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Eye on the Capitol: Week 10 analysis and review

By Rhonda McBride 6:38 AM March 31, 2014
JUNEAU –

Two major anniversaries last week brought reminders of a new state’s coming-of-age.

Alaska was forever changed by the 1964 earthquake 50 years ago, and by the spill of the Exxon Valdez tanker in 1989. Many of the lawmakers and legislative staffers who were involved in responding to the spill said it was hard to believe 25 years had gone by.

The disasters — one natural and the other manmade — marked turning points in the state’s development. Lawmakers reflected on the lessons from those events, and some even took action.

On Monday, the day of the 25th anniversary of the spill, Sen. Berta Gardner introduced a resolution calling on Exxon to pay up for damages allowed under a “reopener” clause, which allows the state to collect for unforeseen injuries from the spill. Gardner said the measure not only deals with unfinished business, but also sets the tone for future development because it put companies seeking to develop Alaska’s resources on notice that Alaska has high standards.

On Thursday, when lawmakers took time out to remember the 50th anniversary of the Good Friday Quake, Rep. Shelley Hughes called it a “good day” but also a “hard day.” She gave thanks Alaska has not been revisited by devastation like that caused by the 1964 quake, and said Alaskans are much better prepared today to respond. She also said it’s important to take time out to remember those who stepped up to help rebuild the state.

Tipping point for education funding

It did not get much attention from the media, but a group of parents in the grassroots Great Alaska Schools group prowled the hallways of the Capitol last week, trying to visit any lawmaker who would give them an audience. Some lawmakers carved out time for this group. Others had their staffers meet with the parents, who were armed with handouts filled with charts and data, backing up their arguments about why lawmakers should increase the Base Student Allocation (BSA) by $400 this year and $125 each year over the next two years to come.

The group said they wanted lawmakers to know it’s a top priority for parents, even if it means dipping into the state’s budget reserves — that this should come first before all other spending on big capital projects like the Knik bridge and the Susitna-Watana Dam.

One of the leaders of this group is Alyse Galvin, wife of former Department of Revenue Commissioner Pat Galvin, who has provided the group with a lot of its economic arguments and spoken out himself on the importance of increasing education funding.

One of the things the Great Alaska Schools delegation had on hand was a notebook listing the names and contact information of more than 1,000 parents. The group started out in Anchorage, but people from all over the state have since signed up to join.

This group could potentially be the game changer. Lawmakers frequently hear from the National Education Association, school boards and school districts. They tend to write off those groups as highly organized lobbying machines.

But Great Alaska Schools could be different.

On Saturday, it held a rally at the Loussac Library in Anchorage. With handmade signs to pass out to a crowd of several hundred people, there was one twist on the traditional protest rally. Large-scale photographs of lawmakers were displayed along with their phone numbers. Those who attended the rally were urged to get on their cell phones immediately and call lawmakers.

So what kind of impact is this having on lawmakers?

To some extent, it seems to be working. At the beginning of the session, Republican  majority leaders said they were not inclined to increase the BSA, the amount the state spends per pupil.

Early in the session, the governor proposed an $85 increase, which Democrats said was far short of what was needed to avoid massive layoffs in school districts across the state.

Majority leaders now say there will be an increase, not as high as the $400 districts have asked for, but probably somewhere between the $85 and $400.

On Friday, the Senate Finance Committee proposed an additional $75 million in spending for education in its version of the operating budget, which comes on top of a  $25 million increase. How this money will affect the BSA is still being worked out. Lawmakers continue to express frustration that education spending is the one sector of state government that has enjoyed regular increases in the budget, though not in the BSA. There was language in an amendment that said the increase was intended to be a stop-gap; to give lawmakers time to figure out how to cut costs while maintaining quality.

AKLNG: Future revenue machine?

This year’s $2 billion revenue shortfall — with also predicts future declines — is the main reason Republican majority leaders have given for trimming the budget. The hope to replenish the state treasury with $3-4 billion a year is pinned on the Alaska Liquefied Natural Gas Project, also known as AKLNG.

Hearings in the House resources and finance committees continued to drill down into whether the deal Gov. Sean Parnell’s administration has put together is a good one. The main focus this week has been on the partnership the governor inked with TransCanada last year to split ownership of a 25 percent share of the pipeline.

Lawmakers in both committees are asking questions about whether it’s really necessary for TransCanada to be a part of the deal.

Roger Marks testifies

Roger Marks, a veteran petroleum economist hired to do a report for the Legislative Budget and Audit Committee, gave testimony Thursday.

The Senate did not ask Marks to testify, though his report was available in February. It’s one of two reports critical of the agreements the governor has reached with oil companies and TransCanada, that have not had a public discussion.

Marks had a number of cautions for the state.

He questioned whether there’s a sufficient market in Asia for Alaska’s gas, and said the cost of the project — estimated between $45-65 billion — will require AKLNG to send huge volumes of North Slope gas down the pipeline in order for the project to pencil out while at the same time creating a marketing burden.

Marks also questioned the need for TransCanada to be involved. He said if TransCanada’s primary role is as a banker for the project, there could be a number of other options for cheaper money.

Whether TransCanada finances the state’s share of the investment or not, Marks had a message for lawmakers.

“Debt is debt,” he said.

Producers and TransCanada testify

The Marks testimony was followed by an upbeat panel discussion Friday between three oil company executives from ExxonMobil, ConocoPhillips and BP, as well as TransCanada’s Vice President Tony Palmer and Dan Fauske, head of the Alaska Gasline Development Corporation.

The oil company executives expressed confidence in the timing of the AKLNG project and said they were ready to go to work on exploring its feasibility. Although there was no mention of the coming referendum on SB 21, they frequently talked about the benefits of the new tax structure the bill created, and how an LNG project of this magnitude needs to be underpinned by a healthy oil industry.

One of the issues raised was the impact of AKLNG agreements and SB 138 on oil taxes.

When Rep. Paul Seaton asked if there could be limits imposed on how oil taxes could be affected, the oil company executives bristled and said it was a bad idea to take options off the table at this point.

While the oil producers didn’t particularly go out of their way to defend TransCanada, they did praise the company’s expertise and value to the partnership.

Palmer seemed like he was trying to keep his emotions under control during the discussion. In the past, Palmer has talked about the company’s years of investment in efforts to bring North Slope gas to market and willingness to shoulder risk. He might feel disappointment that Alaskans don’t appreciate this.

It was a week where the state’s past, present and future intersected at many points. But then again, historians say the past is a prologue to the future and we would be wise to keep that in mind.

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