Guest hosting The Dave Stieren Show Wednesday and Thursday ...

I will be sitting in as guest host on KFQD's The Dave Stieren Show Wednesday and Thursday of this week.  The Show airs in the afternoon from 2 - 5pm (Anchorage) and is available locally at AM 750 and FM 103.7, and on the internet here.

For those of you that don't keep these things in your head, Thursday noon Governor Parnell will be releasing his proposed FY 2015 budget.

As you might anticipate, we will be talking about it some on the Show both days. On Wednesday we will provide some background helpful to understanding the budget, look at the state's recent fiscal forecast and Rep. Charisse Millett will join to talk about HB 136, her bill introduced last session to require the information necessary to develop a sustainable budget for the state.

On Thursday following the announcement of the budget, former Director of UAA's Institute of Social and Economic Research and Economics Professor Emeritus Dr. Scott Goldsmith will be joining me early in the program to discuss the Governor's proposal, as will current Anchorage Education Association President Andy Holleman later in the afternoon.

But the budget won't be all we talk about.  Senator Cathy Giessel will be joining us early in the program Wednesday to talk about the two day meeting early this week of the Alaska Arctic Policy Commission, Jason Hodges, the Executive Director of the Anchorage Concert Association will be joining us also on Thursday to talk about Cirque Dreams Holidaze, the show the ACA is bringing to Anchorage over Christmas break, and some of the programs we will be seeing after the first of the year and we are continuing to work on arranging one or two other guests to join us along the way.

I honestly can't imagine how Dave does this five days a week, week in and week out; it taxes me just to gear up for two days.  But I enjoy the occasional opportunity and am looking forward to the discussions.

UAA, its Kangaroo Court and the Board of Regents ...

As defined by Websters, the phrase Kangaroo Court means "a mock court in which the principles of law and justice are disregarded or perverted."  UAA seems to be adding a further phrase to the term "... and about which they believe no one will care."

Earlier this week I wrote a piece on the main blog about some of my ongoing experiences with UAA's Athletic Department, which brought the phrase to mind ("UAA Athletics remain badly broken, and why addressing it is important …").  Interestingly, the piece set the all time record for number of hits for a day on the blog.  In the piece I described a fairly bizarre process currently underway at UAA which involves me, but I believe also carries a larger lesson related to how the University deals both with its student-athletes and with donors.

Amanda Coyne subsequently discussed my piece in her column, giving emphasis as anyone should to the career-limiting (some have said, "bullying") treatment by the University last year of some of its women student-athletes following the disastrous hiring of Nate Altenhofen ("Allegations of cover-up and retribution involving UAA athletics").  As a matter of fairness she reached out to UAA for comment.  As she subsequently reported, however, apparently believing that no one will care UAA replied only with this non-responsive "response":

UAA has been working with the NCAA since July 2012 on an investigation that looked into the women’s basketball program and the conduct of former head coach Tim Moser. It was not focused on UAA athletics generally, nor was it focused on Altenhofen. NCAA bylaws prohibit UAA from commenting further on an ongoing NCAA investigation. 

Former coach Altenhofen resigned in the midst of an investigation into professional misconduct in August 2012. In accordance with Board of Regents policy, UAA will not comment further on personnel matters.

The response certainly confirms one of my statements -- that the "investigation" began (in July 2012) well after the event in which I was involved (November 2011) and only after I started raising concerns about UAA's conduct in other areas.  Beyond that, however, as Amanda notes generally UAA's "response" dodges the central issues, but without providing good reasons:

