017, according to the company. In 2016, Northrim Benefits contributed $3.8 million, or 3.8 percent of Northrim’s total revenues. Current management and staff of NBG will remain in place following the transaction, which closed on Aug. 14. “We are excited to affiliate with Acrisure to provide even more insurance products and services to our customers,” Weinstein said. Currently, Northrim Benefits helps companies of all sizes and families coordinate and build health care benefit plans such medical, dental and vision. Prior to the Affordable Care Act in 2014, Northrim Benefits acted as a broker to help connect both individuals and businesses with health and risk insurance options. Under the Affordable Care Act, the company helped broker insurance policies on the federal individual market exchange, Weinstein said. He emphasized that the benefits group is not an insurance company. As Northrim Benfits did in the past, RISQ be offering assistance to people navigating the insurance market exchange this fall during open enrollment under the ACA. Individuals can call for an appointment. With Alaska now left with one individual market insurance carrier – Premera Blue Cross Blue Shield of Alaska — that portion of the Northrim Benefit’s work continued but without the advantages of offering clients more choice. “Now, under the individual market, policies are more politically volatile as well. As a brokerage, we link those who need an insurance policy with a carrier selling the policy,” he said. The sale will bring more resources from one of the fastest-growing insurance brokerage firms in the country. “Acrisure has doubled its revenues and remains on an ambitious growth path that follows the trend to consolidate for better insurance options,” according to MiBiz, a business publication out of Michigan where the company is located. Acrisure has bought 120 companies on the philosophy of preserving local relationships with customers but overcoming some of the industry fragmentation that can cause expense through lack of options, MiBiz recently wrote. Weinstein points to the way Acrisure seeks to retain the local management team and maintain the brand equity the prior owners built in their markets over the years. Some of Acrisure’s deals have been for agencies that have been in business for 90 or 100 years, MiBiz reported. The seller will typically retain a minority ownership stake in the agency. “They don’t follow a typical acquisition model,” Weinstein said. “They don’t want to come in and upset the applecart of what has been successful. They provide more support with more nationwide tools.” There may be more options down the road for health benefits offered by RISQ, because health care is continually evolving under the U.S. political system, he added. Currently, Northrim adds to the public policy debates in Juneau on insurance laws and regulations, hoping to bring down costs in what is considered the most expensive state in the U.S. to insure. “While we’ll be able to offer employers and individuals new and innovative ways to finance health care services, many of the affordability problems aren’t insurance-based but are more regulatory and also stem from the underlying growth in healthcare costs themselves,” Weinstein said. “Our partnership will assist our clients in purchasing the right kinds of care, at the right time, and in the right place — all of which affect costs and premiums in a desired direction.” Northrim’s President Schierhorn said he’s excited to join resources with Acrisure and rebrand. “This positions us to be the second largest in the state, giving us more options and resources,” he said. “Northrim works with a variety of customers — we don’t want to disrupt that relationship. We view this as an opportunity to maintain our long-term relationships and offer them a relationship with a firm that provides our customers with more options going forward.” ^ Naomi Klouda can be reached at [email protected]

No resolution in ADN bankruptcy as Northrim seeks more time

A Friday bankruptcy hearing for the Alaska Dispatch News was continued until Aug. 21 after attorneys for Northrim Bank sought more time to strike a new loan agreement with owner Alice Rogoff. At issue is the $10 million balance on a $13 million loan Rogoff took out in 2015 with Northrim Bank to buy the Anchorage Daily News. Before the U.S. Bankruptcy Court Alaska Division can proceed forward to authorize Rogoff’s proposal to save the Dispatch from the brink of closure, the largest creditor needs assurances through new collateral. The loan’s current collateral, the assets of the Alaska Dispatch News, will be assigned to the prospective new owners, Binkley Co., in what is called a super primary lien. This would put the Binkley Co., at the head of the line, in front of Northrim, as well as Rogoff’s landlords GCI and Arctic Partners, and contractors such as M&M Wiring Services who is owed nearly $500,000. Cabot Christianson, the bankruptcy attorney representing the ADN, told Judge Gary Spraker at Friday’s hearing that Northrim has more work to do on its new contract with Rogoff. “We need another day to wrap that up,” Christianson said. “Northrim needs signatures to a document just created.” Michael Parise, the bank’s attorney, told Spraker that he is “close but not there yet” in finalizing a new loan contract with Rogoff. All three of Rogoff’s original motions are now continued to Monday. On the table are a Debtor in Possession Loan Agreement and approval to use cash collateral, permission to pay the employees’ insurance premiums and authorization to pay wages and carriers. In bankruptcy, Rogoff needs court approval before spending her account receivables money on bills – money from ads, subscriptions and commercial printing. Next week’s payroll will need to go out, Christianson told Spraker. “The case needs to be wrapped up soon,” he said, in order to authorize payments for everything from paychecks to postage stamps. “You’ll need to be patient, which is not a bad thing,” Spraker told the court gathering, addressing the attorneys there representing clients owed the largest unsecured debts totaling about $2.5 million, Rogoff estimates. Court for the bankruptcy resumes at 3:30 p.m. Aug. 21. That morning, at 10 a.m., Alaska Superior Court will hear the case of GCI’s motion to evict the Alaska Dispatch News from the building housing its printing press on Northway Drive. Rogoff filed Chapter 11 bankruptcy protection Aug. 12, one day after GCI moved to evict the newspaper as a tenant. The iconic building that still proclaims the Anchorage Daily News banner was constructed 33 years ago around the three-story printing press. GCI bought the building for $15 million as part of Rogoff’s $34 million purchase of the Anchorage Daily News with the understanding between both parties that the ADN would move its printing press operation elsewhere by November 2015. Soon after the bankruptcy was filed, Rogoff announced to her staff that new owners were in the planning stages for taking over the newspaper ownership. The buyers are four siblings – Ryan Binkley, James Binkley, Kai Binkley Sims and Jason Evans. The Binkleys are fourth-generation Alaskans from the pioneering riverboat family in Fairbanks while Evans is owner of four newspapers in the Arctic, Bristol Bay, Homer Tribune and Dutch Harbor. Evans also is president of Rural Energy Enterprises and Financial Inc., a business-consulting firm. The motion filed Aug. 15, if granted, would allow Rogoff to proceed with the sale to the Binkleys and Evans. But the sale of the Alaska Dispatch won’t be a clear hand-over from buyer to seller. Stages outlined in Rogoff’s bankruptcy filings ask Federal Judge Gary Spraker to first allow a lump sum payment of $350,000 from the Binkleys/Evans to Rogoff, and a $200,000 thereafter in weekly payments up to $1 million to settle the most immediate debts. GCI attorneys say they are close to an agreement to continue to rent to the new operators at the ADN. But to date, the Municipality of Anchorage, owed $56,516 has opposed the sale. Attorney Wayne Dawson, representing M&M Wiring, also has questioned the deal. So far, no mention has been made of how the creditors, other than Northrim and GCI, will be repaid the debts owed them, at least, in the court proceedings or filings to date.

