Stephanie M. Nichols
July 2023

I began these reflections in mid-December 2022, about a month after I returned to the United States from
my Marshall Memorial Fellowship in Europe. I have been thinking since then that I will have an epiphany
and everything I am thinking and wanting to say will perfectly and coherently emerge and write itself. So far, that hasn’t happened, but I want to start somewhere so here I am.

After an arduous and lengthy application process, back in 2019 I had the good fortune of being selected by the German Marshall Fund as one of 30 Americans for a Marshall Memorial Fellowship. The fellowship is born out of the Marshall Plan that was implemented after WWII. It is a leadership program for a small group of Europeans and Americans that focuses on building and strengthening transatlantic partnerships.

I was originally scheduled to travel to Europe in March 2020. On that March 3rd morning, nearly 10 days
before I was to depart my home in Anchorage, Alaska, and with my bags already packed, the fellowship was postponed indefinitely. While the borders in Europe closed, the world as we knew it also shut down around us. Finally, after over three years and starting this past October, I embarked on one of the most
transformative experiences of my life at a particularly critical time in our history. Europe in 2022 will reside in the history books as a time like nothing we have seen since perhaps 1939.

After briefings in Washington DC, the American fellows flew across the Atlantic and began our meetings in Brussels, Belgium, at NATO Headquarters, a place that was created in the aftermath of WWII for the
purpose of securing peace in Europe. Its purpose also intended to guard its members’ freedom due to the
impending threat of the then-Soviet Union.

After we passed through NATO security, I was immediately struck by the eerie resemblance of today. Europe has a war on its doorstep as Ukraine fights not only for itself and its own sovereign existence, but also for all of us in defense of textbook democracy. I left realizing not only the powerful role of the United States in NATO but also that NATO is experiencing its most defining test and preparations since its inception.

From Brussels, we traveled to Hamburg, Germany, where the people are rightfully proud of their stunning
and diverse city. On a whirlwind tour with a retired German school teacher as our guide, I witnessed the
beautiful modern parts of Hamburg that were long-ago rebuilt after WWII. I was struck by Hamburg’s
punctuality and no-nonsense no-frills efficiency that covers a warmth and care that often goes unnoticed. It’s no wonder I felt at home there as a large part of my family immigrated to the United States from small
farming communities just outside of Hamburg.

After Germany I spent a week in Rome where we met with various dignitaries while Italy’s new prime
minister was implementing new and unprecedented laws almost daily. Experts across the country, including many with whom we met, were reacting to the implications of these laws and trying to predict what would come next. Since I was in Rome and Notre Dame has a campus there, I had to pay it a visit. I was entertained to learn that Notre Dame insisted on having its own chapel even though there are a plethora of thousand year old churches on every nearby street. Between gelato, wine, and pasta, Rome at night has to be one of the most magical places on earth. Around each corner is another beautifully lit scene that punctuates their postcards.

From Rome, I traveled to Belgrade, Serbia, a country that has chosen not to repair the areas that were
bombed by NATO during the 1990’s because, in their own words, they want to remember those hard times. My first view of the city saw some of the scars from those bombings as our plane entered Belgrade.
Throughout my stay there, I never once heard any recognition for why NATO dropped its bombs in 1999,
and Tito remains their unquestionable hero.

Belgrade has some of the worst air quality of any city in the world and many days it surpasses Shanghai. The permanent cloud of thick pollution that covers the city soon became stuck in our throats and aptly
personified my time there.

My stay in Serbia was oftentimes unsettling, but it is certainly where I learned the most. I got a small glimpse of what it might feel like to live in a country void of true democracy and to reflect upon what freedom really means. At the same time and in what felt like an entire world away, and under a November full moon, the United States midterm elections were taking place. I saw “F%$K the USA” and Russian “Z’s” spraypainted on the side of buildings, Hitler’s Mein Kampf displayed at the bookstore near our hotel, and Putin’s face silkscreened on t-shirts for sale in central Belgrade. It may seem that Serbia’s official position of “neutral” regarding Russia’s invasion of Ukraine is not only a cop-out but a misrepresentation at best.