• Did UAA refuse to release one or more of its women athletes in the wake of its hiring of Altenhofen?  That's not an issue which is covered by either matter to which UAA refers in its response.  Specifically, this matter doesn't relate to Altenhofen's conduct; it relates to the University's conduct in response to the situation the University created by Altenhofen's hiring. 
• As a state institution (ironically enough, also funded in part by own my donations), is UAA conducting investigations and reaching conclusions about sanctions without notice and opportunity for comment by at least one of the intended targets?  Again, not an issue covered by either matter to which UAA refers in its response.  The University can't legitimately duck and cover by invoking the phrase "NCAA investigation."  The NCAA's procedures don't require that institutions conduct their investigations without providing the potential targets due process; indeed, the NCAA's own procedures provide the exact opposite.  The question my piece raised and Amanda echoed is about the process UAA is using, not the NCAA.  
• Finally, is UAA proposing to take actions and impose sanctions beyond those which are supported by NCAA precedent, and if so, why? Again, not an issue covered by either matter to which UAA refers in its response.  If the matters are beyond NCAA precedent they certainly aren't covered by the "NCAA investigation" excuse.  If UAA believes they are imposing what the NCAA would in similar circumstances they can say so (and then be judged as to whether they actually are); if not, UAA should admit it and then defend its actions.  The fact is, of course, UAA can't.  As I explained in my previous piece, UAA has gone rogue and is simply making up stuff as it goes along in order to achieve other objectives.

My understanding is that the UAA Athletic Department now is proposing that there be an outside audit of its compliance activity after the sanctions it has proposed are finalized and implemented.  In other words, UAA wants to finish shooting first and allow questions to be asked only after.

The Board of Regents -- and frankly, because of the potential adverse impact on the University's ability to raise private funds, with the Administration and legislature looking over their shoulder -- should reverse the process.  The judgments handed down by UAA's Kangaroo Court should be put on hold pending the outcome of a thoroughly independent, impartial and due process-oriented (i.e., notice and opportunity for comment) review of UAA's own conduct in this situation.

The problem ultimately with the characters in Jimmy Breslin's classic, The Gang That Couldn't Shoot Straight, is that they repeatedly shot themselves in the foot.  The Board of Regents should step in before UAA completes doing that to itself, and with it further damages the University's reputation with potential donors at the very time it needs to be solidifying it.

Tennis courts and state spending (continued) ...

Wednesday I wrote a column about the current battle over the use of state money to build indoor tennis courts in Anchorage.

I have written about the issue several times before (here, here, here and here), but let me set the stage again.

The chart on the left -- which is taken from a report earlier this year on the status of the state's current fiscal condition by the University of Alaska-Anchorage's Institute of Social and Economic Research -- tells the story.  In its report, ISER concludes:

Right now, the state is on a path it can’t sustain. Growing spending and falling revenues are creating a widening fiscal gap. In its 10-year fiscal plan, the state Office of Management and Budget (OMB) projects that spending the cash reserves might fill this gap until 2023, as the adjacent figure shows. But what happens after 2023?

Reasonable assumptions about potential new revenue sources suggest we do not have enough cash in reserves to avoid a severe fiscal crunch soon after 2023, and with that fiscal crisis will come an economic crash. ...

What can the state do to avoid a major fiscal and economic crisis? The answer is to save more and restrict the rate of spending growth. ... If Alaska had $117 billion in cash reserves and the Permanent Fund by 2023, the state would be on the path to sustainable spending far into the future. But ... that’s twice what the state has in financial assets today. So the state needs to sharply step up its savings rate, starting now.

How much does the state need to step up its savings?  The ISER report responds:  "All revenues above the sustainable spending level of $5.5 billion ... [sh]ould be channeled into savings."

Against that, the actual proposed spending for the current fiscal year -- including that for the proposed tennis courts?  $7.1 billion, nearly 30% above sustainable levels.

What if the state doesn't save?  Two earlier studies (here and here) by Northern Economics and ISER answer the question:

... the phasing in of a state personal income tax starting in 2022, reduction in the Permanent Fund dividend by half, and diversion of remainder of the earnings of the Permanent Fund to support general fund expenditures starting in 2023 largely offset declining oil revenues for a decade but eventually they are insufficient to forestall a downward trend in general fund revenues ...

In short, as the graph at the beginning of this piece indicates, the state falls into a fiscal abyss, reducing the standard of living in the state significantly.

To me, the battle over the tennis courts has become part of this larger story.  Given that state spending for this year already is way over sustainable levels, we need to identify opportunities for lowering state spending commitments wherever they arise.  Governor Parnell recently identified Medicaid expansion as one such opportunity (see "Where the money runs out: The price of oil, Medicaid expansion and Alaska social policy …"); the Anchorage tennis courts are another.