ADN bankruptcy hearing to continue Friday

The newspaper carriers who deliver the Alaska Dispatch News will be paid $80,000 due Friday morning, Aug. 18, after a bankruptcy judge allowed Northrim Bank to “carve out” that amount from owner Alice Rogoff’s account. The allowance meant survival of the newspaper at least for a day after its financial director Erin Austin was able to convince the judge the daily newspaper wouldn’t be delivered without this payment. Payment for ads and subscriptions — the ability for the newspaper to remain in business — hinge on getting out the paper each day, Austin said. “Carriers would walk off the job,” she said, if the checks weren’t waiting for them in the morning. Northrim Attorney Michael Parise proposed the payout for the carriers from the loan after objecting that the deal shouldn’t move forward without a new loan agreement with Rogoff, who has a $10 million balance on the loan she took out to buy the Anchorage Daily News in 2014. After more than two hours of discussion, Judge Gary Spraker seemed prepared to grant Rogoff her request to accept $1 million in loan financing from the proposed new owners, the Binkley Co. Parise objected, saying Northrim was reluctant to see the deal move forward without protections in place for the bank’s $10 million loan. “There is nothing to protect the bank. There is no equity in the assets to protect us,” Parise said. “I think we’re getting ahead of ourselves to do this before an extension is in place.” Northrim wanted the judge to hold off until Northrim could secure a new loan contract with Rogoff now that the terms of her loan have changed in light of the bankruptcy filing. She is not late in her payments, the attorney said, but she is in a technical default by virtue of the bankruptcy. The motions that would move the Dispatch’s financial rescue deal forward — allowing a new potential team of owners to loan $1 million in emergency funding to the Alaska Dispatch to keep the doors open and pay immediate bills including past due health insurance premiums — were continued to another hearing set for 1 p.m. Friday at the U.S. Federal Bankruptcy Court, Alaska Division. That means the health insurance payment for the Dispatch’s 212 employees will wait for Friday’s court decision. Rogoff has argued in motions that the carrier bill and Premera Blue Cross payment are critical to be paid immediately. Other debts are to be worked out in the coming weeks through payouts of the $1 million from the Binkley Co. Rogoff has declared in court filings that the paper is losing about $125,000 per week. Rogoff did not appear in court but communicated telephonically. Ryan Binkley, one of the new prospective owners, testified to questions about how the loan of funds would help save the organization from total shutdown. A half dozen attorneys also appeared representing creditor clients: GCI, the landlord to Alaska Dispatch in the old Anchorage Daily News building where the printing press is located; the Municipality of Anchorage, which is owed $56,516 in back taxes; the attorney for M&M Wiring Services, owed $491,219 and the largest unsecured creditor; Premera Blue Cross, owed more than $400,000 by Sept. 1; Eagle Web Press, owed $58,817, and Arctic Partners, owed $143,871. The payment to the Dispatch’s newspaper delivery crews was nearly postponed until the next hearing when Northrim Bank’s attorney objected to the Debtor-in-Possession Loan, or DIP, loan moving forward. The bank is carrying a $10.2 million balance on a $13 million loan made to Rogoff in 2014 for part of the $34 million purchase price of the Anchorage Daily News. That makes the bank Rogoff’s largest secured creditor, though it is a private loan and not one encumbered directly to the Dispatch, Rogoff told Judge Gary Spraker. After sinking $17 million of her own money into the Dispatch the past three years, Rogoff realized she would need to sell. She approached prospective buyers. Talks began in April with the Binkley family. “We talked off and on, hotter sometimes then colder until last week,” Ryan Binkley said in court. The Binkley family made an offer of $1 to buy the paper back in June. “That was our initial offer until we could do our due diligence on the value (of the Dispatch),” Binkley said. Rogoff turned the offer down, however, and went on to pursue other buyers. William Morris III, the owner of the national Morris Communications newspaper group, responded to her offer to sell the paper by considering several possibilities: a joint operating agreement of the commercial printing plant or an outright purchase. (Morris Communications owns the Alaska Journal of Commerce). “Then Morris announced the sell of some of his own newspapers,” Rogoff said, referring to the sale of the Peninsula Clarion, the Juneau Empire and the Homer News to GateHouse Media among 11 total the company sold in a deal announced Aug. 9. “I had conversations with other business leaders that were very specific but ultimately didn’t come to an agreement,” Rogoff said. She also consulted with a national investment firm in New York. But when GCI took legal action on Aug. 11 to evict her from the Northway Drive building, “I could no longer engage them,” she said. The Binkley family didn’t hear from Rogoff again until Thursday evening, Aug. 10. “When I spoke to her on Thursday night by phone, she said she was going into bankruptcy protection,” Binkley said. “We responded that perhaps this was an opportunity for an outright sale. I found out later that (employees of the Dispatch) had been telling one another (Friday) to ‘save today’s paper because there’s not going to be another one printed.’” Rogoff attorney Cabot Christiansen asked Binkley if, as he digs deeper in the financials, he “understands you are undertaking risks that you don’t even know you are taking?” Binkley said that has been the case since he came on board this weekend. To help protect the family investment, Binkley said he brought in Jason Evans, who owns four rural newspapers and is president of Rural Energy Enterprises and Financial Inc., a business-consulting firm. Evans’ expertise had helped him conduct due diligence on the Fairbanks Daily News-Miner when the Binkley family had considered purchasing it a few years ago, before it was sold to the nonprofit Snedden Foundation. Binkley also brought in Jerry Grilly, the former publisher of the Anchorage Daily News who is most recently retired as president and chief operating officer of the Denver Post. When Rogoff attorney Cabot Christianson asked what does “good faith” mean to him, Binkley responded, “It means treating people fairly and honestly. The people who work for the paper. The creditors, the debtor and any other buyer who comes forward and should be treated fairly.” The U.S. Trustee, a Department of Justice official assigned by the court, had raised a concern prior to this hearing that Binkley needed to show “good faith” in its efforts. The concern was that the Binkleys could cut off funding at its “sole discretion” and this could chill prospects for a potential purchase of the debtor’s assets, Trustee Gail Geiger wrote in a motion to Spraker on Aug. 16. The questions posed for Binkley sought to answer those concerns for the Trustee. Another factor Spraker and attorneys sought to understand is the actual value of the ADN, because Rogoff is selling it for $1 million, which, if this goes through, will only pay off the $1 million loan proposed by the Binkely Co. Rogoff said there is no value outside the present use of assets, such as the printing press that remains locked up in the design of the Northway Drive iconic Anchorage Daily News building. “There is no market value other than as scrap metal,” Rogoff said, though she admitted this information came only from informal appraisals, not an expert. A Goss Urbanite is now sitting idle at the Arctic Boulevard warehouse — a second giant press meant to turn out large circulations of daily print runs that has never been turned on after problems with the installation and Rogoff’s failure to pay several contractors who worked on the Arctic Boulevard building. According to Rogoff’s filings, she paid a total of $1.8 million for the press, the transportation and the installation of the Urbanite. There is another $12.3 million in intangible assets, she said, though did not go into detail. Naomi Klouda can be reached at [email protected]

US Trustee objects to proposed loan to Alaska Dispatch News

A new monkey wrench was tossed into plans for the Alaska Dispatch News to keep operating through a loan and purchase agreement with the potential buyers. U.S. Trustee Gail Geiger responding to the U.S. Bankruptcy Court for the District of Alaska, outlined objections to the proposed $1 million deal in a trustee’s Aug. 16 response to ADN owner Alice Rogoff’s debtor motion. Most parties haven’t been given notice of the first motions filed this week, Geiger objected on behalf of those owed money by Rogoff and the Dispatch. U.S. Trustees are Justice Department officials with broad administrative, regulatory and litigation or enforcement authorities and act as a neutral party to bankruptcy proceedings. Their mission is to work in such cases for the benefit of all stakeholders – debtors, creditors and the public. Geiger told the court in her filing that she will advocate “that the Court grant interim relief only to the extent necessary to avoid irreparable harm between now and the time that a final hearing, on notice to all parties in interest, can be conducted.” In Rogoff’s motion to the U.S. Bankruptcy Court filed Aug. 15, she seeks approval for a debtor-in-possession, or DIP, loan of $1 million with the Binkley Company, made up of four Binkley siblings and Jason Evans, as well as to spend some of that money to pay her newspaper carriers and her past due employee health insurance premiums. Judge Gary Spraker granted an expedited hearing to rule on the motion for the DIP loan and use of funds to fund operations and premiums at 2 p.m. Aug. 17 at the Old U.S. Federal Court Building. Binkley Co. and Rogoff are also entering into an asset purchase agreement with a sale price of $1 million, pending the judge’s approval, Geiger noted. But the loan agreement and the sale motion are “intrinsically intertwined” because as the agreement for financing is contingent on the court’s approval of a super priority lien and cash collateral. Geiger questions whether this accords protection for Rogoff’s $10 million loan balance with Northrim Bank, a secured creditor, and more than 100 other unsecured creditors who are owed a combined total of $2.5 millon as well. “As to the first, issue, the United States Trustee does not currently have a position insofar as it is unclear at this early stage in the case whether Northrim Bank consents to this priming lien and what, if any, adequate protection will be accorded Northrim Bank,” Geiger wrote. “It is worth noting however, that the Debtor’s petition reflects estimated assets of $10 to $50 million and liabilities of only $1 to $10 million, suggesting that the Debtor may be solvent and that Northrim may have an equity cushion sufficient to warrant a finding that they are adequately protected, however, and again, the United States Trustee reserves the right to review and object to any proposed adequate protection payments to the extent they are overreaching.” Secondly, the trustee is concerned that Binkley’s ability to cut off funding at its “sole discretion may chill any potential parties wishing to investigate a potential purchase of the debtor’s assets.” Of further concern to the trustee is the “insider” status of a new manager that Binkley appointed, namely Jerry Grilly, former ADN publisher. It’s fine to appoint a manager but now Binkley falls within the definition of insider and becomes subject to a higher level of scrutiny. “Also worth noting is that the fact that parties in control of a debtor’s chapter 11 operations who undertake the role of debtors-in-possession owe the debtor’s creditors a fiduciary duty to maximize the value of assets.” That’s at odds with Binkley’s financial interests in obtaining assets at the cheapest price they can, she wrote. Geiger posed an example: a potential buyer could begin negotiating with Rogoff’s landlord, GCI, the owner of the Northway Drive building where the press is housed. GCI filed to evict the Dispatch from the Northway property Aug. 11, a day before Rogoff filed for bankruptcy. GCI could prefer to negotiate with the potential purchaser and then refuse to negotiate any further with Binkley, Geiger wrote. “At that point, … Binkley could simply cease its DIP financing, leaving all parties without the ability to reorganize,” Geiger wrote. Based on this possibility, Geiger is requesting that the loan agreement should prohibit Binkley from terminating financing or refusing to provide the funding. She also is requesting that the court require Rogoff and Binkley to give evidence substantiating a “good faith, arms-length lending relationship.” The trustee is also reserving the right to raise additional objections as the case proceeds through the courts. Naomi Klouda can be reached at [email protected]