As we drove to the Belgrade airport to leave the country, I looked up at the exact right moment to catch the words “Remember Kosovo is Serbia” painted in English on an overpass – a clear reminder of the continued unrest and disagreement with the West in recognizing Kosovo’s independence as its own country. This unrest significantly escalated during the short time we were in Serbia, and we heard frequent predictions that another war is likely on the horizon.

The fellowship ended in Paris where we spent several days exploring the city and visiting the U.S. Embassy. I was struck by the fact that a new café exists every 20 feet, and I ironically had some of the best Thai food of my life in Paris. I also made note of the fact nobody got coffee drinks to-go. While this wasn’t unique to France since Italy was similar in this regard, it didn’t occur to me until Paris that I had not gotten to-go coffee since I left the United States. I’m sure it goes without saying that the art of actually sitting and enjoying conversations with a warm drink is something Europeans due on another level than Americans.

After an incredible month crisscrossing Europe, I began the epically long journey back across the globe to
Alaska where I had ample time to reflect on the many briefings and discussions over the past month. In every city and country we visited, the issues that were consistently top of mind were: Ukraine, climate change, and China – in that order.

Upon returning home I began tutoring a Ukrainian still living in Kyiv to assist him in furthering his English
skills. During one of our sessions, I apologized for the loud jet noise outside my house as the United States military conducted their routine Saturday morning practice flights.

He asked, “Are those United States Air Force fighter jets?”

When I said they were, he unequivocally shared, “If I could hear U.S. fighter jets outside my window, I would sleep really well at night.”

Between hearing his perspective and the many ways I witnessed the United States’ profound place in the
world throughout my time in Europe, I will never hear those fighter jets the same way again nor will I
apologize for them.
The wisdom of the Marshall Plan whose legacy continues to be carried out through the German Marshall
Fund and this fellowship are more crucial now than ever as so much in our world hangs in the balance. We are at a tipping point in history, and we each have a responsibility to forge a new and better future for our next generations.

I returned home from this fellowship loving my country, despite our persistent shortcomings, not only more than I thought possible, but even more than I thought necessary.

I close with giving my full respect to the people of Ukraine and all those who fight to defend freedom and
democracy around the world. To quote Willie Nelson in his song, Living in the Promiseland, “The prayer of
every [person] is to know how freedom feels.” No matter who we are, no matter where we live, those words ring true for each and every one of us.

By Peg Tileston, Current and Founding ACG Board Member

Alaska Common Ground (ACG) launched into its second decade with enthusiasm and energy. Relying on our knowledgeable, hard-working board of directors to plan and produce forums and other issue responses, we continued to address Alaska’s fiscal morass and took on several other major projects.

ACG sent board members to the annual Center for Budget and Policy Priorities in Washington DC for several years. The conference brought together participants to examine various states’ budgets, the variety of revenue opportunities, as well as how each dealt with difficult public policy issues. From contacts made at the conferences, ACG worked with the Institute of Taxation and Economic Policy to produce two publications dealing with Alaska’s budgetary problems: “Hard Choices” and “The Impact of Three Revenue Options for Alaska”.

Encouraging dialogue continued to be a major component of ACG’s efforts during this period. We joined with Out North Theater and the Anchorage Interfaith Alliance to develop Understanding Neighbors, funded by a grant from the Ford Foundation which supported the use of art to encourage dialogue on difficult public issues. The theme was “The Role of Same Sex Relationships in Our Community”. Over 100 Anchorage participants were engaged and organized in groups with trained moderators leading sessions. Artists produced a series of videos that were shown at the start of each session to encourage thinking about the topic in a different way. Understanding Neighbors successfully deepened the way participants were able to talk about an uncomfortable issue and ACG received high praise for its role in the project and its outcome.

