Alaska Gov. Sean Parnell, running for re-election in November, gave a four-minute introductory speech at the Anchorage Chamber of Commerce gubernatorial candidate forum on Monday, April 28. After reading a transcript of the speech, only two political conclusions are logical: 1) Parnell never had the chance to edit the speech after it was handed to him; or 2) for the last five years, Sean Parnell has been the governor of Fantasyland.
Parnell’s remarks demand a response. All Parnell’s remarks will be italicized.
My focus as governor is to grow opportunity for Alaska. It’s to clear those paths of opportunity. It’s about Alaska jobs and Alaska families. And clearly, we’re on the right path.
It’s pablum, but he is correct right up until that last sentence, which begs the question: How do we know that?
We’re ranked in the top four when it comes to entrepreneurial activity. When it comes to the last four years of my administration, hundreds more Alaska small businesses have been created because I lead the change in the passenger head tax.
Parnell is referring to the Kauffman Index of Entrepreneurial Activity, which, since 1996, has used the Census’ Current Population Survey data to measure the creation of new business. Parnell’s statistics are actually a little outdated. The most recent Kauffman report places Alaska second in the country behind Montana. However, if Parnell is seeking to claim credit for increases in Alaska’s entrepreneurial activity, the statistics don’t support him.
Among the years for which the Kauffman Index compiled data, activity was actually highest during the Tony Knowles administration (.59% for the 1996-1998 interval) by a significant margin. It dropped precipitously under the governorship of Frank Murkowski, the largest decrease in the country (down to .25% in 2006), then rebounded under Sarah Palin to .44% in 2008.
The numbers under Parnell have been relatively static. There was a dip in 2009 followed by a rebound to Palin levels in 2010, which Parnell is partially attributing to the 2010 reduction of the passenger head tax. This is a gross oversimplification of the economic situation during this period.
The head tax was approved by Alaska voters in 2006. The housing bubble then burst in 2008, triggering the Great Recession. Tourism is one of the industries most susceptible to economic downturns. Outsiders simply did not have extra money in 2009 to spend on travel. It is much more likely that the global economy as a whole impacted the entrepreneurial activity of Alaska than a single tax. Indeed, there was increased activity in 2007 and 2008 while the full $50 tax was in effect.
Individually you each have more money in your paychecks because I stopped those state — those automatic state payroll tax increases.
A short sentence, complete with a telling hiccup that hints at the hidden gravity. What Parnell is referring to are the automatic payroll deductions to the unemployment insurance trust fund. Workers pay 27 percent towards the fund, which amounts to pennies per paycheck for most workers, with the rest borne by employers. This fund pays unemployed Alaskans up to 26 weeks, allowing them to look for work and not have to worry about being able to eat. Alaska’s fund is one of the few in the country that is solvent.
In 2011, Parnell decided that the fund was too large, despite the fact that it was only slightly above historical averages. Through the Rules Committee of the current legislature, he submitted HB 76 to allow for cuts to contributions to the fund in the event of overfunding, to be determined by the Commissioner of Labor. Sen. Johnny Ellis (D-Anchorage) sought to amend the bill, noting that short-term cuts in funding would eventually have to be made up and that future commissioners could succumb to the pressures of Business searching for tax breaks. That amendment failed. The bill passed. In December of 2013, Parnell announced the expected cuts, insignificant for workers, but very significant for large employers.
The move jeopardizes the fund, making it vulnerable to large economic downturns like the Great Recession or huge drops in the price of oil, as Sen. Ellis noted. There is no reason to expect that Alaska will be immune to the next recession.
1,300 jobs at Point Thomson this spring because of my leadership in fighting to the Alaska Supreme Court to make sure that development happens there.
Parnell simply takes credit for another governor’s work here. ExxonMobil leased Point Thomson from the state in 1977, then failed to meet its legal obligation to develop the field when a profit was possible. Frank Murkowski is actually the governor who finally terminated the lease and triggered the court battle with Exxon.
What’s worse, the settlement that the Parnell administration reached with Exxon could cost the state billions of dollars by giving control of Point Thomson development to the oil company. The administration did not involve the legislature in the settlement, which, as reported by the Juneau Empire, attorney Craig Richards says violates the Alaska Constitution.
No more talk of rolling brownouts or gas imports to Anchorage because of the new Cook Inlet tax policy that I championed with legislators. Instead we’ve got lots of new gas.
