Alaska Fiscal Policy| More on UAA ...

I wrote a piece Monday on the decision by the Alaska State Hockey Association (ASHA) on Saturday to issue a vote of "no confidence" in University of Alaska - Anchorage (UAA) Athletic Director Steve Cobb.  The Anchorage Daily News reported on the vote Sunday:

In a resolution sent to a range of university and state leaders, the association cited the steady decline of UAA hockey and claimed repeated efforts to reach out to the university’s athletic department and hockey coaches have been “systematically met with callous indifference.”

As I explained in my piece, I believe this story is as much about Alaska fiscal policy as anything else.  Unlike other public universities, UAA does not raise a significant amount of its budget from alumni and other supporters. Instead, the state underwrites virtually all of the University's costs beyond those covered by tuition.  Because UAA does not have to reach out to donors and supporters, it does not have to pay attention or otherwise cultivate a relationship with them.  The result is the attitude of "callous indifference" noted in the ASHA resolution.

Since Monday, the story has continued and not in a good way for UAA.  

Yesterday, the UAA Hockey Alumni Association, which counts more than 300 former Seawolves among its membership, issued its own vote of no confidence in Dr. Cobb.  Their explanation for their decision proves my earlier point about UAA's indifference to its supporters.

According to the Anchorage Daily News report of the Association's decision, "[s]ince ... it was formed a few years ago, the alumni group has raised more than $100,000 for UAA hockey and the athletic program, including $55,000 for an endowment fund."  Yet, as with the ASHA, the Association feels"shunned" by Cobb's actions.

As if to put an exclamation point on the discussion, a caller on Monday morning's Casey Reynolds Show recounted a discussion with Dr. Cobb during an earlier situation:

... we had a meeting down in the locker room after all the alumni were up in arms about the whole arena.  And Dr. Cobb said, basically along the lines of it doesn't matter how much money this Athletic Department loses, the state is awash in money and we are just going to get a blank check. 

The podcast of that discussion is here; that call was from the 7:50 - 10:00 mark.

Put another way, we really don't need your support and don't have to put up with your ideas.  We will run this program however we want to because the state will keep paying the bills.

Sometime Monday, after the first story broke, Tom Case, UAA's Chancellor weighed in with a statement that included the following, "I have confidence in the steps being taken by Athletic Director Dr. Cobb ...."  KTUU's report on the statement is here.

Subsequently, in response to today's story about the action taken by the Alumni Association, the ADN reported "UAA Chancellor Tom Case ... could not be reached [for comment]."  Hopefully, that means that UAA's Administration is reconsidering its course of action.

Its failure to do so will expand this issue.

Among other things, the Chancellor is the primary face of the university to the larger community.  In the normal university, this is not intended merely as a "public service" role; it is the position where the rubber meets the road in terms of developing a solid and significant fundraising base.

In Monday's piece I wrote about the Fisher Report, the results of a study of the UA system by a team of highly respected higher education consultants commissioned by then newly-installed UA President Patrick Gamble in 2010.  The portions I wrote about Monday related to the "mediocre, at best" efforts of the University to connect in a serious way with its alumni and supporters.

To recap from the report, "[t]he giving rates of alumni to UAF’s, UAA’s and UAS’s annual funds ranges between one and six percent; embarrassingly low ….”  By contrast, “[t]he national average for alumni giving is over 17 percent, and some institutions go as high as 60 to 70 percent.”

The report also identified who is responsible for leading the recovery from this situation.  "The Chancellors, in coordination with staff or key volunteers, are crucial to soliciting [major] gifts and providing careful stewardship and attention to this group of donors. ... the Chancellors, with appropriate help from the President, must be in the forefront of this fund raising activity."

Chancellor Case's action in this situation will tell the broader community whether the attitude of "callous indifference" of the University toward its supporters extends to the person charged with being "in the forefront" of the University's fund raising activity.

What we saw Monday in the Chancellor's reaction likely was the academic equivalent of the military response of "closing ranks."  This isn't the time for that.  Instead, its time for the Chancellor to step up to one of the most important functions of University leadership -- connecting the University to its outside supporters and constituencies.

Sometimes University supporters become overzealous.  But even then, because they have been asked to and have become investors in the University enterprise, their voices deserve respect.  That hasn't happened in this situation.  Instead, at least to this point, the University's attitude toward what it should view as some of its most valued and committed supporters has been one of disrespect.