Our Let’s Talk Alaska and Deliberative Democracy initiatives brought citizens together in informal, respectful settings to share ideas and concerns on issues of importance to them. And with funding from the Atwood Foundation, and in conjunction with KTUU, ACG produced a series of public service announcements “We Are Alaskans” that emphasized the importance of Alaska’s diversity and the need to work together. All told, between 2001 and 2010, ACG presented over 18 forums on a variety of subjects. 

On the November general election ballot, Alaskan voters will be asked “Shall there be a Constitutional Convention”. At the March 16 board meeting, Alaska Common Ground’s Board of Directors unanimously passed a resolution supporting a “No” vote. Alaska’s Constitution has been held up as a model state constitution that secures our heritage of political, civil and religious liberty. A Constitutional Convention could re-write the entire Alaska Constitution. Groups advocating changes to Alaskan’s elections, judiciary, hunting and fishing rights, rights to privacy, Permanent Fund, and more are already laying out plans for fundamental and extremely controversial changes to our Constitution. These issues will pit Alaskans against each other, with out-of-state individuals and organizations pushing their national agendas that will not be in the best interest of Alaskans. The board is concerned that a Constitutional Convention during these polarized times will be contentious, costly and time consuming. Alaska Common Ground rarely takes positions on issues before the voters, but in the past has opposed a Constitutional Convention for similar reasons. We have joined “Defend Our Constitution”, a nonpartisan and broad-based coalition of Alaskans and Alaskan organizations to urge a “No” vote on this issue. 

ACG March 16, 2022, Resolution opposed to a Constitutional Convention

By Peg Tileston, Current and Founding ACG Board Member

Alaska Common Ground was founded in the fall of 1991. Alaska was just coming out of a severe financial depression caused primarily by bank failures. The political situation was messy which caused considerable consternation across the state. Walter Hickel had just been elected with approximately 41 percent of the vote.

It was out of this chaos the desire for an organization that focused on sound public policy was fostered. The effort was led by Esther Wunnicke – former Commissioner of Natural Resources, member of the Federal/State Land Use Planning Commission, and staunch advocate for strong citizen participation in government decision-making.

The first topic ACG engaged was whether Alaska should hold a Constitutional Convention. Alaska’s constitution requires a yes/no vote by Alaskan voters every ten years. A position paper and a forum described the numerous problems a yes vote would entail, not the least of which would be tearing apart a document considered one of the best state constitutions in the country. 

Alaska’s fiscal situation has held ACG’s attention since it started – from 1992 to 2000 alone, we held 10 forums (two of which were televised statewide). Forums on numerous other public policy issues were held too and ranged from Alaska’s high cost of health care to reconciling our urban-rural split to the role of the university. ACG produced position papers on these and other topics, most of which are still available on ACG’s website here and as we know… still relevant today.

ACG is extremely fortunate and grateful for the wisdom of Esther Wunnicke, Peg Tileston – and all our founding board/members – who set the organization on a solid path over 30 years ago. We recognize and thank this inspiring group of Alaskans that also includes Beryl Johnson, John Havelock, Wilda Hudson, John Reeder, Julie Kitka, and Pauline Utter.

Check out the original invitation to join ACG here.

Find all the current and former board members here.

By Cliff Groh – September 29, 2021 

The Alaska Legislature completed this year’s third special session September 14 by passing an $1,100 Permanent Fund Dividend for this fall and failing to adopt a fiscal plan. Gov. Mike Dunleavy reluctantly accepted the $1,100 amount while vowing to fight for a higher Dividend. He also issued a proclamation directing the Legislature to return for a fourth special session starting in Juneau on Monday, October 4 to address the short agenda of “an act or acts relating to a fiscal plan.” 

Observers are split on the likelihood of that fourth special session producing a sustainable fix to the State of Alaska’s structural fiscal deficit.

The Case for Optimism

You can find optimists regarding how fast Alaska can resolve its fiscal gap, and they include well-informed legislators such as Senate Minority Leader Tom Begich (D.-Anchorage) and Rep. Ivy Spohnholz (D.-Anchorage), Chair of the House Ways & Means Committee. They tend to cite the recent work of the Fiscal Plan Working Group that achieved agreement on the description of the problem and came up with solutions. That bipartisan and bicameral panel delivered a report last month with 10 substantive recommendations.

