Taming the Elephant in the Room

Author: Janet McCabe | Opinion | Anchorage Daily News | Feb 22, 2019

Last month a group of representative community members and economic experts organized by Alaska Common Ground met with an audience in Anchorage to discuss “The Costs of Alaska’s Economic Roller Coaster.” It was an enthusiastic and civil discussion, peppered with questions from an engaged audience and moderated by John Tracy. These people clearly loved Alaska and cared about its future prosperity.

They all emphasized that we were at a turning point in the state’s history and should take a long-term view to achieve fiscal stability. New sources of state revenue were essential. Most reasonable cuts have already been taken. There was also consensus that moderate dividends should be continued. During the discussion Tracy asked the audience for their opinions by a show of hands. Most supported all points of consensus. Video of the discussion can be reviewed online.

This month, Alaska’s new governor, Mike Dunleavy, also chose fiscal stability as the focus of his budget plan. But Dunleavy’s proposals are radically different from those of the Anchorage community leaders. He takes new revenue totally off the table. Faced with the looming fiscal shortfall, Dunleavy would cut $1.8 billion from the budget, eliminating state funds for programs that people rely on and have been developed with years of effort.

On the other hand, he would spend about $1.8 billion for supersized dividends. Sen. Natasha von Imhof, chairwoman of the Senate Finance Committee, has aptly referred to Dunleavy’s supersized dividends as the “elephant in the room.” When questioned about this plan, Dunleavy’s spokespeople say he wants to let Alaskans decide how to spend the money, not government.

Unfortunately, this answer ignores the fact that government – accomplishing together what we cannot do as individuals – is essential to life in a functioning community. Try driving across town when the streetlights aren’t working to clarify this concept.

Dunleavy’s cuts are wide-ranging, but many reduce services to those who are poor or live in small communities and would be unlikely to speak up. When asked about the proposed cuts to maintenance of airstrips in small remote communities, the governor’s spokesperson replied, “We can’t be all things to all people.” Tell that to someone with appendicitis.

Alaskans pay for governmental services at the municipal level, but only minimally at the state level. Across the U.S., per capita broad-based state tax revenues are about $2,600 for all the states. In Alaska, the figure is about $540. John Tracy asked the audience at Alaska Common Ground if they would be willing to pay $2,600 in state taxes. To his surprise, most raised their hands that they would. Taxes should and could be set to spare those with low to moderate incomes, and to tax people who earn in Alaska but reside Outside.

The Legislature has been questioning Dunleavy’s spokespeople on many fronts. A recent exchange involved his move to switch from state-run to private prisons. Would a business whose profit depends on the length and amount of incarceration implement programs that cut the need for incarceration? It should be concerning that the governor chose Wildwood Correctional Center for initial cutting. Wildwood is the prison that had started to implement innovations in prison management from Norway and Ireland that reduced post-release crime by as much as 20 percent, as seen in the documentary “Breaking the Cycle” on Netflix.

Alaska’s legislators are up against a challenge. The governor has veto power over all bills, and our Constitution (Article 2, Section 16) requires an affirmative vote of three-fourths of the Legislature to override a veto of a budget-related bill.

If the legislators want to counter the governor’s plans for Alaska, they will need to work together.

But, it’s possible. Last year’s Legislature successfully worked across the aisle to adopt SB 26, establishing the percent-of-market-value (POMV) endowment system for sustainable annual draws from the Earnings Reserve Account, the spendable part of the Permanent Fund. This year, through a similarly united effort, the Legislature could pass a new bill establishing the annual apportionment of POMV funds between dividends and other governmental costs. If enacted early this session, there would be time for the governor’s expected veto, and for the Legislature to override his veto.

The act should be effective immediately. It would convert Sen. von Imhof’s “elephant in the room” into a manageable reality, protecting the dividend for future generations and leaving part of the state’s current revenue available for state government. The Legislature could then proceed to pass a reasonable budget including needed programs and the new revenue measures necessary to fund them. The public would appreciate it!

Janet McCabe and her family have lived in Alaska since 1964. Her education and experience are in community planning with a specialty in population projection. She is actively involved in several nonprofit organizations, including Alaska Common Ground and Commonwealth North.

https://www.adn.com/opinions/2019/02/23/taming-the-elephant-in-the-room/




The Costs of Alaska’s Economic Roller Coaster

Janet McCabe, opinion piece in the Anchorage Daily News, January 27, 2019

With more of a rumpus than a clear public mandate, legislators must study, learn and think independently as statesmen and stateswomen, and work across the aisle.

