Walker protests ‘D’ for business grade

By Elwood Brehmer

Morris News Service – Alaska

Gov. Bill Walker took umbrage with the conclusion drawn by Alaska business groups that his policies have almost failed the state’s private sector.

The governor wrote a six-page point-by-point rebuttal to the “D” grade he received on the Alaska Business Report Card put out jointly by the Alaska Chamber, the Alaska Support Industry Alliance, the Resource Development Council for Alaska and Prosperity Alaska.

Specifically, Walker responded to a two-page letter from the business groups informing him that he had “demonstrated success on just one of eight reasonably attainable policy priorities” and thus earned the poor mark.

Chamber President and CEO Curtis Thayer said the groups’ letter to the governor was a step that hadn’t been taken before, but they felt it was important to explain their position. The governor’s counter came as a surprise, he added.

“In reading the points of the (governor’s) letter and our concerns, I think what it really showed to me is we fundamentally have some disagreements that are going to take a lot more effort to resolve than I think we originally intended,” Thayer said.

The Alliance is a trade association of oil and gas and mining contracting companies. Prosperity Alaska is a business advocacy group. Thayer, RDC Executive Director Marleanna Hall and Support Industry Alliance Deputy Director Renee Limoge Reeve sit on Prosperity’s board of directors.

Walker’s eight “assignments” included cutting government spending; establishing a framework to draw on part of the earnings of the Permanent Fund for government services; keeping the state’s oil and gas tax system intact; advancing the original Alaska LNG Project concept; prioritizing long-term investments and generally promoting policies to grow the Alaska’s private sector.

The only topic the governor received positive marks for was proposing the Alaska Permanent Fund Protection Act, which would have set up an annual draw from the Permanent Fund and changed how Fund dividends are calculated.

The Senate passed a modified version of the legislation — the centerpiece of the administration’s plan to resolve the roughly $3.5 billion budget deficit by fiscal year 2019 — that was ultimately killed by the House Finance Committee.

Walker wrote in his Sept. 30 response that “it is difficult to take the grade or analysis seriously” because of changing criteria and inaccuracies of fact.

“Of far greater concern to me is the message your analysis sends: that Alaska’s business community is ignoring the reality and complexity of our state’s current fiscal situation,” Walker alleged.

While accounting for only one, but by far the largest, issue of the previous Legislature, House Republican Reps. Lynn Gattis, Lance Pruitt and Dan Saddler, who voted down the Permanent Fund bill in the House Finance Committee, all received A- grades.

Republican Sen. Mike Dunleavy, who voted against the bill that passed the Senate, got an A on his Alaska Business Report Card.

The report card was critical of the administration’s 2017 budget proposal for $4.8 billion in unrestricted general fund, or UGF, spending, as the Alaska Chamber has long pushed for a $4.5 billion all-in UGF budget. It characterized the $4.8 billion bill as “well above a sustainable budget level” that reduced the operating budget by “only” $140 million versus 2016.

Walker noted his original budget was 21 percent lower than the budget in place when he took office and that the Report Card evaluation failed to recognize his vetoes that cut 2017 spending to $4.4 billion.

“This is a new low not seen in ten years,” the governor wrote. “And it is below the $4.5 billion spending target the Alaska Chamber called for in its 2016 state priorities. Moreover, we achieved the target a year ahead of the Chamber’s timeframe.”

Thayer, who was Administration Department commissioner under former Gov. Sean Parnell before joining the Alaska Chamber, said he understands the inherent political challenges that come with cutting government spending.

He added that neither Parnell nor Walker likely get the credit they deserve for the work they’ve done to reduce the state’s budget.

Thayer also said the groups were glad Walker vetoed spending after the Legislature shot down the new plan for the Permanent Fund, but added that vetoing $430 million in oil and gas tax credit payments damaged the state’s credibility in the private sector for a second straight year.

Walker has said repeatedly since the June vetoes that the 2017 credit payment veto was necessary to preserve state savings after the Legislature failed to enact a comprehensive fiscal plan and reiterated that in his letter, also noting the state made its required payment of $30 million.

“I can’t in good conscience use scant state funds to pay corporations hundreds of millions of dollars in excess of what is statutorily required when we are reducing education, public safety, and Alaskans’ dividends,” the governor retorted, adding that his fiscal plan cut the credit program but also originally called for paying off the entire expected obligation.

On raising existing industry taxes and reestablishing a state income tax, other aspects of Walker’s New Sustainable Alaska Plan, Thayer commented that the eight tax proposals laid out by the administration would have raised just $855 million per year but discourage the notion that spending would be cut further because of a fear that “you’ll never reduce the size of government because you’re feeding the size that it currently is.”

Walker responded to criticism of higher taxes by asserting that a stable state fiscal situation is much more beneficial to its business climate than the additional tax burden would be detrimental.

“My aim was to keep taxes to a minimum and to spread the impact across all sectors in the interest of fairness,” he wrote. “If your group had a credible proposal to balance the budget in a sustainable way without taxes — and without bringing (Permanent Fund) dividends to zero — I never heard or saw it.”

Looking ahead to the rapidly approaching legislative session that will resurrect many of the themes from this year’s political marathon, Thayer said the Report Card coalition’s message will remain consistent given the state’s fiscal problems remain.

“One thing we don’t want to do, the Chamber in particular, we don’t want to appear we’re changing the goalposts,” he said.

Thayer noted that establishing a long-term fiscal plan and cutting state spending have long been goals of the Alaska Chamber.

Elwood Brehmer is a reporter for the Alaska Journal of Commerce. He can be reached at elwood.brehmer@alaskajournal.com.