Later in the afternoon Wednesday, after posting my latest commentary I received two comments, which are available here.  The first is from Stephanie Williams:

I’ve tried to post to your blog… “The battle over tennis…” Mr. Keithley, the 8 million is 3/10,000 of 1% of the state capital budget of 2.3 billion. Demboski’s proposal is not a good move for the city or the state. If we were to accept her proposal, it would destroy high school regional tennis and the state tennis program along with many other wonderful programs that go on during the summer when recreational players can use the outdoor courts. We lobbied successfully for the monies to fund a multi-purpose facility providing 2 1/2 basketball courts, volleyball, badminton, table tennis and 6 tennis courts. The assembly should honor the intent of the legislature.

It is hard to understand how the failure to build new facilities "would destroy" programs that already exist utilizing existing facilities.  Maybe they won't be as nice as they could be, but "destroy" them?  Unlikely.

Moreover, there are other calculations which are relevant.  The "$8 million," for example, is more than one-third of the $23 million shortfall that the Anchorage School District is projecting for next year's budget.  If the purpose of the grant is to support school activities, perhaps the money instead should be directed to the Anchorage School District to weigh whether the use of the funds for tennis outweighs other high school activities that are currently being cut.

But the better course is that suggested by Assemblywoman Any Demboski -- not spending the money at all and returning it, hopefully for investment in savings, to the state.  As the ISER report makes clear, choices made today are affecting tomorrow.  Spending above sustainable levels today are leading directly to income and other broad based taxes, the diversion of income from the Permanent Fund and other, significant, financial cuts tomorrow.  Indeed, it is not too farfetched to visualize a situation in which building the tennis courts today contributes toward the expense, very quickly, of being unable to pay for high school tennis coaches tomorrow.

Alaska has reached the era where it is required to make choices.  The state can no longer -- if it ever could -- afford to be all things to all people.  The writer suggests that since "we" (whoever "we" is) "lobbied successfully" for money at the state level, they should be permitted to proceed.  The problem is that they forgot one step in the process -- being transparent with the Assembly at the front end so that the Assembly could prioritize that request among other, competing uses for money.  Now that the Assembly finally is catching up with the process at the back end, the proponents can't reasonably complain that the Assembly members are out of bounds in offering alternatives to simply taking the money.  They may be late in the process, but that's not their fault.

The second comment was from current Alaska Tennis Association President Allen Clendaniel, and is more directed to the portion of my comments Wednesday which discuss Ed Hendrickson.  As you may recall, I didn't pick Hendrickson out of the air; instead he himself publicly had made some comments the day before which appeared to attempt to defend the tennis courts on economic grounds, but without providing any economic support.  My column challenges those assertions.

The email suggests, however, that I should

... breathe for a second. Ed Hendrickson can be a volunteer for a non-profit [and] a corporate executive. More folks should give back to the community. Building public recreational infrastructure is good for the community. If we don't believe in public recreational infrstraucture we should sell the Performing Arts Center, Sullivan Arena, Ben Boeke, Dempsey Ice Arena, the Spenard and Fairvew Rec Center, and let the trail system rot. I'm not sure why you are singling out a project that represents 0.0003% of the capital budget and going after a volunteer. No good deed goes unpunished I guess.

I disagree that, given the state's financial condition, its a "good deed."  A good deed would be giving money personally to the effort and helping raise at least a substantial (e.g., 50% or more) portion of the remainder personally from others in the private sector.  That is how such things are financed elsewhere in the country.

Take for example the Michael D. Case Tennis Center at the University of Tulsa.  One of the premier college tennis facilities in the nation, the facility was built in 2001 for $10 million.  How was it financed? "Tulsa developer and philanthropist Mike Case ... funded a major portion of the tennis center and raised the additional funding for the project."  Now that is a "good deed."

Simply being part of a lobbying group to carve out state (i.e., "other people's") money to fund a new capital project, when the state already is spending over sustainable levels, does not require much of a personal sacrifice.