ADN owner seeks quick court approval to pay carriers, insurance

Alaska Dispatch News owner Alice Rogoff filed motions in U.S. Alaska Bankruptcy Court Aug. 15 seeking an expedited hearing to keep the operation functioning and to restore her employees’ health insurance benefits. The motion for a quick hearing was granted and set for Aug. 17. According to filings in the latest phase of Rogoff’s Chapter 11 proceedings, getting current with her Premera Blue Cross Blue Shield premiums and having cash on hand to pay her carriers to deliver the paper necessitates quick court approval of $1 million in loan financing that equals the $1 million sale price to the new owners. Soon after the bankruptcy was filed Aug. 12, Rogoff announced to her staff that new owners were in the planning stages for taking over the newspaper ownership. The buyers are four siblings — Ryan Binkley, James Binkley, Kai Binkley Sims — and Jason Evans. The Binkleys are fourth-generation Alaskans from the pioneering riverboat family in Fairbanks while Evans is owner of four newspapers: the Arctic Sounder, Bristol Bay Times/Dutch Harbor Fishermen and the Homer Tribune. Evans also is president of Rural Energy Enterprises and Financial Inc., a business-consulting firm. The bankruptcy filing came one day after GCI filed to evict the Dispatch from the Northway Drive building that the Anchorage telecom owns and where the newspaper’s printing press is housed. Formerly from the East Coast where she worked 10 years as a chief financial officer for U.S. News and World Reports, Rogoff has owned the Alaska Dispatch News since April 2014. The Dispatch is a combined publication from an online-only news publication by that name that was established in 2008 by Tony Hopfinger and Amanda Coyne. Rogoff combined the Dispatch and the McClatchy-owned Anchorage Daily News, which was established in 1946 and became Alaska’s largest newspaper in the folding of the Anchorage Times in 1992. Rogoff bought the Anchorage Daily News and the building for $34 million, with GCI then purchasing the Northway facility for $15 million. Rogoff wrote in her personal declaration that she took out a $13 million loan from Northrim Bank and used $6 million of her cash to pay the remaining $19 million of the sale price. Highest on the list of priorities is paying three months past due insurance payments to Premera Blue Cross for coverage of the Dispatch’s 212 employees. Also critical is being able to pay carriers $80,000 on Aug. 17, or the newspapers will not be delivered to subscribers, Rogoff stated in the filings. “The debtor has immediate need of cash for, among other things to pay the $262,556.99 in past due health insurance premiums, as set forth in the insurance motion,” Rogoff stated in her filing. “Debtor’s cash on hand is less than $100,000…In addition, Debtor needs to pay its carriers approximately $80,000 on Thursday, August 17, 2017. It is critical that funds be available that day. If the carriers are not paid that day, newspapers will not be delivered.” The iconic building on Northway Drive that still proclaims the Anchorage Daily News banner was constructed 33 years ago around the three-story printing press. Extracting the Goss Headliner printing press from the building is the largest liability facing the company. The motion filed Aug. 15, if granted, would allow Rogoff to proceed with the sale to the Binkleys and Evans. But the sale of the Alaska Dispatch won’t be a clear hand-over from buyer to seller. Stages outlined in Rogoff’s bankruptcy filings ask Bankruptcy Court Judge Gary Straker to first allow a lump sum payment of $350,000 from the Binkleys/Evans to Rogoff that would be applied toward carrier payments and insurance premiums, and a $200,000 thereafter in weekly payments up to $1 million to make payroll and continue operating. A separate motion was filed to explain the emergency in paying the Premera Blue Cross premiums. “Employee morale has suffered significantly due to Premera not processing medical claims other than pharmacy benefits,” the motion states. “The past due amount, $262,556.99 is included in the cash budget for which Debtor seeks approval in its motion for a DIP (Debtor in Possession) loan, and use of cash collateral, and is a major reason why the first week’s advance under the proposed DIP loan is $350,000, whereas subsequent weekly loans are $200,000.” Other insurances policies are also past due. State-mandated worker’s comp payments through Berkshire Hathway are behind by $26,733.68. So far, the Dispatch is not in violation with state law, however, said Rhonda Gerharz, chief investigator for special investigations, Alaska Workers Comp Division. Rogoff also said she is behind in her Liberty Mutual liability insurance, which is past-due $10,227.75. In her personal declaration, Rogoff wrote that a total of $421,000 would need to be paid to Premera by September to get her employees’ policies current. Restructuring debt It could take years for the top 20 creditors to receive payment as the Alaska Dispatch Chapter 11 filing winds its way through the courts, said Alaska bankruptcy lawyer David Bundy. “Usually you wouldn’t have the debt worked out (prior to the sale); it would take too long otherwise,” Bundy said. He sites the example of General Motor’s bankruptcy in 2009. “In a very short time the productive assets were transferred to a new company that called itself GM and kept going. The old bankruptcy case is still going on. Creditors are still waiting for payment,” he said. GCI is listed as the Alaska Dispatch’s second-highest debt in a list of 20 unsecured creditors at $304,394 owed. This differs from GCI’s Forcible Entry and Detainer motion filed Aug. 11 in Alaska Superior Court seeking to evict the company. The amount GCI says Rogoff or the Dispatch owes is $1.4 million in back rent and utilities. No rent was paid for July or August, and the Dispatch share of the utilities, amounting to about $1,500 per day, have not been paid since February. GCI is claiming additional damages “in excess of $1 million” to remove the Goss Headliner Press and clean up toxic ink from the Northway property. The U.S. Bankruptcy Court in the District of Alaska will determine if the proposed sale of the Dispatch to the new owners can proceed forward, said Bundy, who is not an attorney on the Dispatch filing but was willing to explain how federal bankruptcy laws work. “If the court approves it, it will most likely happen within a few weeks,” Bundy said. “Once it’s put together, creditors will be notified that this is to happen. At the moment, they (creditors) probably are in the dark, but before the sale occurs they would be told about it.” The bankruptcy filing lists 21 pages of people and businesses that the Dispatch owes, and their addresses so that they can be notified by the court, as is standard in bankruptcy proceedings, Bundy said. For the moment, a bankruptcy filing can keep GCI from barring the Dispatch from using the Northway Drive building. But GCI also has recourses. “They can go to a judge and say, ‘we don’t want to be held off any longer,’ and ask for approval to move forward,” Bundy said. GCI spokeswoman Heather Handyside said she could not comment further on how the bankruptcy filing impacts the company’s move to evict the Dispatch. On Aug. 11, she said the company “can’t keep sustaining their operations” and that the company wants to take control of its facility that it purchased with the intent to consolidate its own warehouse operations. The Dispatch was originally supposed to be out of Northway by November 2015, then by December 2016, but was unable to complete the move and soon thereafter stopped paying its portion of utilities and, most recently, its rent. In the Motion for Sale of Assets, Free and Clear of Liens,” Rogoff is selling Binkley/Evans the company assets including the printing presses at Northway and the currently unavailable press on Arctic Boulevard for $1 million, with certain conditions that will either be approved or denied after the Aug. 17 court hearing. According to the Asset Purchase Agreement that Rogoff is asking the court to approve, Rogoff and the Binkley Co. worked out a deal that would keep the new owners unencumbered from the Dispatch’s current debt. If the deal falls through, after the DIP loan is granted, the buyers would gain 3 percent of the ultimate selling price and reimbursement of $100,000. Largest debts According to the list of 20 largest creditors, the biggest debts relate to the Dispatch’s quest for a new home to house its printing presses. Because it cannot dismantle and move the Goss Headliner press built into the property at Northway, a new printing press needed to be purchased as well as finding a new place to put it. Toward that end, Rogoff leased warehouse space owned by Arctic Partners at 5900 Arctic Boulevard. A used press worth about $400,000, a Goss Urbanite, was installed in the warehouse. But that lease is also in litigation, and M&M Wiring Service Inc., owner Mark Miller has placed a lien on the Arctic Boulevard building. M&M ranks No. 1 on the list of 20 unsecured creditors with a debt of $491,219. Rogoff had stated in her response to press inquiries after the GCI eviction notice that, “(t)he events that led us to this point have been extremely complex.” If she was speaking about the printing press, that was no exaggeration. Bruce Ross, a longtime printer in Alaska who works for Alaska Printers Supply, said the Goss Headliner the ADN purchased prior to its move from Potter Drive in 1984 for its new Northway Drive quarters “wasn’t put in the building with the idea that the press would ever be moved. If it were, you could disconnect, dismantle it and roll it out. But the building was built with floors connected to the press.” M&M was the company hired to wire the press and the building. Precision Maintenance Fabricating was hired to prepare the concrete floor. But according to a second contractor, Shane Perrins of Frontline Construction, the initial concrete work had to be completed twice. “They poured concrete but didn’t follow inspection laws and they didn’t follow drawings like the municipality requires,” Perrins said. “We had to cut out their concrete work and re-pour because it wasn’t engineered right, both for the new bay (for delivery trucks) and inside the building. Alice had to pay twice because the original contractor didn’t do the work per municipal requirements.” The warehouse currently holds two presses, one that prints advertising supplements and the other that is meant to replace the current press at Northway. But the warehouse is “no where near” close to receiving its Certificate of Occupancy, said the Municipality of Anchorage’s Chief Municipal Inspector Hans Gisler. The Dispatch does have a permit, however, to continue work until it meets occupancy and use requirements. “They are not ready to use the building because there are a whole bunch of inspections that need to be done,” Gisler said. “I haven’t seen any work for quite a while. I don’t think they are even close to getting a Certificate of Occupancy.” Earlier, a stop order was imposed on the project by the municipality, Gisler said. “It was later lifted when the new drawings had to be brought in for work by the new contractor,” Gisler said. Perrins said the work project at the warehouse has been “on hold” for a few months. Currently, the debt owed Frontline Construction is listed as $68,901 but Perrins said the latest invoice brings the total to $90,000 owed him. Nonetheless, he said, “I’m willing to help out Alice any way I can. I’m in touch with her, and I believe she’s good for the amount she owes me.” He doesn’t blame Rogoff. “She trusted someone and things weren’t done properly. It took time to gain the muni’s faith that the project was moving in the right direction,” Perrins said. Rogoff argued in a declaration accompanying the bankruptcy motions that she was willing to take a loss on her $34 million newspaper investment “to maintain robust journalism in Alaska, and as an investment in the future of the company.” But she wrote she is losing about $125,000 per week. New digital platforms are not paying off. She estimates 4,000 digital-only subscribers and does not list print circulation numbers, which are thought to be in the 33,000 to 40,000 range, down from 57,622 daily circulation claimed in 2014 at the time of McClatchy News’ sale of the ADN to Rogoff. “Since the purchase of ADN, I have personally financed ADN’s operations, cash shortfalls, and capital expenditures,” she wrote. “In addition to the Northrim Bank Loan, I guaranteed the Arctic Road lease and certain removal costs related to the GCI lease. However, personally financing the future operations of ADN in addition to the current personal guarantees is no longer feasible.” ^ Naomi Klouda can be reached at [email protected]