Alaska Common Ground invites you to a public forum on “The Costs of Alaska’s Economic Roller coaster” on Jan. 27 from 4 p.m. to 6 p.m. at the 49th State Brewing Co. in Anchorage. A panel of community leaders and ISER economist Mouhcine Guettabi will present their different perspectives on the costs of instability, possible solutions and their vision of Alaska’s future. Do join us and ask questions. Alaska Common Ground forums are free, and everybody is welcome and encouraged to attend.

Read the full article at the Anchorage Daily News here.




Costs of Alaska’s Economic Roller Coaster

Sunday, January 27th, 4 – 6 pm
49th
State Brewing Co
717 W 3rd Ave, Anchorage

We’ve been
here before. Petroleum revenues have
benefitted Alaska greatly, but these revenues are highly volatile and largely
at the whim of global forces beyond state control.
Alaska
Common Ground recognizes that to achieve a strong and stable economy our state
will need an ongoing income stream large enough to pay for essential state
governmental services. This event will examine the costs of a start-and-stop
economy and the benefits of a stable source of state income.

Senator
Lisa Murkowski invited to open the discussion:
Serving
Alaskans by Working Across the Aisle

Panelists’
Perspectives:
Moderated by John Tracy

  • Business – Angela Libal, Owner, Title Wave Books
  • Banker – Joe Schierhorn, Chairman, President & CEO,
    Northrim Bank
  • Labor – Ryan Andrew, Business Representative, IBEW
    Local 1547
  • Municipal – Larry Persily, Former Chief of Staff, Kenai
    Borough
  • Rural – Greg Razo, VP Government Relations, CIRI
  • Service – Mark Schneiter, Schneiter & Moad CPAs

Economist Response:
Mouhcine Guettabi, UAA ISER

There will be time for your
questions
Pizza and beverages available for
purchase

Cosponsored by the Anchorage Public Library and
the League of Women Voters of Anchorage




Alaska’s Fiscal Reality

Ready to delve into Alaska’s fiscal issues? Here are the slides from House Speaker Bryce Edgmon’s presentation to AFN in October. We’re looking to host a discussion on the issues raised by this information.

Click on this link to check out the slides.




The Salmon Initiative: Beyond the Rhetoric

Thursday, October 4th, 7 – 9 pm
49th State Brewing Company

Wondering how to vote on ballot measure 1 in the general election this November? We held an event discussing the pros and cons of this ballot measure. You can find out more about this event and watch the video or listen to the audio here.

 

 




Member Survey Results

Thanks again to all of our members and guests who attended Alaska Common Ground’s 2018 Annual Meeting in April and to our members who participated in our recent membership survey. Both provided an invaluable opportunity for us to hear how you think we are doing and what topics you would like us to feature in the future.

Housing, fiscal policy, criminal justice reform, oceans, food security, and the upcoming ballot measures were among the ideas discussed. Additionally, this word cloud shows what our members highlighted as most valuable to them about their experience with ACG, from our neutrality, to staying informed on important issues.

Alaska Common ground survey 2018 results




The Alaska Legislature needs to pass POMV — now

Janet McCabe, ADN opinion piece, April 10, 2018

It’s crunch time in Juneau. Legislators need to pull together and accomplish the essentials!

Next November, most legislative seats plus the governor will be up for election.  That fact underlies much of the thinking in Juneau today, intensifying pressure to finish this session’s work and start campaigning.

Legislators are frustrated with their own inability as a group to compromise and reach agreement. Constituents complain — those who rely on the dividend to feed their families or stave off foreclosure, as well as business owners feeling the slowdown of economic recession.

If, as in the past, the value of the Permanent Fund trends upward, the Earnings Reserve will grow and payouts for state operations and dividends will increase.

I urge the Legislature to pass a POMV statute this session, and to cap this achievement by also passing a proposal to stimulate the economy that was developed by Sheldon Fisher, Alaska’s clearheaded and sensible commissioner of Revenue.

His concept, embodied in House Bill 331 and Senate Bill 176, merits full consideration as a way to generate employment in the oil service industry, and pay existing debt without additional cost to the state.

As background, recently the Legislature eliminated the tax credit incentives for new development by small oil companies. They were no longer affordable. But that action left us with previous contractual agreements that must be paid. The state has been repaying these obligations gradually, as allowed by law, but banks will not make loans to the small oil companies based on distant state payments. North Slope and Cook Inlet projects have been shutting down and employment in the oil service sector is declining.