More importantly, seeking full funding for such projects from the state sends very confusing signals to state policy makers.  I have lost count of the number of times legislators have told me stories of people or companies coming to them on the one hand to argue for "fiscal restraint" or "fiscal certainty" and then in the next breath, asking for state support for this or that project.  Understandably the second ask severely undermines the credibility of the first, which has led us precisely to the condition in which the state currently finds itself.

The ISER report makes clear that we have come to a time in the state's history where first things have to be put first.  The first thing that the state needs to do is to put its fiscal house in order, and then, once we have adopted sustainable budgets, to fund only those projects going forward that fit within a sustainable budget and citizens believe in enough to help fund significantly themselves.  Frankly, that is not a lot to ask in a state that otherwise imposes no state level income, sales or property taxes.

The tennis courts meet neither of those criteria.  Until they do (if they ever do), my criticism of the proposed appropriation -- and support for Amy Demboski's alternative -- remains.

The battle over the tennis courts becomes curiouser and curiouser ...

The morning papers reveal that, despite appearances to the contrary as recently as yesterday morning, the vote over whether to use state funds to build indoor tennis courts in Anchorage won't occur during the same month as the Anchorage School Board starts the process of making significant cuts in the city's school budget.  Instead, the vote on the tennis courts has been put off to the Assembly's next meeting, in early December.

Facing a nearly $40+ million deficit over the next two years, the School Board doesn't have the same luxury of putting off dealing with the situation it faces.

The latest reason for the delay appears to be a statement made yesterday by House Finance Co-Chair Bill Stoltze suggesting that Anchorage Mayor Dan Sullivan used "deceptive practices" in arranging for the state grant.  That may -- or may not -- sort itself out before the next vote.

But in the midst of everything else what interested me most about the controversy yesterday was a comment made by Ed Hendrickson, among other things the Vice President of the Alaska Tennis Association.

As I have outlined before on these pages, Hendrickson is a smart guy.  His day job is Chief Financial Officer of Alyeska Service Company, the operator of TAPS.  He is on loan ("seconded," as they say in the trade) in that job from ConocoPhillips Alaska, one of Alaska's major producers and a fairly profitable company as these things go.

Yesterday, in response to an opinion piece by the owner of the Alaska Club about another way for the city to spend the same public money, Hendrickson had this to say:

The Alaska Tennis Association believes that sport and recreation activities produce a healthier population, both physically and mentally, which in turn places less stress on our health care system. Sports also contribute to economic growth through business investment and community employment. 

Essentially, Hendrickson is arguing that the tennis courts should be viewed as an investment, which will produce a return in terms of lower health care costs and also in terms of increased investment and employment.

Really?  Hendrickson's Alyeska resume states that, among other things, "[h]e has extensive expertise with ... economic evaluations [and] long-range planning ...."   If he truly believes that argument he is fully capable of producing an economic evaluation showing the return that Alaskans would realize from an investment in tennis in terms of lower health care costs and increased business investment and employment.

He hasn't.  

Moreover, as one of the the three largest taxpayers in the state, if ConocoPhillips believed that building tennis courts would help to reduce public expenditures elsewhere, I have to believe they would be considering contributing to the investment themselves.  One of the reasons production tax rates in this state are -- and with the upcoming referendum on SB 21 threaten to remain -- so high is because of the current level of state spending.  You would think finding ways to reduce state spending is something that should interest COP and its fellow oil companies.

But, ConocoPhillips hasn't offered to contribute toward the cost.  Instead, Hendrickson -- one of its senior executives -- is arguing that the entire cost should be born by the state.  

While he may fail to see the irony, I don't.  Let me make it clear:  the industry shouldn't be asking for increased state spending -- especially on non-core services -- out of one side of its mouth at the same time it is arguing for reduced state revenues out of the other.  Its time to put up or shut up.  If you want to see this state again become attractive to investors, then help identify ways to lower state spending.  And good lord, whatever else you do, don't add to the problem.

According to the Alaska Dispatch (but oddly enough unreported in the Anchorage Daily News) one of the three suggestions before the Assembly on dealing with the issue is that sponsored by Assembly member Amy Demboski.  Under that proposal, "all of the tennis court money [would be sent] back to Juneau to be re-appropriated for other uses."