Teacher shortages loom even after layoffs rescinded

While the Alaska Legislature tarried on budget talks for fiscal year 2018, nearly 700 teachers statewide were handed pink slips as required by state law in the weeks before the school year ended. The Legislature eventually settled budget questions six weeks after school was let out by reversing a proposed 5 percent cut, or $69 million. The statewide education budget was restored to the same amount as the prior year, or $1.3 billion to be shared among all 53 school districts. That allowed the layoff notices to be rescinded. A couple months later, schools are struggling with an opposite problem: a teacher shortage with the school year set to begin Aug. 21. Where did all the teachers go that were laid off? Many were rehired. But others were lost to moves out of state, lured by school districts in the Lower 48 that pay more and don’t put teachers through the drama of wondering each year if they’ll have a job in the fall, said Tim Parker, president of National Education Association-Alaska. “It’s not unusual to have teacher vacancies after a school year,” said Parker. “We’ve had a teacher shortage going for a while and the problem has gotten a little bigger. The development that’s surprising here is that on Aug. 10, there were 45 unfilled positions in Anchorage alone. I don’t think that’s ever happened before.” Parker was referring to the Anchorage School District teacher shortage. In May, about 220 ASD teachers were handed pink slips in addition to the 100 positions lost in an early layoff due to 2017 budget cuts. Within two weeks, ASD Superintendent Deena Bishop said she was able to hire a majority back, plus new teachers. Still, there were nine elementary school vacancies across the district, a need for science, math, music physical ed and Alaska Native teachers. In Juneau and on the Kenai Peninsula, the same story plagues districts just as first day of school draws near. “What is unusual,” said Juneau School District Director of Student Services Bridget Weiss, “is having vacancies this close to school starting.” Days before school was set to start in Juneau, Weiss said the amount of vacancies in the school district is about the same as past years, but usually, the jobs are filled by this point. Schools throughout the country, and especially in Alaska, are dealing with a lack of teachers. As of Aug. 15 there were 541 job listings for Alaska Teacher Placement, a site that tracks education jobs in Alaska. The Juneau School District listed a need for two teachers, along with 38 other openings related to substitute teachers, support staff and student support services. The Kenai Peninsula Borough School District is advertising 99 jobs. That district is need of eight substitute teachers, five athletics/activity teachers, two elementary and three high school teachers. Some 45 teaching volunteers, who undergo a formal job-hire like screening process, also are listed as needed in the KPBSD. Alaska Teacher Placement numbers from Aug. 4 showed the state had 155 teaching positions and 90 special education positions open across the state. On Aug. 15, 122 openings remained: 59 elementary school openings, 55 high school teachers and 8 vacancies in junior high schools. Substitute teacher needs remained at 56 openings. Parker notes that Alaska’s 53 school districts typically hire 1,000 teachers each year due to high turnover numbers and retirement. “We need to hire that number of teachers because we have a really high turnover rate, about 8 to 10 percent in the urban areas and 33 percent in rural areas,” Parker said. Meanwhile, the University of Alaska system graduates about 200 to 250 new certified teachers per year. Given the UA system’s hard-hitting budget cuts – this year the budget is to be reduced by $7.8 million – the fear is that Alaska will be producing even fewer of its own home-grown teachers in the coming years, Parker said. The rest of the country also has a teaching shortage, which means educators can take their pick of where to live. “We bring educators in from the Lower 48, but now those in Alaska can also be considering where else they might want to go since our wages are flat here,” Parker said. “Meanwhile, wages in the Lower 48 have grown steadily by 2 to 5 percent per year for most years.” Alaska schools are having trouble staying competitive as a marketplace. Salaries continue to drop. In actual dollars, Alaska is ranked 12th in the nation for teacher wages, even while the cost of living is higher. Add to these woes the three past years of legislative budget stalls that didn’t add to the budget through either an income tax or a reconfiguration of Permanent Fund earnings. “Teachers as potential hires might be saying to themselves, ‘why go there? I would get a pink slip at the end of the year’ as a newer teacher,” Parker said. “We put ourselves in a difficult box to attract and retain teachers from the Lower 48. They know that every year we’ve been handing out pink slips.” Yet another side of the issue is that nationwide, the number of college students seeking teacher certifications has fallen, Parker said. Studies show people aren’t interested in pursuing teaching careers because “people aren’t valuing the career. They beat up on teachers,” he added. Bishop said the district is looking at ways to limit its teacher shortage and layoff losses through a better incentive system. Part of what catches the district up short in June is the late notice for a high number of teachers announcing retirement. Suddenly, those vacancies — unforeseen when pink slips are handed out due to budgetary requirements — are an unknown that will have to be calculated in. In one district, $150 checks were handed out as incentives to teachers to alert the district by Dec. 30 of plans to retire. “We lost about 300 teachers through attrition – and that’s a natural rate for the ASD because it’s around 1/10th,” Bishop said. “Many wait until June 30 to announce their retirement, which also keeps the district from planning.” Another problem is difficulty filling nursing, librarian, special education openings and support staff, Bishop said. Schools compete with private sectors for these positions. To head off budgetary uncertainty from a lagging legislative process that’s become the norm for the past three sessions, the ASD is planning on using some of its savings reserve to fill foreseeable gaps, Bishop said. Currently the district has a reserve of $53 million, but much of that balance must stay in the bank by Municipality of Anchorage ordinance. Of that, $25 million needs to stay in reserve to guarantee bonds. Another $8 million is set aside for charter schools. Reserve money is built up by happenstance, though, not planning. “If what’s budgeted for gas to heat buildings isn’t fully spent, the balance goes into the reserve. If vacancies aren’t filled, the unspent salaries and benefits go into reserve,” Bishop said. “That’s not the best way to build up a reserve.”

GCI moves to evict Alaska Dispatch News

GCI filed an eviction notice against Alaska Dispatch News owner Alice Rogoff on Aug. 11 alleging non-payment of rent for July and August and running up unpaid utility bills since February that together total nearly $1.4 million GCI filed the Forcible Entry and Detainer complaint in Alaska Superior Court Aug. 11, asking for payment of what is owed at the Northway Drive building that houses the Dispatch printing press as well as damages in excess of $1 million. Total rent and utility bills due to GCI is $1.39 million as of Aug. 11. The electricity bills mounted to $29,000 in February to more than $46,000 by July. GCI estimates it is paying more than $1,500 per day in utilities attributable to the Dispatch operations. “It is extremely unfortunate that GCI has taken this legal action to evict us from our press facility,” said Rogoff in a statement to the Journal. “The events that led us to this point have been extremely complex. At no point has there been any bad faith on the part of the newspaper. Our goal has always been to keep Alaska’s largest newspaper alive and robust for the sake of our readers and the community. Our goal remains unchanged and we are in active discussions toward that end. Until the discussions are concluded, we are unable to provide any details. Please know that business disputes arise from many causes and are never one-sided. We hope that this matter will be resolved shortly to the benefit of all parties.” Meanwhile, the press continues to be operated to put out the Alaska Dispatch each day, said GCI spokesperson Heather Handyside. GCI doesn’t intend to lock the Dispatch out of the facility. “We’re hoping to gain access and control of our facility back,” Handyside said. “The Dispatch has operated since December with no lease. We would like to take ownership and to be repaid the debt owed, which is $1.4 million at this point. And then we are seeking compensation for expenses of getting the press out of the facility.” GCI currently has six warehouses located around Anchorage where it must store products and equipment that was meant to be moved to the Northway property more than two years ago, she added. Purchase of the 126,691-square foot space was attractive for consolidating operations, using conference rooms and inventory. ‘We’ve used a few back offices and the conference rooms a few times,” she said, but mostly GCI hasn’t been able to enjoy use of its building purchase since the agreement was made. “Our plans have been on hold for a while.” Even early on, Rogoff failed to make good on her agreements when GCI completed more than $200,000 for IT work on the new building at 300 31st Avenue currently housing the newsroom and advertising operations. “When they weren’t able to pay for that, we accepted in-kind advertising in lieu of payments. We’ve been kind of subsidizing the operation. We can’t keep sustaining their operations,” she said. A court date has been set for later in August when the situation may be resolved, Handyside said. In the meantime, if the Dispatch owner comes back into negotiations, “we certainly would consider it.” GCI lays out the chronology of its complaints starting with the original agreement in April 2014 when the Alaska Dispatch Publishing, owned by Alice Rogoff, entered into an agreement with GCI. The telecom company wanted the space at 1001 Northway Drive that housed the Anchorage Daily News under the McClatchy Co. In purchasing the newspaper, Rogoff was to use the money from GCI for the sale of the building to help pay McClatchy for the newspaper. The ADN had operated out of the distinctive white three-story on DeBarr and Northway from 1984 to 2014. Rogoff, and GCI entered into an agreement to purchase property from the Alaska Dispatch/Anchorage Daily News as a component of a multi-step stock purchase transaction enabling the Dispatch to use GCI’s cash payment to purchase McClatchy’s interest in the newspaper. The payment included advance purchasing of advertising worth $500,000 that would appear in the future on the Dispatch website and in print. On May 5, 2014, Rogoff closed on her two related purchase-sale transactions. She bought out McClatchy’s stock and sold the Northway Drive property to GCI. But Rogoff’s new newspaper operation remained tethered to the Northway building because the printing press was located there. Her agreement with GCI was as a temporary tenant who would pay rent through November 2015. The “holdover rent” was set at 250 percent of the base rent as an understanding by both sides that exiting the premises as quickly as possible was the goal. Meanwhile, Rogoff moved the news operations into a new office location at 300 W. 31st Ave., which required its own remodeling. According to GCI’s complaint, filed by the firm Ashburn & Mason, Rogoff/Alaska Dispatch didn’t pay invoices of $205,558 for work GCI completed on the new office premises on 31st Avenue and C Street. In Jan. 21, 2016, GCI agreed to a take advertising credit in lieu of rent. The parties amended the lease so that Rogoff was granted two 12-month extensions for the warehouse on Northway Drive, but it was to expire Nov. 30, 2016. In November 2016, Rogoff and GCI conducted a series of meetings in which the Dispatch indicated it was making progress in removing the printing press from the premises. But despite giving notice of terminating the lease, Rogoff’s operation didn’t move. She remains in possession as a “tenant at sufferance,” which means continuing to hold onto property without the landlord’s consent. Though in December and January 2017, Rogoff continued to hire contractors to complete work on removing the printing press, GCI alleges she did not pay several contractors and two of them, Anchorage Sheet Metal LLC and M&M Wiring Service, filed liens on the property. The M&M Wiring lien was released March 1. But the Anchorage Sheet Metal lien, in the amount of $4,775, remains on the property. GCI continued to negotiate a settlement in February to provide for repayment of the outstanding rent. GCI permitted the Dispatch to remain in the Northway building and GCI agreed to take more advertising in lieu of late rent. But Rogoff didn’t agree to GCI’s proposed terms and negotiations ceased at the end of February. “The Dispatch’s failure to vacate the warehouse space has prevented GCI and its affiliates from utilizing the property for its own purposes,” GCI wrote in the filing. “Following the Dispatch’s initial refusal to vacate the premises in 2015, GCI took various steps including renegotiation of short-term leases at relatively unfavorable terms to accommodate GCI operations slated for move to the Premises. “GCI has continued to accommodate (the Dispatch) and failure to vacate the premises by renegotiating leases and operating multiple disparate warehouse operations across Anchorage.” At the time of the filing, GCI said Rogoff has neither “disassembled nor removed its printing press.” The cost to restore the warehouse to a useable state is estimated to be more than $1.5 million. “Since February of 2017, GCI gave alternatives to Rogoff to enable the newspaper to continue operation and prevent a forcible eviction. But none of the alternatives were acceptable to Rogoff,” states GCI in the filing. Three times GCI also delivered default notices to Rogoff in March, April and July. On Aug. 9, GCI delivered a no-cure Notice to Quit. Naomi Klouda can be reached at [email protected]