The ability for Alaskans to continue heating their homes is a pretty bipartisan issue. In 2010, both the House and Senate unanimously passed bills providing tax incentives for companies engaged in Cook Inlet gas exploration and development. However, Parnell’s rosy assessment of the short-term gas supply is not supported by industry. In 2013, experts repeatedly testified in legislative committees that known Cook Inlet gas supplies were dwindling, despite the tax breaks. To be fair, it would be too early to fully judge the tax breaks’ effectiveness in regard to new development. More on that below.
Four years ago: guaranteed oil production decline. Today, with a new competitive oil tax regime, billions of new dollars flooding into this state; two new independent companies investing on the North Slope. You can’t find a bunk on the North Slope because there’s so many people working and laborers and contractors say they can’t get enough people to fill these jobs all the way from Fairbanks to Wasilla, Anchorage, Kenai, and more.
This is the big one, SB 21, the oil tax policy facing referendum in August. Parnell knows the oil industry intimately, so when he says something untrue about oil, you can be confident it is deliberate. To that end, he was very careful not to say that oil production was guaranteed to increase under SB 21. Because it’s not. In fact, the Department of Revenue predicts there will be less production in eight years than there would be under the previous oil tax regime, Alaska’s Clear and Equitable Share (ACES). Production during that span will decline 33%, according to Department projections, costing the state $12 billion. That dollar amount is almost equal to the savings the state built under ACES.
Democrats volunteered to alter the progressivity feature of ACES that gave the state a larger share of oil profits at higher prices. Instead, SB 21 eliminated it, instantly throwing the state into deficit spending. The impact has already manifested itself in the budgets for things like education, public safety, and health care, which was entirely ignored in Parnell’s speech, probably because his failure to expand Medicaid cost over 40,000 Alaskans health insurance.
All those bunks that Parnell mentions, like the state’s coffers, are full because of ACES. Oil company boards, while certainly aware of the legislation pending last year, could not make decisions until the bill was passed. Moving heavy equipment to the North Slope and upstaffing to operate that equipment is a huge investment not only in money, but also in time. It takes years to implement oil development plans. Oil industry executives testified as much. The settlement with Exxon over Point Thomson, reached in 2012, does not require Exxon to produce hydrocarbons from the site until 2019. That’s how long the oil production process is.
The bottom line is that any investment currently being made by oil companies is because of ACES.
Historic gasline progress in four years. On Alaska’s terms and in Alaska’s interest. It’s the first time in our history that companies — producers, pipeline companies, and the state — will be laying down money together because we’re aligned together on that pre-front end, engineering, and design phase. That’s actual engineering and design work, not some study that you’re hearing about elsewhere.
Parnell is excited about this one because it makes for great sound bites that generate dollar signs before the eyes of some Alaskans. As always, though, the devil is in the details.
The “progress” to which Parnell refers is the passage of SB 138 this past April. The bill was one of two major issues that extended the legislative session. It spent only a month on the House side and was rushed to passage, but not before the 90-day deadline had passed. The House minority had recommended a special session for the bill, given its potential impact on the state economy.
SB 138 is not a gas line contract. It is the state’s outline for negotiating a contract with TransCanada and the oil companies, a contract that can then be canceled by any of the players during the subsequent study that Parnell alleges does not exist. If the state or TransCanada pulls out, under the bill, the state would be liable for damages to TransCanada. What’s worse in the long term is that each of the Big Three oil companies would own 25 percent of the pipeline and TransCanada the final 25 percent. Alaska only has an option to exercise a 40 percent stake in TransCanada’s quarter. As Sen. Bert Stedman (R-Sitka) described during debate, Alaska and TransCanada are “out of alignment.” Democrats offered a variety of amendments to correct these flaws in the bill, all of which failed.
The cost of building a gas line has been estimated at $65 billion. Businessman David Gottstein, a member of the anti-SB 21 group Backbone, recommended for several years that the state build — and take full ownership of — a large-bore pipeline itself to reduce the cost of gas for Alaskans. When Harry Crawford was in the House, he even suggested that the state buy large amounts of steel in anticipation of pipeline construction when steel prices bottomed out . However, under the economic forecasts influenced by SB 21, experts testified to the current legislature that the state could not afford the risk of full pipeline ownership, hence the 40 percent of a quarter stake in the gas line bill. But the state assumes substantial risk anyway under the existing deal with TransCanada, while TransCanada assumes none.
Legislators have wanted to take action on a gas line for some time. With most, along with Parnell, facing re-election campaigns this year, it must have seemed like a good time to pass something, and SB 138 was the result.