“I do not support using the legislative funding for any tennis court project,” said Demboski.

Especially in light of the funding shortfalls being addressed elsewhere in town, that is the fiscally responsible position to take on this issue and my view as well.  If the Alaska Tennis Association wants to take another they should produce a study showing that taxpayers -- including the state's largest investors -- will be money ahead in the future if they spend some of it now.

Until then, I will just continue shaking my head -- and wait for the other so-called "fiscal conservatives" on the Assembly (and most of them claim they are) to step up and support Demboski's proposal.

If I were Governor ...

Yesterday I published a piece on the main blog discussing Alaska's gathering fiscal storm -- "Where the money runs out: The price of oil, Medicaid expansion and Alaska social policy …."  Then late yesterday I received an email in response which basically said "ok, genius [the actual word that went here was less charitable], what would do different if you were Governor."  The basic theme of the email was that the current Governor is doing all that can be done to deal with the current situation and Alaska is simply going to have to ride it out.

As my friends know (the email wasn't from a friend) one of the things that motivate me is a challenge -- and the odds of a response increase if the challenge is put in the form of a semi-derogatory email.  Interestingly enough, I have thought about this -- so here are the first three steps I would take "if I were Governor":

1. Capital Spending.  Immediately -- as in today, right now -- I would dramatically slow down the issuance of new state construction contracts.  A major part of the increase in state budgets over the last three years has come through the capital budget.  In the five years preceding the last three, capital spending averaged roughly $800 million/year.  In the last three years the capital budgets have been $1.6 (FY 2012), $2.6 (FY 2013) and $1.8 (FY 2014) billion, respectively.  Not surprisingly, those rank as the first, second and third highest in Alaska's history (the next highest is a half billion dollars lower).  While I can't get my hands on the precise number, I understand that these funding levels are so high that the contracts for a number of the projects have not yet been issued.  If I were Governor I would put a moratorium on those now, and then set a schedule for pacing them out over the next three to five years, to act as a means of softening the transition to the necessary reductions in future capital budget levels.


2. FY 2015 Budget.  I would submit a budget for the coming fiscal year which limits total unrestricted general fund spending (the key number in any state budget) to $5.8 billion.  While some claim that is an "unacceptable" drop from current levels, its not.  It allows for an operating budget of $5.3 billion -- the same as for the current fiscal year -- and a capital budget of $500 million.  While some will claim that capital budget level is "too low," it will still result in a rolling five year average capital budget (i.e., the average over the last five years) of $1.42 billion, which is the second highest in Alaska's history (second only to the current five year average of $1.48 billion).  Such a budget not only is a significant step toward sustainable levels, but it would provide breathing room this coming year while the Commissioners work with the legislature to identify what its going to take to get the operating budget under control in future years.  And to emphasize the point, at the same time I announce that I am submitting a $5.8 billion budget, I would make clear also that I would use the Governor's power of line item veto to bring the final number back to the same level should the legislature attempt to increase it during the session.


3. Fiscal Plan.  Finally, I would work with the legislature this coming session to craft and enact a state budget act which would require future Governors to submit sustainable budgets.  Current Alaska law requires that Governors submit (and legislatures enact) "balanced budgets," but as the last few years have demonstrated that concept is insufficient to protect Alaska's interests.  Under current law budgets are "unbalanced" only if they exceed current cash flow plus available financial reserves.  As the analysis earlier this year by the University of Alaska-Anchorage's Institute of Social and Economic Research (ISER) makes clear that approach permits current Governors and legislatures to spend away the "nest egg" which is needed to support future Alaska generations.  My approach would not prohibit spending above sustainable levels where both the legislature and Governor agreed -- the legislature could enact a higher than sustainable budget and the Governor could concur by not exercising a line item veto to bring it back down.  But requiring the Governor initially to submit a sustainable budget at least would provide Alaskans -- and the legislature -- with the information they need to judge whether taking money from future Alaskans -- and how much -- is appropriate.

No, I don't have a similar list for how to achieve world peace or, even, how to solve the nation's health crisis.  But Alaska fiscal and oil policy?  I got this.

A supplement to a personal note ...