Regardless of the ultimate outcome of this situation, however, my point from Monday's piece stands.  It is time for the University to connect and develop its supporters.  For the very reasons Dr. Cobb unintentionally made clear in his locker room speech, the state should reduce its funding by the amount that the University should be raising from its alumni and other friends.  The state should not be the University's blank check.

In a time of declining state spending, its time for the University system to start pulling the same weight as its peers in the L48.

Short Takes| Hmmmmm ...

I just finished listening to the second hour of Monday's Casey Reynolds Radio Show.  I was out of town Monday, but I understood from a friend that Casey talked about the current situation at UAA, which I had written about that morning (and am again this morning).  As it turns out he had read the post and was talking about it on air.

The podcast of the second hour is here; the discussion of the post runs from roughly 18:15 to 30:30 of the segment.  Casey makes an interesting -- and unexpected -- comment at the end of the segment, at roughly the 30 minute mark.  I am honored by the comment and the company. 

Frankly, as I have said elsewhere, I do think there is scope for an Independent candidate for Governor in 2014.  At least from a fiscal policy perspective, which drives a number of others, Juneau is seriously broken.  

This year the Governor proposed and the Legislature passed the second largest combined capital and operating spending package in Alaska's history, oddly claiming in the process to be "fiscal conservatives."  They aren't.  

As the University of Alaska-Anchorage's Institute of Social and Economic Research (ISER) made clear before the session started, "In fiscal year 2014, Alaska’s state government can afford to spend about $5.5 billion."  Spending above that level, ISER warned, would continue "the state ... on a path it can’t sustain," leading ultimately to "a severe fiscal crunch soon after 2023, and with that fiscal crisis will come an economic crash."

The Governor and Legislature's combined response?  A final spending package of $6.8 billion, fully $1.3 billion (or nearly 25%) above sustainable levels, and as I mentioned above, the second highest in Alaska's history.

Adding injury to injury, toward the end of the session the Governor announced that he intends to double down on this reckless policy, proposing a "fiscal plan" that maintains spending at the same level -- $6.8 billion -- for the next five years.  The plan affirmatively contemplates deficit spending in the range of $700 million per year.  The difference between that and the sustainable spending level will be significantly more.

As I have explained elsewhere on these pages, at the end of that road lies disaster. "[E]ven with oil tax reform and a production response that results in 0% decline, the state simply emerges at the end of the five year period at the edge of the fiscal cliff ISER describes in its study, perhaps even earlier than 2023."

Twenty years ago in the midst of a similar failure of fiscal policy by both parties, Maine voters rebelled and elected an Independent as Governor.  The experiment was a success.  Reelected with 59% of the vote after his first term, Governor King ultimately left office with Maine's fiscal house back in order.  This past year, running with the support of federal fiscal hawks former Wyoming Senator Alan Simpson (R) and former Clinton White House Chief of Staff Erskine Bowles (D), King was elected to the U.S. Senate, again as an Independent.

There is a lesson in that for both Alaska parties.

King, by the way, is a graduate of the University of Virginia School of Law.  So am I.

On Glen Biegel this morning ...

I will be on Glen Biegel's new morning show -- KBYR Morning News/Comment with Glen Biegel -- at the 6:45 am segment today.  Anand Dubay is joining Glen as host this morning and we will do a quick update of where Alaska stands on oil, gas and fiscal policy.  AM 700 KBYR on the radio, available on the web here.

Short Takes| Well, at least I have one reader ...

The second hour of today's Casey Reynolds Show contains an engaging -- and often humorous -- interview with Senator Hollis French.  The segment is available here; the interview with Senator French begins at about the 13:00 mark.

Casey had suggested I listen to the interview and a little over 15 minutes in (at the 30:15 mark) it became apparent why.  Invoking my name for the second time in the interview (the other was in response to Casey's mention of my name around the 27:15 mark), Senator French started taking issue with my recent column in the March 2013 edition of the Alaska Business Monthly -- Alaska Oil Policy|  "Maximum Benefit".  He was suggesting that the decline curve I used in that piece as the optimum (3%) was, in fact, what Alaska was experiencing, and thus, there was no reason to adjust taxes.

