Tuesday, June 19, 2012

The Great Alaska Airline Ticket Spree, Part II ...

UAA announced yesterday changes to the "Fan Flight Frenzy program" under which the University is providing airfare from 18 rural Alaska communities to Anchorage in connection with the purchase of tickets to the Great Alaska Shootout, UAA's annual Thanksgiving basketball tournament.

The changes have the effect of now charging approximately $103 for the airline portion of the the package; UAA formerly had proposed to provide free airfare for participants willing to pay $127 for game tickets.  The total charge for tickets (and airfare) now is $230.

Put another way, rural Alaskans who view the program as simply a way to obtain discounted airfares to Anchorage for Thanksgiving Break will now pay $230 for the tickets, rather than $127.

The University said that it was making the revisions "to find a solution that addressed the concerns of the public," presumably, among others, the criticism of the program leveled by Dermot Cole of the Fairbanks News-Miner.

In a column written after the revisions were announced, Cole said the revisions were not enough to satisfy the concerns raised by the program.  "While this is an improvement over the plans to give free airline tickets ... it is still a waste of  money.  The program should be halted by UA President Pat Gamble."

That tends to border on quibbling.  UAA previously has said the cost of the program would be "about $400,000."  According to Cole, 230 of the tickets previously had been bought at the lower, $127 price, at a cost to the state of approximately $140/ticket.  Assuming the remainder of the 1500 tickets are purchased at the revised price, the charges will recover approximately 80% of the overall cost of the program, leaving a total net cost to the state of the program of about $80,000.

I agree with Cole that a number of deficiencies remain in the program.  In an extended discussion Sunday, one of the UAA coaches passionately defended the program as providing an opportunity to "transform" the lives of some children from rural Alaska.  That seems something of an overstatement, given that the program is neither limited to children, nor designed to ensure that the participants actually attend the Shootout (Cole has pointed out that many in rural Alaska may view the program simply as a means of acquiring discounted airline tickets to visit Anchorage over the Thanksgiving holiday for other purposes).

Moreover, the touted economic benefits of the program -- UAA's first statement appeared to claim that the program could result in a $2 million addition to the Anchorage economy -- largely are coming at the expense of other, more economically challenged parts of the state.  Some restaurant and diner owners in rural Alaska, for example, have complained that the program could result in lower sales in their areas during the economically important Thanksgiving weekend.  A state subsidized raid by Anchorage on the economies of rural Alaska would seem to make sense only to those with an Anchorage-centric view of the world.

Nonetheless, by reducing the net cost of the program to the state to $80,000, UAA has taken steps to minimize its impact on state spending.  At that level, continued discussion borders on noise.

Which leads to one final comment.  Some readers have asked why a page concerned with Alaska oil and gas issues has spent time on a University and sports-related issue in the first place.  Indeed, the UAA coach commenting Sunday bordered on suggesting that the comments made here were anti-higher education ("If universities operated in your suggest[ed] model they would never have athletics programs, art programs, or music programs.  You certainly understand the costs but you are not appreciating the value."  Parenthetically,  I might add that seems an odd thing to say to one of the University's largest individual donors.)

But the reason that this page has devoted time to the subject is simple.  As this page consistently has made clear, Alaska oil production is in dramatic decline.  One of the reasons for that is the economic environment which has been created by Alaska's high oil tax rates.  Recently, one of the justifications some have given for why those rates cannot be changed is because reductions in the rates would result in sending the state into deficit spending.

Frankly, that is not a justification for refusing to change the tax.  Instead, as discussed elsewhere on these pages and, ironically enough, by another part of UAA, it is a wake up call for the state to stop spending above long-term, sustainable levels.  One way to do that is to eliminate state spending where it is less than efficient.  As even UAA's own Institute of Social and Economic Research ("ISER") has predicted, if current state spending levels are not lowered immediately, they will lead to a crash in state spending in the next decade.  In that light, spending $400,000 so that a few -- very few -- lottery winners from rural Alaska can fly free to Anchorage looks pretty damned ridiculous.

If Alaska -- and that includes the University of Alaska Anchorage and its various departments -- is to have a viable future, it needs a strong oil industry which continues to produce the revenues necessary to fund that future.  In order for that industry to remain strong, among other steps the state's oil tax structure needs to be reformed.  In order to reform that structure, state spending needs to be lowered significantly (using ISER's estimates, the current general fund spending rate needs to be lowered to approximately $5.3 billion annually; this year, the spending rate is $7.6 billion).

In order to lower state spending, even some major programs -- perhaps including some at the University -- are going to need to be eliminated.  Certainly, current marginal spending programs, producing very small, if any, benefits, need to go first.  At $400,000 -- or even at $200,000 -- UAA's "Great Alaska Airline Ticket Spree" was one such program.  As Dermot Cole suggests, at $80,000, it likely still is, but the cost is reduced enough so that its time to move on to other, larger things.  Hopefully, however, UAA will have received the message.