State bonding to make immediate payments on Alaska’s existing debt to small oil companies would provide them with cash needed to employ oil service businesses and restart stalled projects. Yet the state’s bonding obligation could be paid gradually. The state will negotiate with the companies for a discount to cover interest on the bonds, making the state’s cost the same or less than under existing obligations. This is a win-win proposal, putting people back to work in a lagging sector of the economy.

Enacting a statutory POMV system in 2018 is still the primary step toward fiscal stability needed this session, but adding legislation that stimulates the economy, as proposed by Commissioner Fisher, would cap this achievement. With both measures, the 30th Alaska State Legislature could go home with a well-deserved sense of accomplishment.

The memorable statement: “No man’s life, liberty or property are safe while the Legislature is in session” was written in 1866 by Gideon John Tucker. Possibly, he was exaggerating!

Janet McCabe and her family have lived in Alaska since 1964. Her education and experience are in community planning with a specialty in population projection.  She is actively involved in several nonprofit organizations, including Alaska Common Ground and Commonwealth North.




How is The State Dealing With the Shortfall in Pension Systems?

UAA ISER Publications

A new paper by Cliff Groh, in collaboration with ISER faculty, looks at how the state government has dealt so far with a very big problem: the state’s two largest retirement systems for public employees don’t have enough money to cover future costs of pensions and benefits for state and local employees when they retire. Since discovering the shortfall in 2003, the state has made special contributions of nearly $7 billion to the retirement systems.

But analysts believe it will take billions more dollars in the coming years to balance the funds. That poses a major challenge for the state, in this time of big budget deficits, as well as for local governments, which also need to help pay for the unfunded liability.

To learn more about what the state has done—and might do—to deal with the pension shortfall, download the full paper, History and Options Regarding the Unfunded Liabilities of Alaska’s Public Employees’ and Teachers’ Retirement Systems, or the summary.

If you have questions, get in touch with Cliff Groh at cliff.groh@gmail.com.




Lawmakers do Right by Alaskans, Adopt POMV and Protect Dividend

Anchorage Daily News, Op-Ed by Janet McCabe, February 4, 2018

Thanks, Anchorage Daily News, for asking the public to express opinions on the Permanent Fund, the Permanent Fund Dividend, and the plan for annual “Percent of Market Value” draws from the Permanent Fund that would provide for both government services and dividends (POMV).

In answer to ADN’s request, here are some highlights from Alaska’s history as a state that may provide guidance for the future. After all, one definition of insanity is making the same mistakes repeatedly and expecting different results.

Surprisingly, unexpected disasters have been instrumental in breaking the grip of major economic recessions in the past. Both the 1964 earthquake and the 1989 Exxon Valdez oil spill occurred during serious recessions. Expenditures to recover from both disasters injected enough money into the economy to overcome the economic doldrums. We never hope to be “lucky” again because of disaster, but the lesson is clear that recovery from a recession can be boosted by spending. Cuts in spending have an opposite effect.

There is no doubt that Alaska is now in a recession. The two recent times since statehood when the rate of population growth declined are the late 1980s and today. According to the Department of Labor and Workforce Development, Alaska’s unemployment rate is currently the highest in the nation. Also, like the 1980s, crime rates have soared, especially for theft. Ask businesspeople you meet how they’re doing, and they may say things like “there’s nothing out there” or “I’m just hanging on.”

Uncertainty increases recession by slowing business investment.

The Legislature could address uncertainty and help stabilize the economy by enacting legislation establishing a disciplined POMV process for spending. This system — the same system as that used by many major corporations to protect endowments — has been recommended by the Alaska Permanent Fund Corp. since 2003.

Given the need to stabilize the economy, it is alarming to hear that some legislators are planning to bypass the discipline imposed by POMV, and simply adopt a budget that would spend directly from the Earnings Reserve Account of the Permanent Fund. Legislative spending needs the restraint of POMV to provide stability and protect the dividend.

A look at Alaskan history gives a clear warning of what could happen without spending sidebars. In 1969 when Alaska received a fiscal windfall of $900 million from the oil field lease, legislators competed to fund new projects in their districts. If one district got approval for a library or a community hall, other districts needed similar things. Some economic development projects were clearly boondoggles.