Sen. Begich told The Hill last week that lawmakers are concentrating on four main elements to produce a sustainable fiscal plan, and the four on his list are a shorter version of the Fiscal Plan Working Group’s 10:

• Changing the formula for calculating the Dividend each year
• Embedding in the Constitution the allocation of Permanent Fund earnings between Dividends and public services/projects (in practice, constitutionalizing the allocation would seem to resolve the question of the Dividend formula by setting the dollars available for the annual Dividend)
• Imposing a tighter spending limit
• Adding new revenues

The Case for Pessimism

Pessimists, on the other hand, have their own long list of reasons why no deal will be reached this next (fourth) special session. The obstacles include: 

• A highly divided Legislature on ideological and philosophical lines
• A public that includes many Alaskans with unrealistic expectations of a relatively painless solution to Alaska’s structural deficit
• A tiny House Majority Coalition that finds it difficult to conduct business on the floor
• Fractures in the Senate that effectively produce two caucuses within the Senate Majority, with rumors flying that the Senate (and—less plausibly—the House) will re-organize soon
• Tribalism within the Legislature that has combined with fear of social media exposure to reduce the after-hours cross-party socializing that used to make compromises easier
• An unusually high degree of rancor and even “hatred” within the Capitol
• A Governor and a group of legislative allies who refuse to support legislation that would pay for the jumbo Dividends that this faction has advocated, preferring instead to overdraw the Permanent Fund as “bridge” funding for a transition to sustainability

Wild Cards:   Gov. Dunleavy’s Re-Election Campaign, Reapportionment, and a Potential Constitutional Convention

Alaska had the most complex fiscal politics in the United States before we got to this 2021-2022 election cycle, and now three other elements make it even more complicated.

First, there is the odd role of Gov. Dunleavy. He has staunch supporters among Republican lawmakers. It is striking, however, how much opposition he triggers among powerful Republican legislators as well as in Democrats. Fierce critics of the Governor’s approach to fiscal matters include GOP lawmakers like Sens. Bert Stedman of Sitka, Click Bishop of Fairbanks, and Natasha von Imhof of Anchorage. (Each are members of the powerful Senate Finance Committee, and Stedman and Bishop are the Co-Chairs.)

There is much speculation in the Capitol among the bipartisan anti-Dunleavy group about what steps would be most likely to help or harm his chances for re-election. Thus the Governor’s proposed constitutional amendment for a 50/50 allocation of Permanent Fund earnings is held up for reasons both substantive and political. That is, the opposition is powered not only by fears of billion-dollar deficits, but by concerns that putting that amendment on the ballot would aid the Dunleavy campaign.

Then there’s reapportionment. House Republican legislators lament the fact that there is a House Majority Coalition mostly composed of Democrats when the voters elected six more Republicans than Democrats to the House, and they hope that the redistricting that occurs for next year’s election will produce a Republican-only House majority in 2023. This thinking tends to make some Republicans reluctant to compromise and want instead to wait until more like-minded lawmakers arrive in Juneau. Conversely, some Democrats advise making a deal now to avoid a more difficult environment after this current 32^nd Legislature ends.

Finally, there are hopes and fears about another once-in-10-years event, the vote in November of 2022 on whether to have a constitutional convention. This could be the biggest game-changer in Alaska politics, both regarding fiscal matters and a whole bunch of other subjects.  The political dynamics of a potential constitutional convention resemble those of reapportionment, with those who believe they will benefit wanting to hold up on big decisions and those who are scared of coming up on the short end later feeling incentives to move now.

The Upshot:   It’s Probably Unlikely that a Fourth Special Session Will Produce a Big Fiscal Fix, and a Higher Dividend than $1,100 This Year Depends on that Big Fiscal Fix

Matt Buxton of the Midnight Sun Memo wrote last week that:   “I think that right now the chances are high that the Legislature may just immediately gavel out [of the fourth special session] or just let the session simmer with the occasional hearing and plenty of technical floor sessions.”