The economic window for corrective action is not closed. There is no gas line contract. If SB 21 is voted down in August, Alaska will have the chance to go back and find a way to build a line that will actually reduce the cost of gas for Alaskans while increasing gas availability.
We’re on a stronger fiscal foundation. Alaska has earned and maintained a triple A bond rating under my leadership. George Mason University reports that Alaska’s fiscal condition is the strongest in the nation. In the last two years, we’ve gone from $8 billion of spending to $5.8, a little over $5.8 billion this year.
SB 21 again. It’s impossible to know where the floor is, let alone the foundation, when projections estimate the bill to remove $12 billion in eight years from the state savings accounts. One of the reasons spending has decreased is because of deficits caused by SB 21.
This always triggers a philosophical debate, but the way to grow an economy — and it can be assumed that is Parnell’s objective based on the speech’s introduction — is to increase government spending, not decrease it. There are dozens of historical examples to draw from, some of the most recent being the austerity movements in Spain, Portugal, and Greece, which have resulted in unemployment rates over 20 percent. There is a more local and timely impact tied to reduced government spending. More on that under “Education.”
We’ve addressed that single biggest cost driver in the budget, the unfunded pension liability with my leadership this session.
Putting an additional $2 billion toward the pension liability was a great decision. And Parnell was nowhere to be found when it was suggested years ago by both Democrats and Republicans in the Senate. Stedman supported the move when he chaired the Senate Finance Committee, and Senators Johnny Ellis and Bill Wielechowski (D-Anchorage) sponsored SB 142 during the 27th Legislature, which also would have moved a huge sum from savings to the pension fund. Better late than never from the governor.
Education. Thousands of Alaskan students have now earned Alaska performance scholarships. Something I championed. This legislative session I sponsored and passed the Alaska Education Opportunity Act, to provide more opportunity in education as well as significant new funding with legislators to our public schools system.
Parnell’s omnibus education bill, HB 278, is the second bill that delayed the end of the legislative session. Funding levels were the biggest point of contention. Parnell has consistently submitted budgets that he alleged “flat-funded” education, meaning that there was no year-over-year increase or decrease. What any wage earner can tell you is that the cost of goods and services has increased over the last several years. Inflation happens, so flat-funding is in actuality a cut.
In HB 278, Parnell recommended increases to the base student allocation (BSA), the per-student amount the state gives to schools, of about $200 total over three years. Democrats, as well as concerned parents and teachers who formed the group Great Alaska Schools, argued that respective BSA increases of $400, $125, and $125 were necessary to offset Parnell’s education cuts over the past several years. Those cuts cost over 600 jobs.
The bill, as eventually passed, included a $250 increase, only $50 more than Parnell originally recommended. In Anchorage, the paltry increase meant as many as 100 teachers would have been laid off. Thankfully, the Municipal Assembly stepped in to fill the hole, using property taxes so the school district can depend on the funding in future years and budget accordingly. The move passed 6-5. Anchorage Mayor Dan Sullivan could still issue a veto.
Parnell’s insistence on underfunding education has impacted the lives not just of teachers, but also of students. Reduced teacher staffing means larger classroom size, which reduces the chances for individual attention from teachers and impacts performance. Ultimately, that may be Parnell’s goal. A constitutional amendment to allow public money to go to private schools was introduced this session with Parnell’s support. The amendment, which failed to gather sufficient support to pass, would have further diluted public education funding, but would certainly have put money in the pockets of private education firms ideologically aligned with Parnell.
Safe homes and strong families. About 50 more Alaska communities have village public safety officers; have that presence of law enforcement in their community that they didn’t have before.
50 more VPSOs is great, but it’s not enough. With the deficit spending under SB 21, there won’t be any money to employ more, which directly affects Parnell’s next topic.
The Choose Respect movement to eradicate this epidemic of domestic violence and sexual assault four years ago? We organized 18 communities to hold Choose Respect rallies and to begin breaking this culture of silence among Alaskans on this topic. This March, 170 communities organized, with Alaskans standing up courageously. How do I know that’s working? Two weeks ago, I was on the phone with community coordinators from all around the state. One of them told a story about how in her small community — she was a teacher there; she came about five years ago — she was told by others that 100 percent of the girls in [her] school will be sexually assaulted in high school, or have been sexually assaulted in high school. We’ve changed that. She said that, today, through the Choose Respect Initiative and through the work of the community around that, she can ask and she doesn’t think that one girl has been sexually assaulted in high school.