Public alarm at the rapid spending, together with leadership from Gov. Hammond and wise legislators like Hugh Malone, resulted in the constitutional amendment that created the Permanent Fund in 1976. Four years later Hammond urged legislators to adopt a bill creating Alaska’s Permanent Fund Dividend program. He wanted to the give the public a vested interest in protecting the Permanent Fund, and to assure that both rural and urban communities benefited from Alaska’s new oil wealth.

Alaskans received their first dividend checks in 1982. This was fortunate timing, but it did not prevent the recession that occurred because of a fall in oil prices, and expiration of the $900 million construction boom.

The state income tax had been repealed in 1980, and the shortage of funds for essential state services led to further cuts in employment which, in turn, added to the negative ripple effect. The recession was severe.

Hammond ultimately realized that the only solid protection for Alaska’s dividend program was an ongoing source of state income. In 2004 at the Conference of Alaskans in Fairbanks he argued strongly for an income tax, saying his biggest mistake as governor was not to have vetoed the bill repealing the income tax in 1980.

A year later, Gov. Jay Hammond died, having made an enormous contribution to Alaska by leading the establishment of the Permanent Fund and the Permanent Fund Dividend. He was a Republican who saw the big picture, perhaps Alaska’s greatest governor.
Read the full article here.




Alaskans face the nation’s highest health care costs. Why?

Author: Cliff Groh | Opinion Updated: December 10, 2017 Anchorage Daily News

An Alaskan spends on average more than $3,000 on health care per year over what the average American spends, according to the latest federal data. That overall comparison, however, masks much bigger disparities for certain procedures and treatments. One Alaskan researching last year, for example, found that the “all-in” cost of her hip replacement surgery in Seattle was well under half what the total cost would have been in Anchorage. (By far the biggest cost difference was in the facility fee quoted by the hospital in Anchorage vs. that charged in Seattle, not the relatively small difference in the orthopedic surgeon’s charge.)

Experts have identified some causes of Alaska’s high health care costs as:

• Hospital margins in urban Alaska that are higher than national averages (the most recently released study shows that Anchorage hospitals have margins almost three times the national average);

• The relative shortage in Alaska of beds at facilities with skilled nursing and other behavioral health centers that would allow some patients to avoid expensive hospital stays;

• Limited competition and/or leveraging of market power by some medical providers — particularly specialty physicians such as orthopedic surgeons, neurosurgeons, and cardiologists — that keeps prices/fees higher than they would be otherwise (although some Alaska medical practitioners appear to make only 1/50th — or even 1/100th as a few specialist practitioners do per year and some family practitioners are clearly struggling financially, the top is quite high in our state; one neurosurgeon more than tripled his annual income by moving north, going from $1.5 million in Washington State in 2007 to $5.5 million in Alaska in 2009).

• A regulation adopted in 2004 establishing “the 80th percentile rule” for medical provider compensation that critics say has boosted some medical specialists’ fees;

• A statute adopted in 1998 that appears to make it difficult to rely on managed care to hold down costs;

• A slowness to adopt value-based compensation for medical providers instead of the traditional fee-for-service model of reimbursement;

• Expensive medical infrastructure built at least in part for convenience that Alaska may not be able to afford;

• Wasteful overutilization of certain procedures and treatments that are particularly profitable for physicians on the Last Frontier given Alaska’s unusually high reimbursement rates.

Alaska Common Ground will take a deep dive into the difference between the health care costs of Alaska and those of the rest of the country at an event Wednesday evening, Dec. 13.  This event — the third of at least four events on our state’s high health care costs — is at the 49th State Brewing Company, 717 W. Third Ave., from 7 p.m. to 9 p.m. The Anchorage Public Library is cosponsoring this series, which is financially supported by the Alaska Humanities Forum. This event is open to the public and free, with a requested donation of $10.

Important players in the health care field will hash out on Wednesday the relative importance of the factors set out above — and others — in the high costs of Alaska’s health care.   Participating that evening will be physicians, a hospital CEO, a state of Alaska regulator and other knowledgeable observers. There will be an opportunity for the audience to ask questions.

Folks, this is your chance to learn more about this critical topic in a congenial environment. You should come, as your health and wealth may depend on it.

Cliff Groh is chair of Alaska Common Ground, a nonprofit and nonpartisan organization devoted to helping Alaskans understand and reach consensus on the major issues facing our state. If you are interested in watching the video from the previous two events in the health care series, you can see video of each at http://akcommonground.org/can-alaskas-high-health-care-costs-be-cured/.