That prediction may well be correct, and it might not go far enough.

Some lawmakers and observers are pushing for the Legislature to work with the Governor to cancel the fourth special session and hold off on big fiscal decisions until the regular session starts in January, when legislators have more time and more staff than in the special sessions (which are constitutionally limited to 30 days).

Paying a Dividend of more than $1,100 this year would require some combination of overdrawing the Permanent Fund/raising taxes/additional budget cuts, so most Legislature watchers believe that achieving a long-term fix would be necessary before there would be the votes to appropriate more money for a larger Dividend.

The Competing Visions Undergirding the Divisions

Counteracting these negative factors to produce a sustainable fix to Alaska’s structural fiscal deficit is going to take leadership, courage, creativity, and a spirit of compromise. Whatever the timing, the way those big decisions will come out depends on the visions driving them.

This is particularly true given just how deep the gulf is over which way Alaska will go. Contrast two big-picture looks at our state’s future.

The Alaska Municipal League has catalogued an “infrastructure deficit”  regarding improvements to highways, deferred maintenance of State-owned buildings and schools, broadband, ports and harbors, housing, and other categories that totals more than $27 billion. (You can find this list at the “Unfunded & Underfunded Priorities” section at https://akfiscalfutures.com on the Internet.)  Supporters see these items as critical investments to help make the 49^th State desirable and competitive in the necessary transition away from an economy and a fiscal system based on oil. Backers of this vision tend to push for taxes to pay for spending on this list as well as other items.

An influential Republican legislator pointed towards a different path in a meeting with me this month, however. After acknowledging that after adjusting for inflation and population growth the State of Alaska is now spending at levels seen in the 1970s, the lawmaker suggested that the spending should go down to the levels of the 1960s. Advocates for this approach stress the importance of much greater additional cuts to the conventional budget paired with jumbo Dividends.

Alaskans need to decide which vision is more desirable for our state.

Cliff Groh has been a board member of Alaska Common Ground for more than 20 years. As a Board member he has facilitataed discussion of the state fiscal situation and as an individual has been a strong advocate for solving the state’s fiscal problems. He spent the just-concluded third special session in Juneau meeting with legislators and legislative staff (while agreeing not to identify them), and he also writes an e-mail newsletter called “Fiscal Cliff’s Notes.”  (You could get on the list by writing him at cliff.groh@gmail.com, and you can read it in blog form at https://www.cliffgroh.org/alaska-fiscal-cliff-notes.)  

Cliff Groh, Opinion Piece in the Anchorage Daily News, July 29, 2021

The Alaska Legislature has created a Comprehensive Fiscal Plan Working Group to produce a fiscal plan before the Legislature convenes again in a special session currently set to start August 2. Unusually, this informal joint committee includes equal representation from each caucus in the House and the Senate.  Depressingly, there is a substantial chance that the Legislature will either do nothing or something very short-term this year.

Either outcome would be unacceptable. It is difficult to solve the State of Alaska’s yawning structural deficit, and it is also urgent to do so. 

It’s hard to come up with a fiscal fix largely because Alaska appears to have the nation’s most complicated fiscal politics. The fiscal policy here on the Great Land is pretty complicated by itself. The law that the Legislature adopted in 2018 to spend Permanent Fund earnings sustainably in the budget is a novel—and little-understood—concept for a state government.   That legal change three years ago created a system called Percent of Market Value (POMV).  Under the POMV system, Permanent Fund earnings now provide more than 60 percent of the State of Alaska’s revenues—making Alaska more of an endowment state than an oil state.  The details of oil taxes are complex as well.

But it’s the politics of paying for what the State of Alaska does that are really complicated.

In every other state, deciding how to pay for the budget is basically like a two-sided wrestling match between people who mostly see themselves as budget beneficiaries and people who mostly view themselves as taxpayers. 