I sure hope that teacher is correct. The problem is that she isn’t sure. And this one anecdote shouldn’t convince Parnell that his initiative is getting the job done.
Anecdotes are great for speeches, and this one wielded a tepid round of a applause from the forum’s attendees. But nothing kills a speech like statistics. And numbers are where the truth lie, especially in this case. The truth is that a person is more likely to be raped in Alaska than any other state. Alaska’s reputation for rape and domestic violence is so profoundly bad that CNN’s John Sutter dedicated a series of articles to the topic. Sutter noted that, according a 2010 survey, 59 percent of Alaska women have experienced either rape or domestic violence at some point. Of course, Alaska’s place on the top of the FBI’s state rape list is secured only with those rapes that are reported. One shudders at the thought of all those life-changing instances that go unreported.
To his credit, Parnell is seeking a cultural change through Choose Respect. Oddly, it is the kind of low-budget initiative more typical of grassroots online campaigns. Parnell is the governor of the state of Alaska, and as such, has the ability to make serious change. For example, VPSOs. As Sutter reports, “Rates of serious injury from assaults are… 40% lower in villages with a VPSO,” and sexual assault cases 3.5 times more likely to be prosecuted when VPSOs are present. But Parnell only recommended adding 15 new VPSOs in this year’s budget. He would certainly argue that there are budgetary constraints. Those constraints developed when he cut the legs out from under the Alaska economy with tax cuts for the richest corporations in the history of the world.
In February, Parnell told Sutter, “I can’t wave a wand and solve alcoholism, I can’t wave a wand and solve domestic violence, but I can work to create a climate where it’s culturally permissible to speak about [violence against women] with our family and friends, get people to help who cross our paths, to stand up for those who are being abused and hurt.” Then, on March 27, Parnell issued a proclamation that said, in part, “The Choose Respect initiative is a call to action – to break the silence and stand up against these horrific crimes,” calling on “all Alaskans to join with me in standing up against these crimes.”
Unfortunately, recent discoveries by Shannyn Moore suggest this is merely lip service.
As Moore reported in the Anchorage Daily News (ADN), Parnell was contacted multiple times in late 2010 by officers of the Alaska National Guard and Air National Guard about documented allegations of sexual assault in the Guard. Parnell took no apparent action. In December of 2011, those same officers spoke with Mike Nizich, Parnell’s chief of staff, about the issues with sexual assault. Nizich had them keep in contact with him via his private email address, which is not subject to public records requests. Sen. Fred Dyson (R-Eagle River) asked Parnell to investigate the various claims, which had become public in late 2013 in an ADN story. Parnell finally brought the issues to the attention of the Department of Defense on February 28, this year. When asked about the delay in investigating, following the debate on Monday when this speech was given, Parnell claimed he had not had specifics until this February that would be necessary to investigate.
The officers of the Guard who brought these issues to Parnell’s attention over three years ago followed the tenets of Choose Respect. They jeopardized their careers to say what needed to be said. Parnell was in a position to do something about it. He did not. He stayed silent. He did not stand up. He did not Choose Respect.
Fitting for a governor who told a virtual town hall that the first time he saw “the face of domestic violence and child abuse in our state” was when he served in the state house in 1994, despite first coming to Alaska as a child in 1973. It took him 21 years to notice something that 59 percent of Alaskan report enduring?
I’m asking you to reelect me so we can keep clearing paths of opportunity for Alaskans. I’m asking you to help Alaska stay on track, so more Alaskans can live free of fear and seize those opportunities that we do hold dear.
Which is worse, a delusional Parnell who truly believes what he speaks, or a cynical Parnell who is engaged in the most diabolical of front-runner rhetoric? Unfortunately, the answer is irrelevant unless something dramatic happens.
As has been pointed out recently by Alaska Commons columnist John Aronno, this election is a referendum on the Parnell administration. Referenda, by definition, only have two choices, “Yea” or “Nay,” like the choice Alaska voters will have on SB 21 on the August primary ballot. But the gubernatorial “Nay” itself currently consists of two options. As the incumbent, Parnell is the obvious front-runner. Democrat Byron Mallott and Republican-running-as-an-Independent Bill Walker have the inherent burden of proof to demonstrate Parnell’s failures. While that task seems relatively easy, what won’t be easy is convincing Alaskans to consolidate their voting power in one candidate to defeat Sean Parnell.