Bradley hydro expansion moves forward with AEA approval

The Alaska Energy Authority board of directors unanimously approved a $46.4 million expansion of the Bradley Lake hydroelectric plant at its Aug. 10 meeting in Anchorage. The board’s vote allows the AEA to move forward to pursue financing and developing the Battle Creek diversion project at the headwaters of Kachemak Bay, a move that will boost production by about 10 percent and add 37,300 megawatt hours per year to its current output. That’s equal to powering an additional 5,200 homes. The project has received approval from the Federal Energy Regulatory Commission, and is “shovel ready,” AEA Executive Director Michael Lamb told the board. Now it is up to the energy authority to decide between five funding options. The least expensive involves New Clean Renewable Energy Bonds or NCREBs. The most expensive involve financing from the utilities for a project estimated to be complete by 2020 but will not be paid off for 30 years or more. The board’s decision means moving swiftly ahead in its application for a U.S. Treasury Department allocation that would cover 70 percent of interest on the hydro project. The allocation would come from leftover American Recovery and Reinvestment Act funds in President Obama’s 2009 economic stimulus package. The request is for NCREB funds that were made available to expand renewable energy projects under certain criteria. Between 2008-2009, $2.4 billion in NCREB funding was made available to U.S. utilities. “There aren’t many of those funds left, but there is enough,” Fred Eoff, the director of PFM Financial Advisors LLC of Seattle, told the board. AEA board member and Deputy Commerce Commissioner Fred Parady advocated “moving ahead as quickly as possible to get in line for the lowest possible financing.” There’s a lot of variation between the five options, said Eoff, whose firm is advising the authority on possible financial arrangements to fund the Bradley Lake hydro expansion. Interest rates range between 1.47 percent to more than 5 percent, depending on which financing scenario is chosen. Among the various financing options, interest totals ranged from $12.4 million to $50.9 million over 30-year life of the financing. “There’s a wide disparity in the total and the reason for that is that the most effective financing available would be from the Treasury Department, a 70 percent subsidy equal to 70 percent interest costs over a 30-year period,” Eoff said. “That radically reduces the cost of financing.” AEA would then pay the lower costs — around $12 million for financing the $46.4 million over 30 years. “But that is only if they are successful in their application to the U.S. Treasury and are granted an allocation of congressionally-authorized limits,” Eoff said, referring to the NCREBS funding. “There is not a lot of capacity left, so we have to submit the application at the earliest date possible. Until they get an answer from Treasury, we don’t know if that’s available. But we do believe the characteristics of the project — clean, renewable energy — meets the criteria established.” Lamb told the board that the application is already in the works. Another factor that could influence the cost of borrowing money is Alaska’s poor credit rating, which was downgraded in July by two different agencies after the Alaska Legislature failed to come up with a long-term fiscal plan. “A score of AA- or AA+ affects the interest, and the cost of the project would go up or down based on that,” Eoff told the board, in response to a question from Parady about what impact the state’s economic situation could have on the Bradley Hydro financing. Eoff, whose firm also acts as financial advisor for the Alaska Industrial Development and Export Authority, the Yukon Kuskokwim Health Corp., and the Alaska Municipal Bond Bank Authority, said he is optimistic that this year’s credit rating is “as low as it will go, and it will stay in the A category.” If it did decline to BBB rating, the bonds would be sold at a higher interest. “The Alaska credit rating is the bell weather of everything that goes on up here,” Eoff said. If AEA does not receive NCREB funding, one option is to issue taxable bonds. Another option is for Chugach Electric Association financing. CEA has offered to finance, procure and manage the project for all the participating utilities “if necessary,” according to an agreement signed July 1 by CEO Lee Thibert. The project has the support of all six Bradley Lake utility associations: Homer Electric Association, Chugach Electric Association, Matanuska Electric, Seward Electric Utility and Golden Valley Electric Association and Anchorage Municipal Light and Power. All will have the ability to tap into the power generation, but so far, four have agreed to help plan the funding and development: CEA, HEA, MEA and the City of Seward. The Battle Creek project consists of constructing a 16-foot high, 60-foot wide concrete dam to divert water into a five-foot diameter, high-density polyethylene pipe. The pipe — using natural gravity — would carry the water 1.7 miles to the Bradley Lake facilities. A 2.9-mile gravel road would be built to access the dam. It would be located atop buried water pipe to make the most use out of the pipeline corridor. The water from Battle Creek would be stored in Bradley Lake, thus providing additional water to be run through the existing powerhouse, said AEA Owned Assets Manager Bryan Carey. In other AEA board action, members accepted the resignation of Lamb, effective Aug. 15. Current AIDEA Executive Director John Springsteen will serve as interim director for AEA as well as his AIDEA role. AEA has started accepting applications for the new executive director. Naomi Klouda can be reached at [email protected]

Bradley hydro expansion moves forward with AEA approval

The Alaska Energy Authority board of directors unanimously approved a $46.4 million expansion of the Bradley Lake hydroelectric plant at its Aug. 10 meeting in Anchorage. The board’s vote allows the AEA to move forward to pursue financing and developing the Battle Creek diversion project at the headwaters of Kachemak Bay, a move that will boost production by about 10 percent and add 37,300 megawatt hours per year to its current output. That’s equal to powering an additional 5,200 homes. The project has received approval from the Federal Energy Regulatory Commission, and is “shovel ready,” AEA Executive Director Michael Lamb told the board. Now it is up to the energy authority to decide between five funding options. The least expensive involves New Clean Renewable Energy Bonds or NCREBs. The most expensive involve financing from the utilities for a project estimated to be complete by 2020 but will not be paid off for 30 years or more. The board’s decision means moving swiftly ahead in its application for a U.S. Treasury Department allocation that would cover 70 percent of interest on the hydro project. The allocation would come from leftover American Recovery and Reinvestment Act funds in President Obama’s 2009 economic stimulus package. The request is for NCREB funds that were made available to expand renewable energy projects under certain criteria. Between 2008-2009, $2.4 billion in NCREB funding was made available to U.S. utilities. “There aren’t many of those funds left, but there is enough,” Fred Eoff, the director of PFM Financial Advisors LLC of Seattle, told the board. AEA board member and Deputy Commerce Commissioner Fred Parady advocated “moving ahead as quickly as possible to get in line for the lowest possible financing.”   There’s a lot of variation between the five options, said Eoff, whose firm is advising the authority on possible financial arrangements to fund the Bradley Lake hydro expansion. Interest rates range between 1.47 percent to more than 5 percent, depending on which financing scenario is chosen. Among the various financing options, interest totals ranged from $12.4 million to $50.9 million over 30-year life of the financing. “There’s a wide disparity in the total and the reason for that is that the most effective financing available would be from the Treasury Department, a 70 percent subsidy equal to 70 percent interest costs over a 30-year period,” Eoff said. “That radically reduces the cost of financing.” AEA would then pay the lower costs — around $12 million for financing the $46.4 million over 30 years. “But that is only if they are successful in their application to the U.S. Treasury and are granted an allocation of congressionally-authorized limits,” Eoff said, referring to the NCREBS funding. “There is not a lot of capacity left, so we have to submit the application at the earliest date possible. Until they get an answer from Treasury, we don’t know if that’s available. But we do believe the characteristics of the project — clean renewable energy — meets the criteria established.” Lamb told the board that the application is already in the works. Another factor that could influence the cost of borrowing money is Alaska’s poor credit rating, which was downgraded in July by two different agencies after the Alaska Legislature failed to come up with a long-term fiscal plan.  “A score of AA- or AA+ affects the interest, and the cost of the project would go up or down based on that,” Eoff told the board, in response to a question from Parady about what impact the state’s economic situation could have on the Bradley Hydro financing. Eoff, whose firm also acts as financial advisor for the Alaska Industrial Development and Export Authority, the Yukon Kuskokwim Health Corp., and the Alaska Municipal Bond Bank Authority, said he is optimistic that this year’s credit rating is “as low as it will go, and it will stay in the A category.” If it did decline to BBB rating, the bonds would be sold at a higher interest. “The Alaska credit rating is the bell weather of everything that goes on up here,” Eoff said. If AEA does not receive NCREB funding, one option is to issue taxable bonds. Another option is for Chugach Electric Association financing. CEA has offered to finance, procure and manage the project for all the participating utilities “if necessary,” according to an agreement signed July 1 by CEO Lee Thibert. The project has the support of all six Bradley Lake utility associations: Homer Electric Association, Chugach Electric Association, Matanuska Electric, Seward Electric Utility and Golden Valley Electric Association and Anchorage Municipal Light and Power. All will have the ability to tap into the power generation, but so far, four have agreed to help plan the funding and development: CEA, HEA, MEA and the City of Seward. The Battle Creek project consists of constructing a 16-foot high, 60-foot wide concrete dam to divert water into a five-foot diameter, high-density polyethylene pipe. The pipe — using natural gravity — would carry the water 1.7 miles to the Bradley Lake facilities. A 2.9-mile gravel road would be built to access the dam. It would be located atop buried water pipe to make the most use out of the pipeline corridor. The water from Battle Creek would be stored in Bradley Lake, thus providing additional water to be run through the existing powerhouse, said AEA Owned Assets Manager Bryan Carey. In other AEA board action, members accepted the resignation of Lamb, effective Aug. 15. Current AIDEA Executive Director John Springsteen will serve as interim director for AEA as well as his AIDEA role. AEA has started accepting applications for the new executive director. Naomi Klouda can be reached at [email protected]    