In Alaska, by contrast, it’s all different. The Permanent Fund Dividend, the Permanent Fund, and oil taxes combine to make it much weirder on the Last Frontier. In Alaska, fiscal politics resemble a movie scene where five people are pointing guns at each other in the cockpit of an airplane—and the airplane is running out of fuel. Instead of a straightforward two-wrestler match, Alaska has a hopped-up cross of Reservoir Dogs and Snakes on a Plane.

As is usually true in politics, the people with guns in the cockpit are defined by what they fear the most. Let’s go through them one by one—and put a face on each person holding guns.    

One person pointing pistols is someone who most fears additional cuts to the conventional budget. Think of a parent activist in Great Alaska Schools concerned about the education of that parent’s children, given that the State of Alaska pays close to 75 percent of the total costs of K-12 education in Alaska and K-12 spending is more than a fifth of the State budget. 

The second person with guns up is someone who most fears the restoration of broad-based taxes in Alaska, particularly a graduated personal income tax like our state had from 1949 to 1980. That second person might  be a surgeon—I’ve met one who made $5.5 million in net income from work in our state in one year without paying a penny of broad-based taxes to the State of Alaska. 

The third person holding guns is someone most afraid of more cuts to Permanent Fund Dividends from what they would be under the Dividend formula created in the 1980s. That person could be lower-income and happy about how Dividends help pay the bills.

The fourth person with handguns out is someone most afraid of increased taxes on the oil industry. Think of an oil company executive—or maybe an oilfield worker—here.   

And the fifth person pointing guns at the others is someone most concerned about the Legislature overdrawing from the Permanent Fund earnings so that there is less money to pay for what the State of Alaska’s government does in the future.  This person probably plans to live in Alaska a long time and counts on there being good roads and public safety in 2041 as well as in 2021.   

So if it seems like Alaska’s fiscal politics are unusually paralyzed, all those gun-pointers in the cockpit help explain why. 

The reason that the cockpit standoff wasn’t a problem before the last seven years or so is that the plane used giant wads of oil money for fuel without much need for choices among the diverse collection of passengers.  For about 35 years—starting around 1980—the State of Alaska essentially paid the bills with the big annual revenues from oil taxes and oil royalties. But that system stopped working due to the combination of declines in Alaska oil production, drops in world oil prices, and a new oil tax system.  Unless oil prices shoot up—and, crucially, stay up—well above recent highs, that old world of oil money financing the State of Alaska is not coming back.   

The State of Alaska has responded to the dramatic fall in oil revenues since 2014 by spending most of its savings outside the Permanent Fund as well as by cutting spending to a level below that seen in the 1970s after adjusting for population growth and inflation. (The calculations in this piece are based on Unrestricted General Fund (UGF) dollars, the most common definition of the budget in Alaska.) 

I have set out in detail elsewhere my comprehensive proposal for fixing our state’s structural deficit. Briefly, I favor amending the Alaska Constitution to include the POMV system and guarantee the Dividend at a sustainable level; the reinstatement of broad-based taxes focusing on higher-income Alaska residents and non-residents (which means that I prefer the personal income tax over a statewide general sales tax); a moderate increase in taxes on the oil industry; and a continued emphasis on searching for efficiencies in the budget (while recognizing that the budget might need to go up in certain areas, such as the capital budget). 

Your opinions may differ, and I am always willing to discuss potential solutions with Alaskans. Getting to an agreement on a long-term fiscal fix is tough in Alaska, mostly for the reasons laid out above.  What is completely unacceptable, however, is going with no or little action over and over. Folks, let’s put down the guns, go big and get creative, and land this aircraft safely. 

__________________________________________________________

Cliff Groh has studied Alaska’s fiscal system over the past four decades, and his work has included service as the legislative assistant who worked by far the most to develop and get passed in 1982 the bill that created the Permanent Fund Dividend. He plans to go to Juneau for the next special session on the big-picture fiscal issues.

Anchorage Daily News, May 2, 2021 – Opinion by ACG board member Janet McCabe