As Lisa Demer pointed out in a recent piece in the Anchorage Daily News, there was a lot of discussion in the closing days of the debate on SB 21 over decline curves.  Indeed, one of the last presentations made before House Finance by EconOne, the Administration's consultant, was entirely about the effects of the bill under a broad range of decline curve scenarios.

Suffice it to say that Senator French and others took one view, but as Lisa Demer's article points out the Administration, supported by recent state production forecasts, took another.  The point that Senator French overlooked in the course of discussing my article, however, is that the decline curves I used better fit both recent history since the passage of ACES and the long-term state forecasts made both before and during the debate began on SB 21.

But, hey, I am just happy to know that someone reads the pieces I write.  And Senator French isn't always a critic.  During the first Senate floor debate on SB 21, Senator French used another presentation I made during the session as support for one of the amendments he offered at the time.  (The floor debate is available here.  Senator French's comments begin at 5:45pm (18 minutes into the segment) and extend to 5:53pm (or 26:30 of the segment)).  Maybe I will get a Christmas card from him after all, Casey.

Short Takes| A conversation with Dave Stieren ...

I was on the Dave Stieren Show Thursday to discuss the current status of oil tax and fiscal policy reform.

The discussion ended up being part of a larger discussion that transcended the current legislative session, which Dave started earlier in the show, continued after our conversation and returned to again in his morning commentary Friday.  Our discussion  focused mostly on my sense of where oil tax reform and fiscal policy will stand at the end of this session, and how they may play as issues during the 2014 electoral season.

When put that way, my take was that this legislature has stumbled to a result on oil tax reform which will produce some investment, but is not a long term fix to Alaska's issues.  As I explained during my segment, the level of spending -- and the pressure to maintain state revenues (demonstrated by the continued debate about putting the base rate at 33 or 35%) -- has gotten in the way of developing a sound oil tax policy.

And as Dave and I discussed during the segment the state is nowhere near fixing its spending (fiscal) policy.  Indeed, if anything, it has become worse this session as a result of the Governor's apparent satisfaction with leveling annual spending at $6.8 billion -- which seems like a significant cut only because last year's budget was the largest in the state's history.  To put that level in perspective, $6.8 billion is the second largest budget in the state's history, and now the Governor proposes essentially to freeze spending at that level for the next five years.

As I pointed out in a written commentary also on Thursday, even if oil tax reform produces a significant production response, the state cannot sustain that level of spending without a significant call on its fiscal reserves, which at the end of the five year period will leave state government at the edge of a serious fiscal cliff.  Essentially, that policy appears designed to spend away Alaska's fiscal reserves, needed to sustain future spending levels, simply in order to avoid making hard decisions now.

Dave's opening segment on the issue is the first 11 minutes of the second hour of the Thursday show, which is here.  My segment is later in that hour, starting at 22:35 and running to the end.  Dave then continued the discussion for the first 10 minutes at the beginning of the third hour of the show, which is here.  Dave's Friday morning segment is not yet available; I will post it when it is.

On the Dave Stieren Show this (Thursday) afternoon ...

I will be on the Dave Stieren Show this afternoon at the 3:30 pm segment to discuss the current status of oil tax reform (House Finance just released a new draft Committee Substitute) and state fiscal policy (the proposed budget is now the second highest regular session budget in state history) ... and there's four days remaining in the regular session.

Tune in at AM 750 if in Anchorage or here on the web.

Short Takes| A conversation with Glen Biegel

I was on the Glen Biegel Show Monday to discuss a variety of issues, including oil and budget policy, Norway ... and Margaret Thatcher.   The podcast of the complete discussion (23 min.) is here.  Among other thoughts ...

On SB21 (oil tax reform): "This isn't going to be the big bang.  This bill isn't going to pass and all of the sudden everything is going to be right with the world and we never have to worry about [oil tax issues] again.  What we are going to have here is a little bang, or a little few bangs.  We're going to increase investment in the state, but we are still going to need to worry about oil policy going forward.  ... We are going to need to worry about, as they have done in the UK, how we identify tax rates that go after other opportunities."

On fiscal issues.  "We have slowed the boat down. ... The test is going to come in turning that boat around and starting it back in the other direction.  And this Legislature is not going to accomplish that.  ... Glen:  Does [that] require the Governor to be brave, to have courage?  Brad:  Absolutely, [but so far] the Governor has come out with a 5-year fiscal plan that I think is just kicking the can down the road in ways that are very bad for the state."