Competitors, rural customers raise price complaints over GCI sale

Old grievances between Alaska’s telecoms have resurfaced with allegations that GCI holds a monopoly over the state’s broadband internet services, and after benefiting from the public pot with $50 million to help build the system, it is now charging rural Alaska schools, hospitals and other companies uncompetitive prices to access the network. Fellow Anchorage-based telecoms Alaska Communications and Quintillion filed formal objections with the Federal Communications Commission to recommend the agency deny the sale of GCI to Colorado-based Liberty Interactive for $1.12 billion. During their Aug. 3 conference call with investors to discuss second quarter earnings, GCI officials said they expect the FCC to approve the transaction at the end of the year. The company was granted early termination of the waiting period on June 7 by the FCC and the Department of Justice. Now complaints brought by the competitors and Alaska rural leaders are before the FCC in a forum that GCI argues isn’t the appropriate place. GCI has said in its filing that the transaction is in the public interest because it “will result in GCI becoming more stable and will not result in any countervailing harms.” The applicants claim that the transaction will serve the public interest by providing GCI’s operating businesses with more stable access to financial markets and greater capacity to execute GCI’s current business plan, the FCC summarized in its invitation for public comment. Alaska Communications and Quintillion, in separate letters to the FCC, wrote that to the contrary, the proposal poses substantial harm to the public interest. Quintillion has been laying subsea fiber optic cable for high-speed internet infrastructure in the Arctic over the past two summers and will complete Phase 1 this December. When completed, the subsea cable system will be accessible to Japan in the west and London in the east. In partnership with Alaska Communications, Quintillion began offering broadband services to rural Northwest Alaska schools and clinics this spring. In an objection written by attorney Karen Brinkman June 19, Alaska Communications asked the FCC to impose several conditions on a combined GCI-Liberty. Alaska Communications asked that first GCI-L must be required to use federal Universal Service Fund, or USF, support to expand the “middle mile” infrastructure linking remote facilities to existing networks. GCI recently completed its six-year TERRA project that involved multiple phases, starting in 2011 when 400 miles of fiber optic cable and 13 new microwave towers began providing network connection for 65 communities in Southwest Alaska. The TERRA Southwest and Northwest phases serve 84 communities totaling nearly 45,000 residents, and another 12 communities will be connected by the end of 2017, according to GCI. The TERRA route covers 3,000 miles. Secondly, Alaska Communications wrote, the new infrastructure that relies on federal money should be available to all carriers on “commercially reasonable and non-discriminatory rates, terms and conditions.” Alaska has about 20 telecoms ranging from smaller Adak Telephone Utility, Bristol Bay Coop, Mukluk Telephone and Nushagak Electric &Telephone to larger entities such as GCI, Matanuska Telephone Association and Alaska Communications. Each is able to hook into GCI’s TERRA infrastructure where that is possible but the complaint from Alaska Communications alleges wholesale costs charged by GCI makes it prohibitive. Thirdly, Alaska Communications asked the FCC to require emergency service restoration agreements with other carriers on reasonable commercial terms. This means in case of a natural disaster or downed systems for any reason, telecoms commit to come to one another’s aid. Alaska Communications sees needs in additional middle mile build-out as necessary to meet future broadband demand in rural Alaska. This is where the smaller telecoms could build out broadband, but Alaska Communications makes the argument that the FCC needs to force GCI to do so because the current “monopoly pricing” elbows out their ability to do it. Alaska Communications also points out that though TERRA was built in part with federal funding, it is now part of a publically traded entity that is “ultimately owned by the shareholders.” GCI holds 16 percent of the voting interest and 23 percent of the total equity, while shareholders hold 84 percent of the voting interest and 77 percent of total equity. If the sale is approved by the FCC, an Outside entity, Liberty, will have a majority ownership in GCI. “Though the two companies are competitors, Alaska Communications heavily relies on GCI for long-haul transport or ‘middle mile’ telecommunications between Alaska Communications facilities in Anchorage, Fairbanks and Juneau, on the one end, and many of its customers in rural and remote communities,” the filing states. Because GCI has effectively been unregulated on those routes, GCI enjoys market power “indeed a monopoly,” and has priced Alaska Communications out of the market due to “excessively high middle-mile transport prices charged by GCI over facilities funded directly or indirectly by the federal government,” the company alleges. Rural objections Alaska rural leaders overseeing large organizations along GCI’s new TERRA route also urged the FCC to look deeper at the monopoly argument in light of the fact that federal funding was used to help pay for fiber-optic miles GCI now owns outright. Vivian Korthuis, the chief executive of the Association of Village Council Presidents, which oversees services for 56 tribes in the Yukon-Kuskokwim Delta, also submitted testimony to the FCC on the proposed GCI-Liberty transaction. She said broadband costs need to be “accessible and affordable” to individuals and tribes. She questioned high costs that continue to be charged AVCP even though the TERRA Southwest, which hooks into Bethel where AVCP is centered, was supposed to bring costs down. GCI was given $44 million in a federal stimulus grant under the Obama administration for TERRA Southwest and another $6 million in from the Regulatory Commission of Alaska for TERRA Northwest. TERRA Southwest was partly funded with a $44 million, low-interest federal loan and GCI also borrowed about $50 million with low interest loan through the New Market Tax Credit program for TERRA Northwest. NMTCs are used to attract investments that otherwise wouldn’t be economic into low-income communities with the goal of revitalizing local economies. The federal program allows the investor, in this case US Bancorp, to use 39 percent of the investment as a credit against its tax liability. This in turn allowed US Bancorp to loan GCI funds at a rate of about 1 percent, according to the company’s Securities and Exchange Commission filings. Out of all funding streams, GCI calculates it has spent $300 million in total for the TERRA project. Out of the $44 million initial grant, GCI spent $42 million and returned the rest, said GCI spokeswoman Heather Handyside. “We’ve been able to pay back the loan and built the rest of the TERRA with our own $200 million capital,” she said. However, the amount of aid GCI received in various forms is a recurring theme among those protesting the GCI-Liberty transaction. Former Alaska Rep. Harry Crawford, in his letter to the FCC, noted the government “substantially subsidized GCI’s TERRA system in Southwest Alaska, yet the rates to consumers in that part of Alaska have not materially been reduced. “This appears to be the result of a lack of competition to supply services in these regions serviced solely by GCI. GCI’s monopoly position in its ownership of the infrastructure is yielding the predictable result – namely non-competitive high prices.” Crawford cited the Nome School District as an example. The district has five schools, and 700 students, and paid $305,000 per month to GCI for its internet service. According to Crawford’s letter, the district was able to reduce its bill to $95,000 a month once Quintillion connected to the shore from its subsea fiber optic cable. Handyside noted that each Request for Proposal submitted by schools to gain internet contracts can vary greatly, even from year-to-year for the same district. According to the bid specifications, Quintillion’s package “wasn’t an apples-to-apples comparison” with the previous contract. Rep. Zach Fansler, representing the Yukon-Kuskokwim Delta region in District 38, also wrote a lengthy letter to give his concerns about the proposed merger. He, too, brought up the Nome School District example of what happens when new competition emerges but focused on subsidies GCI used to help build the TERRA project. “The Alaska Plan, and grants made possible through the FCC’s E-Rates programs are a lifeline for Alaska communities. The FCC has committed billions of dollars to build the infrastructure to provide broadband internet access. In particular the FCC subsidies in Southwest Alaska have funded the infrastructure that makes up GCI’s TERRA project, yet costs have not gone down,” he wrote. Schools in the region are paying “hundreds of thousands of dollars a month” for state-mandated broadband internet access, Fansler wrote. The FCC is directly subsidizing GCI, and without competition, the company still charges whatever it wants with little oversight, he wrote. The Alaska legislator red-lined what he called “an inefficient use of public money” to the FCC. But GCI counters that it doesn’t have a monopoly because it competes in a bid process against other telecoms. “One place we do distinguish ourselves is in rural Alaska where it’s risky to cover telecommunications and there is the need to connect vast distances,” Handyside said. “GCI understood it was a financial risk. We worked hard to develop a business model that would be viable.” The Alaska Plan, to be fair, involves most all the telecoms in Alaska, explains Alaska Telephone Association Executive Director Christine O’Connor, who has worked for the Nushagak Electric &Telephone and MTA. “They each have tasks they are obligated to complete in order to receive the money. If they don’t, they must pay it back,” she said. The Alaska Plan secures $152 million per year for the next 10 years from an annual $4.5 billion national fund. The funding is supposed to result in expanded fixed and mobile broadband service to Alaskans across close to 100 rural communities by building out both wireline and wireless services to 4G LTE or better for 85 percent of the population. Complex costs The way costs breakdown for broadband in rural Alaska is complicated, said O’Connor, who leads the ATA consortium made up of Alaska’s 20 telecoms, including GCI, ACS and Quintillion. Schools are charged the same prices as those in urban centers though it costs more to deliver broadband to places such as Naknek or Quinhagak. In a calculation like the school lunch federal subsidy, schools receive USF E-Rate help for up to 90 percent of their costs. “All of the telecoms in Alaska are heavily subsidized through the various flavors of USF funding,” O’Connor said. Revenue from managed broadband, the category in GCI financial reports that list rural data services to schools and hospitals, showed a steady increase from 2011 to 2015. Figures from 2010, the last pre-TERRA year, show GCI revenue of $50 million from managed broadband. Each year the amount climbed as more of the TERRA route communities went live. In 2011, GCI reported revenue of $63 million for managed broadband; in 2012, $86.5 million; 2013, $95.6 million; in 2014, $105 million and in 2015, $127.4 million. The total for the five years of TERRA Southwest Service came to $477.5 million. Again, GCI responds that it took on all the risks of the TERRA infrastructure, which is a hybrid terrestrial fiber-optic and microwave network that removes the latency limitations of satellite. Recouping costs of its projects is part of its business model, Handyside said. “TERRA not only cost $250 million of our capital to invest, there also is a significant cost to upgrade and maintain this network that is over 3,000 miles long,” she said. “A team of technicians is always on standby in Bethel and other hubs. Equipment is staged so we can deploy it at a moment’s notice if something goes wrong. “We have specialized equipment and helicopters to refuel TERRA sites where they are not on a power grid. So we have to have 5,000 gallon diesel tanks and we fly out and refuel them — just some examples of the high cost of the project.” After 2015, GCI changed how it reported managed broadband. The 2016 report released in March of this year did not have managed broadband as a separate category. Handyside said broadband for hospitals and schools is now listed under business revenue along with the other 2,000 businesses. “In the past, managed broadband was an independent department responsible for construction, deployment, sales and customer service. Late last year, the Managed Broadband department was combined with the Business and Enterprise departments to form GCI Business,” she wrote in an email. The FCC Universal Services Administrative Co., or USAC, shows that GCI is the largest recipient of federal subsidies for all four categories of Rural High Cost support: Lifeline (for low-income consumers), Rural Health Care, and school and library E-rates. According to the FCC’s Deputy Director of Media Relations Mark Wigfield, GCI brought in $220 million in 2016 from the four areas of USF funds. The majority, $78.6 million, came from Rural Health Care telecom subsidy funds. Because GCI is the largest Alaska telecom, this isn’t surprising. But the primary complaints voiced to the FCC by Alaska leaders and GCI’s competitors centers on questioning high costs given the funding help. Total costs for a school’s broadband, for example, vary around the state. In the Bering Straits School District, 90 percent of the costs for school internet are paid by USF E-Rate directly to the telecom that won the RFP, in this case GCI. They were charged $171 per student per month, which tallies to $316,008 per month for 8,000 students, according to Connect Alaska’s survey of school districts across the state in 2015. In Cordova School District, E-Rate funding is $21 per student or $7,329 per month for its 349 students with service provided by AT&T. They receive an 80 percent E-Rate subsidy. The Lower Kuskokwim School District served by GCI is $110 per student per month, or $471,350 for 4,285 students. Some 80 percent of costs there are covered by USF subsidy. “These funds put the telecoms on equal footing with what those costs would be in an urban setting to level the playing field,” O’Connor said. “Otherwise, they would be prohibitively expensive.” And costs for broadband have been reduced since GCI built the TERRA middle-mile routes, say the providers of major medical services via GCI. Rural Health Care subsidies, like E-Rates for schools and libraries, are critical to one of the largest health providers in Alaska. At the Yukon-Kuskokwim Health Corp., President Dan Winkelman said with the subsidy YKHC spends the same as hospitals and clinics in Anchorage pay, yet they have the ability to reach thousands of miles. “It saves us millions of dollars a year,” he said. In addition to saving money, it can save lives along with travel and air-ambulance costs. Telemedicine made life-saving changes possible on an amazing scale, he said. “The ability to treat a patient in remote Alaska from centers of specialty, behavioral health counseling, electronic health records, voice-over-internet contact with professionals throughout 56 villages — all is now possible for 42 village clinics and five sub-regional health centers,” he said. TERRA wasn’t about speed; it was about reliability, Winkelman added. “Satellite connections would go down. It helped on the reliability side,” he said. GCI also is building “redundant” lines so that if one system fails on the TERRA route, there’s backup, he said. Regulatory jurisdiction The Regulatory Commission of Alaska analyzes price increase proposals on behalf of consumers for water, electrical, telephone and gas companies, then approves or denies the changes. But who approves rates for broadband before they imposed? “That’s a big question right now,” said O’Connor. “The FCC has struggled to set benchmarks, an Alaska-specific price benchmark because rural Alaska presents real challenges on pricing.” The RCA does not have jurisdiction over broadband rates as it is superseded by the FCC. In April, the FCC announced benchmarks for Alaska Plan Carriers, a first attempt to rein in free-market pricing. But the new FCC Chairman under the President Trump administration, Ajit Pai, has said high-speed internet service should no longer be treated like a public utility. He has spoken in favor of leaving the industry to police itself, according to national news accounts on changing net neutrality rules. In using the GCI-Liberty transaction, however, as the basis for complaining about GCI’s prices and alleged monopoly, GCI lawyers argue Alaska Communications and Quintillion are utilizing an incorrect forum. “(Their) attempt (is) to use the Commission’s review of this transaction to rehash old grievances about GCI’s extensive and ongoing efforts to invest in terrestrial middle-mile facilities to connect remote Alaska with city centers and the rest of the world,” wrote Liberty attorney Richard Baer. “The Commission should recognize these efforts for what they are: attempts to resuscitate pre-existing, shop-worn complaints unrelated to the pending transaction to seek unwarranted conditions on GCI.” GCI also counter-claims that ACS hasn’t taken on the financial burden of building large infrastructure but wants to “piggyback” off GCI’s investments and gain a discount to do so. The FCC could refuse to address the complaints in its GCI-Liberty ruling later this year, as it had in earlier complaints by the competitors. Quintillion, Alaska’s newest entity changing the landscape of future broadband, still hopes the FCC will “realize this as an opportunity to protect the public and taxpayers’ interests in balance with the desire to reduce regulatory barriers to industry,” wrote Vice President of External Relations Kristina Woolston in an email. “For much of the public the telecom industry is a confusing puzzle and they rely on the FCC to enforce rules and regulations that assure public funds are benefiting the public as intended.” Competition on the horizon Competition and collaboration between telecom companies promises to bring the costs down for Alaska in the coming years as Quintillion, Alaska Communications and AT&T launch projects building out wireless and fiber optic networks. Besides Quintillion’s high speed fiber optic, changes are coming to internet broadband in Alaska over the next two years due to new low earth orbit, or LEO, satellite technology. Alaska Communications developed a non-exclusive memorandum of understanding to become the first reseller of OneWeb enabled broadband access in Alaska starting in 2019. That puts rural Alaska a step closer to more affordable broadband access, said CEO Anand Vadapalli. The LEOs will be deployed by OneWeb in late 2018 or early 2019, Vadapalli said in a June 9 interview with the Journal. O’Connor notes that since this is a non-exclusive agreement, any telecom, even the smaller village-based entities, could hook into OneWeb for bringing down their broadband costs. “A satellite dish the size of a pizza box will be able to move 500 megabits at a 30 nanosecond speed,” O’Connor said, noting those speeds are fast enough for live gaming. “OneWeb is looking for partners in Alaska, which is seen as the great telecom challenge. If they can make it work in Alaska, they can make it work anywhere in the world.” O’Connor said the increasing internet options coming online over the next few years could render moot the current angst over rates and market share. Naomi Klouda can be reached at [email protected]