A couple of weeks ago I wrote a personal note about the recognition of a donation I had made ("A Personal Note| The "Keithley Collection of Native American Art Works'").

This week I received an update on the collection, with pictures of the collection's installation and a copy of the accompanying brochure.  Originally, and probably still, these pages were intended as a place where I could capture extended thoughts about things that were important to me, which I could share with others that might be interested and then preserve in one place so I wouldn't have to search through various folders or file boxes when I wanted to recapture them.

So it is with the things related to this collection.  For those interested -- and for me when I just want to wander back for awhile -- the pictures and brochure are captured here.  Thanks, Ginger, for sending ....

A new book worth reading| "American Nations: A History of the Eleven Rival Regional Cultures of North America"

I have always been captivated by books that try to explain why America -- and its parts -- think and vote the way they do.  I carried around Kevin Phillips' seminal (and at the time, controversial) work -- The Emerging Republican Majority (ERM) -- for years, not because I necessarily agreed (or disagreed) with the outcomes he predicted, but because it provided a fascinating (and turns out, mostly accurate) insight into a previously under perceived (or at least under reported) shift then going on in the American psyche.

So it may be with a new book that I first learned about yesterday and then subsequently, off and on, read most of last night and this morning.  Titled "American Nations: A History of the Eleven Rival Regional Cultures of North America," the book provides a fascinating insight into the current cultural, social and political differences which characterize not only the United States -- but also Canada and parts of Mexico.

I first learned about the book while flipping through the Washington Post's "GovBeat" webpage, was intrigued and then went on to read a larger summary written by the book's author, Colin Woodard, for his college (Tufts) alumni publication, and then started into the book itself after downloading it from Amazon.

As with ERM, the book seems important to me because it rings true with my own experience.  According to the divisions made in the book, I was born, raised and have lived large segments of my life in portions of the country that are defined as "Greater Appalachia" and, indeed, continue to carry many of those characteristics with me now. In his piece for the Tufts alumni magazine, Woodard describes those characteristics as follows:

GREATER APPALACHIA. Founded in the early eighteenth century by wave upon wave of settlers from the war-ravaged borderlands of Northern Ireland, northern England, and the Scottish lowlands, Appalachia has been lampooned by writers and screenwriters as the home of hillbillies and rednecks. It transplanted a culture formed in a state of near constant danger and upheaval, characterized by a warrior ethic and a commitment to personal sovereignty and individual liberty. Intensely suspicious of lowland aristocrats and Yankee social engineers alike, Greater Appalachia has shifted alliances depending on who appeared to be the greatest threat to their freedom. It was with the Union in the Civil War. Since Reconstruction, and especially since the upheavals of the 1960s, it has joined with Deep South to counter federal overrides of local preference.

The book's general approach to Alaska also rings true.  While the book does not discuss Alaska extensively, it essentially divides Alaska among three of the eleven nations.  Juneau (and I would assume Southeast generally) is described as being part of "The Left Coast," Anchorage, Fairbanks (and I suspect the Railbelt in general) are included as part of "The Far West" (which has a lot in common with Greater Appalachia), and the remainder of Alaska, along with large portions of Northern Canada and Greenland are included as part of the "First Nation."

That correctly helps capture the uniqueness of Alaska; no other state reflects a mix of those three "nations."

But in addition to that surface explanation, the book also helps provide a deeper dive into what drives Alaska.  As all here recognize, large numbers of Alaskans are either first or second generation "immigrants" from other parts of the country (and indeed, other parts of the world), and often retain much of the culture of the nation from which they moved.  So, depending on the person and the issue, discussions on Alaska policy issues also often reflect characteristics common to "The Midlands," "The Deep South," and even "Yankeedom."

For those similarly interested in such things, I recommend the book highly.  If you aren't sure, you can follow the same track I did -- start by reading the summary on the Washington Post "GovBeat" website, then go to the longer summary written by the author for the Tufts alumni magazine, and then subsequently, if it retains your interest, go on to the book itself.

My guess is, as I did ERM, I will be carrying it around for awhile and referring to it often as a source for understanding the reason for this reaction or that policy position.