Dunleavy pitches united front on resource development to Anchorage chamber

Gov. Mike Dunleavy shifted his message on Alaska’s finances during a Monday lunch hour address to Anchorage Chamber of Commerce members by appealing to those who oppose the cuts-first approach that largely defined his first year in office to instead “lock arms” with him in support of resource development projects statewide.

In a wide-ranging speech in which he also briefly discussed Alaska’s history, public safety, education, his trips to the East Coast and the series of public policy forums he intends to hold leading up to the pending legislative session, Dunleavy spent most of the hour emphasizing that Alaska is a resource-driven state.

He stressed that without a unified front to counter interests that want to limit resource projects in the state, Alaska could revert back to a state that is even more dependent upon the federal government than it already is.

“If we can’t develop our resources to create wealth for Alaskans to provide jobs for Alaskans and revenue for Alaska to be able to pay for programs — a lot of social programs — that people want, how are we going to make a go of it? That’s the question we need to ask ourselves,” Dunleavy told the business crowd.

To that end, he said members of his administration have had conversations with representatives from Goldman Sachs regarding the global finance giant’s recent announcement that it will no longer invest in Arctic oil development.

The firm will be sending a contingent to Alaska soon to continue those talks, he said. Dunleavy has since questioned whether the State of Alaska should be doing business with a company that is at-odds with its flagship industry and Acting Department of Revenue Commissioner Mike Barnhill told Goldman Sachs CEO David Solomon in a Dec. 20 letter that the company will not be considered as a potential underwriter of the state’s plan to sell up to $700 million in bonds in 2020 to finance unpaid oil and gas tax credits.

Dunleavy said his trips to Washington, D.C., and elsewhere on the East Coast — most recently in mid-December — are mostly to discuss resource development policies with President Donald Trump and spread the word to investors about Alaska’s resource potential as well as bringing other industries to the state.

Without such championing of the state’s traditional economic prospects, he said, Alaska could ostensibly be turned into a “park” for Lower 48 visitors that do not understand the realities of living in the state.

“You have well-intentioned folks that believe that they’re doing something good coming from the heart to help save our state from ourselves, but at the same time that is going to put us on a course, potentially, to insolvency,” Dunleavy said.

He also remarked that Alaska was first purchased from Russia in 1867 and was allowed to become a state based on its resource potential.

“If we can’t mine and we can’t drill what is Alaska going to do?” Dunleavy questioned further, comparing limitations on resource development in the state to prohibitions on software and aircraft development in Washington state (home to Microsoft and Amazon headquarters and where Boeing builds aircraft).

“No one does resource extraction and development better than Alaska does.”

For those staunchly opposed to oil and gas development because of its downstream implications, the governor also highlighted that Alaska has world-class reserves of many of the metals and minerals that serve as building blocks for renewable energy technologies.

The aptly named Graphite Creek prospect near Nome holds large quantities of high-grade flake graphite needed for lithium ion batteries used in electric cars as well as for storing and dispatching power generated from highly variable renewable energy projects, he noted. Additionally, the Bokan Mountain rare Earth element deposit on southern Prince of Wales Island could provide a host of specialty metals needed for advanced technologies and devices, Dunleavy said.

“These deposits are located where they can do the most good for the people of those regions for jobs, for taxes, for programs right there,” he said. “But if we’re going to say ‘no’ to development for Alaska, we’re going to push it overseas — the wealth overseas, the opportunities overseas,” adding that there is a much higher likelihood for resource development projects to lead to environmental damage in countries without the modern environmental protections and regulations of the U.S.

Dunleavy called for “balance” in the state and national resource development policies.

“We don’t have to be a slash-and-burn state; that’s not necessary. But at the same time, we don’t have to zip (Alaska) up and tie it up and put it behind a glass frame and just let people look at it. In other words, we can be both,” he said.

Dunleavy answered selected written questions from the luncheon audience but did not take questions from reporters following his speech.

On the budget, Dunleavy reiterated his belief that Alaska needs to drastically revise its constitutional spending limit downward so it can be an effective cap on state spending. While passing an amendment to the state constitution requires two-thirds affirmative votes in both the House and Senate — often a prohibitive requirement — before the proposal is adjudicated by voters, both Senate President Cathy Giessel and House Speaker Bryce Edgmon have indicated support for addressing the issue this year.

The $2.5 billion general fund appropriation limit passed in 1982 allows for population growth and inflation adjustments that put it at about $12 billion today, according to Edgmon, or roughly twice the current state budget.

Resetting the spending cap is especially important to limit the growth of formula-driven programs, which automatically increase the state budget year-to-year, Dunleavy said. He again asserted his willingness to discuss changes to the Permanent Fund dividend formula in the legislative session that starts Jan. 21, but said that unless other formula-driven programs, such as education and Medicaid, aren’t also revised, they will continue to shrink the pool of funds available for annual PFDs.

However, Dunleavy has said he doesn’t currently have plans to submit legislation that would overhaul those formula programs.

The administration’s attempts to cut Medicaid spending through regulatory changes and other means in the current state fiscal year largely fell flat, leading to a $120 million supplemental budget request.

Officials in the governor’s office and the Department of Health and Social Services have said their Medicaid reforms haven’t been as successful as anticipated in part due to unexpected requirements from the federal Centers for Medicare and Medicaid Services.

This is where the series of public policy discussions comes in, according to Dunleavy.

Rather than pushing for more cuts to close the state’s $1.5 billion deficit as he had indicated for months would happen, he surprised many Alaskans by proposing a mostly flat state budget Dec. 11 and instead called on lawmakers and the public to specify programs and services they feel are crucial for the state to continue.

The Monday talk before the Anchorage Chamber of Commerce was unofficially the first of those discussions in what will be an ongoing dialogue, according to Dunleavy.

“I’m going to be going to every community that I possibly can in the state of Alaska starting with this conversation today. I will be visiting every community to talk to folks in those communities about what they think Alaska should look like. I’ll be meeting with chambers; I’ll be meeting with Tribes; I’ll be meeting with school districts; I’ll be meeting with boroughs and cities,” Dunleavy said. “I’ll be meeting with individuals and at the end of these meetings in these cities and boroughs, small towns, big towns, we’ll have a town hall so people can come and let me know what services they value.”

Dunleavy’s spokesman Jeff Turner said a schedule for the town halls is still being worked out.

He continued to say that what services the state should provide, and at what level, is up for debate but everyone should demand better outcomes from a couple of the state’s core services, namely public safety and education.

On public safety, Dunleavy said the state hired more State Troopers in 2019 than were hired in roughly the past decade. His budget proposal also shifts funding from other programs to support hiring 15 more State Troopers in the 2021 fiscal year.

As for education, the governor said some of Alaska’s urban schools produce students with test scores that are on par with some of the best in the country while many students in small, rural schools continue to struggle.

His solution is to require all students to read at grade level before leaving third grade and be proficient in algebra by eighth grade. His administration will submit legislation to reform the state’s reading requirements and Dunleavy has also suggested Tribal compacting for education, but the details of those concepts are unclear.