GCI posts loss in 2Q, takes hits in consumer and rural health care

General Communications Inc. posted a $9 million loss in the second quarter, which company officials attributed to weakness in consumer wireless and video as well as lost rural health care subsidies. GCI released its second quarter financial results Aug. 2, showing the telecom brought in total revenue of $224 million, an overall decline of $4 million over this year’s first quarter. The transaction between GCI and Colorado-based Liberty Interactive Corp., is expected to be completed by the end of 2017, GCI officials say, pending approval from the Federal Communications Commission. The deal involves no major changes to existing service or management, but sells a controlling interest to Liberty for $1.12 billion. Business revenue was down 2.7 percent year-over-year, primarily from a $5 million reduction in subsidies to the rural health care providers that normally come from the Universal Service Fund, or USF. Another bite came from Alaska consumers as they continue to change habits away from extensive cable channel packages and forego the latest iPhone or Samsung debut. Declines in the consumer segment amounted to $6 million, primarily in the handset sales and average revenue per user. This was a 5.5 percent decline over last year. GCI lost 7,800 cable subscribers in the past year, Chief Financial Officer Peter Pounds said. GCI has 102,700 basic subscribers, down from110,500 a year ago. “The recession in Alaska is a significant contributing factor in our subscriber headwinds,” Pounds said. “There’s a cord-cutting trend in video, meaning people are asking themselves, when they see their friends lose jobs, ‘do I really need 80-90 channels?’ “This includes both iPhones and Samsung. The new phones they brought out this year weren’t as good in consumers’ eyes.” But wireless also took a hit in the competitive environment of national low-rate offers from Sprint and T-Mobile. Though those companies don’t operate in Alaska, Verizon and AT&T do. In competition with the Lower 48 carriers, Verizon and AT&T responded with deals meant to give them an Alaskan competitive edge, Pounds said. Consumer wireless customers fell from 203,900 to 201,200 year-over-year, and revenue for the segment dropped 9 percent to $40 million. Business wireless fell by 800 customers from 24,200 to 23,400 this June. In its Business segment, GCI absorbed 7.5 percent of all costs for health care providers in Alaska that exceeded their Universal Service Funds. The Federal Communications Commission doles out funding from one pot of $400 million for all carriers nationwide to share in a competitive bid process. This year, RHCs in America exceeded the $400 million fund for the first time. “Rural health in Alaska is expensive, and in order to bring their costs down, rural health areas pay what it costs in Anchorage to receive broadband,” Pounds said. “Anything over that cost is picked up by USF. But the second window of filers didn’t receive it (the subsidy) when the universal service funds ran out.” GCI took the $5 million in losses after the FCC, recognizing the burden it would place on health care providers, asked the telecom to “forgive” 7.5 percent of the fees. “Everyone took a hit,” Pounds said. “We are working with our rural health care provider partners and the FCC on alternative funding solutions for future years.” The $300-million Terrestrial for Every Rural Region in Alaska network, or TERRA, was completed this summer. According to the second quarter financial report, a bright spot is the EBITDA or earnings before interest, taxes, depreciation and amortization. This quarter GCI saw Pro Forma EBITDA margins of 33.4 percent compared to 30.6 percent in the second quarter of 2016 and 32 percent in the first quarter of 2017, the report stated. Pro Forma EBITDA is up due to general operational efficiencies including savings achieved in procurement initiatives and GCI’s circuit costs. “As we mentioned in our first quarter call, we are focusing on operating efficiencies and cost savings as we expect muted revenue growth in the context of the Alaska recession,” wrote Pounds in the second-quarter revenue report. Pounds said the new efficiencies relate in part to hiring a procurement specialist who will work aggressively to find cost efficiencies across the company, which will keep up its EBITDA margin. Excluding costs for the Liberty transaction, GCI is narrowing its guidelines between $300 million and $315 million in 2017 EBITDA. GCI’s stock has continued to rise in the third quarter and traded at $43.11 per share on Aug. 9. When the deal between GCI and Liberty was first announced in April for selling a controlling interesting to the Colorado-based Liberty Interactive Corp., shares rose to $32.50 from a range of $12 to $20 per share over the previous year. Naomi Klouda can be reached at [email protected]

Business owner builds floor-cleaning robot

The janitorial contract for the old Palmer Hospital, now medical offices, involves thousands of square feet of floor space to clean using above average sanitary measures. Noting an irksome shortage in qualified applicants answering the call “for hire,” Curtis Lucas figured maybe a robot could do the job. The accountant who launched Alaska Professional Janitorial 13 years ago in Wasilla had steadily built a clientele of large medical facilities, retail stores and commercial buildings. It took a staff of 22 seven days a week to handle the work. “Two years ago, I had one position open and I got 50 applicants. Right off the top, 40 didn’t qualify,” Lucas said. “I had 10 left and was down to three choices — then none of them took the job. Over the last several years, I have had a very difficult time finding people to work.” Some applicants were eliminated for their criminal record or for not being able to pass a drug test. Other times, the applicant didn’t really want the job after Lucas invested time and training. HIPPA confidentiality requirements added an extra layer of security employees need to pass. Then Lucas spotted the glimmer of a solution in a 2009 news article on the Sumitomo Corp in Osaka, Japan. A robot system that interfaced with elevators “came awake” at 11 p.m., and went to work cleaning floors at the Sumitomo Building. The autonomous robot moved without human assistance between building floors using the elevator system to clean common spaces such as corridors.“It was like theyhad read my mind,” Lucas said. For several years, Lucas’ wife and two sons watched as he experimented with creating his own robot meant to vacuum, mop and sweep via remote or onsite automation. “My family nicknamed him Mal, short for malfunction, because that’s all he did at first,” Lucas said. Building his robot entailed inventing a coordinated system of tasks that turned the robot on in a location, set perimeters for its job: mopping, squeegee sucking water, spraying out clean water for rinsing and repeating, or a different floor cleaning task. After working 12-hour days in his janitorial business, he’d come home and head for the garage. Getting Mal and his circuit of sensors and hardware to operate at the click of a phone app took a while. Once he had the basic functions, Lucas hired a Wasilla tech to invent the app that tied it all together. “It’s a lot of fun. I liked the challenge, but it would be frustrating, too. I’m entirely self-taught. A lot of times I felt like giving up,” Lucas recalled. “Then, finally, I was going from a pipedream to actual reality.” First one in 2015, and now two robots in 2016 gave Lucas the competitive edge in bidding on jobs. “We use the robots seven nights a week, so the labor savings are significant,” he said. At 35 clients and a work force of 21 employees, Lucas determined the robots free up his staff to do more detail oriented tasks and save them from the monotony of floor cleaning. Each robot works six hours at a time, and the app signals the operator when finished. Robots similar to “Mal” that Lucas is in the process of patenting can go for a price tag of $30,000 to $40,000. For him, the cost was a faction of that. He figures he can build them for $1,000 to $3,000 each. He is now in the process of building two more, and by next year, he would like to have eight operating in his cleaning service. Inevitably, practical discussions turn to philosophical about the ramifications of robots replacing humans. Lucas said this is the wave of the future and there are a lot more robots already replacing humans than people may realize. Many jobs of the future will require the technological knowhow to program, repair and build new equipment, he said. “I know there are a lot of Luddites and they won’t like this,” Lucas said, referring to a leader of a Victorian revolt on machinery in the cotton and wool mills that threatened workers jobs in 1811-1816. “Workers really need to think about this. People need to show up. They have hindered the productivity in the country,” Lucas said. “It is getting harder and harder to get people to work in certain industries. The prime age group 25-45 will have a tough road if they can’t adapt.” Amazon now has 45,000 robots in its warehouses, according to Business Insider, and sells robotic arms for building your own robot. But they are also seeking to hire 50,000 people. An article in Bloomberg Businessweek in May focused on “China’s Robot Revolution.” There, scarce labor and rising wages are claimed as reasons why factories incorporated 90,000 more robotics in 2016 alone. Wired Magazine recently featured an article on a truck, outfitted with $30,000 hardware and software from San Francisco startup Otto, that made the world’s first autonomous truck delivery of 50,000 cans of Budweiser. An Alaska manufacturing niche now using robotics is the tank fabrication industry. Steel tanks that hold water, sewage, and natural gas, among other substances are getting a high-quality weld with the help of a robotic welder at Greer Tank and Welding in Anchorage and Fairbanks. A recent article by fisheries columnist Laine Welch described robots now used to process crab and debone and fillet cod in the fishing industries. Robot-makers predict that in the future highly skilled humans will work on sophisticated machines and computers, not on the slime lines. It’s not so much rejecting human capital, Lucas said, but rather a way to protect his business. He considers lacking good workers a “national epidemic.” One Wasilla grocery advertised “hiring workers for all shifts,” Lucas noticed while shopping recently. People don’t seem to want to work certain jobs, he said. “The difficulty is mostly finding people when someone leaves. I haven’t laid any people off. I just haven’t had to fill certain positions,” he said. He figures he can pay a better wage to the employees he has, because he’s saving money from the work of his two robots. “I can put my people to work on tasks that take more thought, more detail and then we’re providing a superior service,” he said. For now and into the foreseeable future, when he puts out job ads, there’s one for which he won’t need to advertise. “This position is no longer available,” he said. “I have the floor cleaning jobs filled.”

Medical marijuana amendment has little impact on Alaska

States that have legal medical marijuana programs will remain free of federal law enforcement efforts if an amendment makes it into the final budget as it has for the past three years. The Senate Appropriations Committee on July 27 approved what is known as the Rohrabacher-Blumenauer amendment to prohibit federal funds from being used against businesses in states with legal medical marijuana programs. Sen. Lisa Murkowski sits on the committee and supported the amendment. Sen. Patrick Leahy, D-Vt., brought forth the amendment and it passed by a voice vote with broad Republican support. Because Alaska didn’t develop a body of regulations around medical marijuana dispensaries, as other states did, the Rohrabacher-Blumenauer amendment doesn’t have as much relevancy here, said Bruce Schulte, the former chair of the Alaska Marijuana Control Board. Since 1998, when 58 percent of Alaska voters approved Ballot Measure 8, Alaska law has removed state-level criminal penalties on the use, possession and cultivation of medical marijuana. But no medical marijuana dispensary infrastructure was developed. A study released by the national Marijuana Policy Project showed 1,042 medical marijuana cardholders in Alaska as of February 2017. That was down from the 1,132 counted the previous year in 2016 and 1,178 at the end of 2015. It wasn’t until after the 2014 Ballot Measure 2 legalizing recreational use passed that the Alaska Marijuana Control Board was created by the Legislature in 2015 and the process of developing regulations began. Shaping regulations for the first licenses took until June 2016 when the first businesses to be licensed were the cultivators. Over the next few months, dispensary and testing applicants were licensed and retail shops began opening in October 2016. “A lot of states came about medical marijuana as an incremental step toward full legalization,” Schulte said Aug. 1. “Alaska did have a medical dispensary bill that was passed, but the Legislature chose not to implement it. That incremental step simply failed.” Alaska Statute 17.37 addressed medical marijuana, a law that was never fully implemented, Schulte said. The new AS 17.38, dealing with legal recreational marijuana use does not make a distinction between medical and recreational and prohibits promotions claiming medical properties of cannabis. “It’s always been a point of confusion. Some people were outright angry that we didn’t have medical marijuana dispensaries. My answer to that was that we didn’t need it if we could get full recreational use legalized,” Schulte said. “I would put it on the Legislature.” The need for medical supervision over people who use THC or cannabis oil to treat chronic illnesses remains a part of the picture in today’s marijuana market. For every one person on the registry, Schulte surmises, four or five more should be but chose not to go that route. “Some are afraid to be listed on the medical marijuana registry. It might impact their ability to get a job. There are all sorts of stigma, social and legal. From a practical perspective it doesn’t do them a lot of good,” Schulte said. Having a medical marijuana card doesn’t give a person any advantage when they walk into a dispensary. Alaska law specifies a limit of 5,600 milligrams of THC products per purchase, though there is no limit on the amount of cannabis oil that can be purchased at a time. “To this extent they are friendly to the medical consumer. But then there is also in our regulation that a retail sale can’t promote the health benefits of marijuana,” Schulte said. In the year after medical marijuana was approved by voters in 1998, only 24 people registered for medical marijuana cards. In the past 19 years, just more than 1,000 people per year obtain or renew medical marijuana cards. An estimated 2.3 million Americans are registered as medical marijuana patients, according to the Marijuana Policy Project. The Rohrabacher-Blumenauer amendment protects the patients and the physicians by prohibiting the use of any federal funds for prosecutions targeting legal medical use. As part of the 2018 fiscal year budget, the amendment now moves to the full Senate. The amendment, first enacted by Congress in 2014, is in effect for the current fiscal year. In a June 13 letter to Senate President Mitch McConnell, R-Ky., June 13, Attorney General Jeff Sessions argued that the amendment inhibits the Justice Department’s “authority to enforce the Controlled Substances Act. … It would be unwise for Congress to restrict the discretion of the Department to fund particular prosecutions, particularly in the midst of an historic drug epidemic and potentially long-term uptick in violent crime. “The Department must be in a position to use all laws available to combat the transnational drug organizations and dangerous drug traffickers who threaten American lives.” But lobbying groups working to change public policy such as NORML say Sessions’ stand places medical marijuana patients on footing with “illegal drug cartels.” Further support of the legal medicinal use of marijuana came from the courts. Last August, the Ninth Circuit Court of Appeals unanimously ruled that the language in the amendment bars the federal government from taking legal action against any individual involved in medical marijuana-related activity if evidence that the defendant is in clear violation of state law is absent. Sen. Cory Booker, D-N.J., introduced a bill Aug. 1 to decriminalize marijuana by removing it as a Schedule One drug in the same category as heroin. Both Murkowski and Rep. Don Young introduced bills to protect the 46 states that have legal medical marijuana or cannabidiol derived products. They introduced parallel bills in the Senate and House titled the Compassionate Access, Research Expansion and Respect States Act, or CARERS. The bills would amend federal law to allow states to set their own medical marijuana policies. Like Booker, Young has also introduced a bill to remove marijuana from its listing as a Schedule One substance in the Controlled Substances Act. Meanwhile, since 1998, Alaska marijuana patients — though small in number — have seen progress in acceptance. ReLeaf Alaska, an Anchorage company that offers “professional and confidential medical cannabis evaluations and education” for patients who wish to acquire a medical marijuana card — claims on its website that some insurance companies in Alaska now cover the cost of a medical marijuana card. It costs $25 for new medical marijuana card applicants and $20 for renewals. To receive the card, conditions must meet the state’s medical marijuana authorization eligibility requirements, according to the Alaska Department of Health and Human Services’ website. But physicians who treat medical disorders with the plant’s extractives believe there are more who want the card and medical guidance for use than are applying for it, according to an interview in Northwest Leaf with Dr. Michael Smith, a longtime cannabis activist who holds clinics in Alaska, California and Montana through Healing Center Medical Clinics. A list of health conditions that are approved for medical marijuana on the state level that issues the medical cards are cancer, glaucoma, HIV/AIDS, or treatment for “chronic or debilitating disease or treatment of such diseases, which produces chronic or severe pain, nausea, seizures, including those that are characteristic of epilepsy and spasms such as those characteristic of multiple sclerosis.” Doctors willing to talk on the record for news reporters in Anchorage are not plentiful. Only one physician responded to phone questions, recommending that people who have specific illnesses on the “list of conditions” approved by the state shouldn’t try to go it alone. But he refused to let his name be used for the article because of the “repercussions” to the traditional portion of his Anchorage practice. One of the fears for physicians is any trouble that would damage their reputation with patients biased against marijuana use of any kind, said the physician who wished not to have his name used. In some cases, there is a concern about federal prosecution. ReLeaf of Alaska and the Healing Center, which help patients obtain medical cards and give them examinations for $225 to $275 per visit, use a machine answering service. When finally reached by phone, the person answering at ReLeaf of Alaska hung up upon learning the call came from a Journal reporter. The Healing Center didn’t return phone calls. “People are terrified of enforcement,” Schulte said. “One of the next things that has to be done is to unblock (the industry) from talking about the healing properties of cannabis.”


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