The Mudflats

Ethan Berkowitz served in the Alaska House of Representatives from 1996 to 2006 as a Democrat. Eight of those years he served as the House Minority Leader. He ran for Lt. Governor with Tony Knowles in 2006, and for the U.S. House of Representatives in 2008. As a state legislator he won national recognition for his distinguished service to Alaska, and championed many issues including fiscal responsibility and energy policy. He is currently an Alaskan Democratic gubernatorial candidate.

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How We Can Eliminate Oil Taxes and Stimulate Production: The 100% Solution

by Ethan Berkowitz

Debate about Alaska’s oil and gas revenues has been too much about short-term gain and not enough about long-term interests. The result is a system that fails to optimize outcomes for either the state or industry. Alaska can do better – we can have a system that reduces development risk, increases production and jobs, gives Alaska a fair share for our oil, enforces budget discipline in Juneau, strengthens the Permanent Fund, and takes the politics out of the state’s relationship with the oil industry. Doing better, however, requires a new approach.
Alaska receives oil revenue from two main sources – royalty (generally, the state’s 12.5% share from an oil field) and severance (the selling price for the oil “severed” from the state). Historically, debate has focused only on severance.

When the old severance method, ELF (Economic Limit Factor), faltered, Frank Murkowski replaced it with PPT (Production Profit Tax), followed quickly by Sarah Palin’s ACES (Alaska’s Clear and Equitable Share). Both PPT and ACES are essentially corporate income taxes, built around “net profits”, and both captured revenue for the state during this recent time of high oil prices. But long-term, revenue depends on production as well as price, and we need a system that does a better job encouraging production.

That’s why it’s worth examining a “no severance, royalty-only” solution: Eliminate ACES entirely and replace it with a field-by-field royalty structure.

Every broadly written tax code, including ACES, shoehorns all taxpayers and all ventures into a “one size fits all” tax system. A customized system recognizes the unique costs and challenges of developing individual leases. It provides the flexibility needed to accommodate the range of economics confronting various Alaskan oil and gas projects, spanning from heavy oil to natural gas, and from Cook Inlet to the North Slope. That flexibility will spur investment and development.

A 100% royalty solution more closely aligns the state’s interest in revenue and industry’s interest in production, and also features several significant attributes:

• Fiscal certainty for industry — royalty rates are contractual, negotiated between the state and the leaseholder, which insulates rates from legislative changes. A good contract protects both parties by containing “reopener clauses” to address changed circumstances in the future. In addition, by reflecting field specific incentives, ramp-ups, and individual field economics, a contract minimizes risk, increasing potential for development.

• Fiscal stability for the state – declining oil production seriously threatens the revenue stream needed to sustain state budgets, and the jobs and businesses that depend on development. And moving away from severance-based revenue gets state government away from boom-and-bust budgeting, and institutionalizes fiscal discipline.

• Grows and protects the Permanent Fund – the Constitution requires that 25% of all royalty (by statute, 50% for new fields) be deposited into the principal of the Permanent Fund. Under an all-royalty system, a portion of the money that now goes into the general fund would go to the Permanent Fund.

It is also important to depoliticize implementation and management of the oil revenue system. That’s why a specifically designated, independent commission, one beyond the control of the governor and the legislature, should have responsibility for negotiating new leases, renegotiating existing leases and handling operations of the 100% Solution. As Alaskans know through our experience with entities like the Permanent Fund or the Board of Fisheries, elected officials should set policy, but in matters involving complex issues, the people of the state are better served when experts and professionals, not politicians, implement those policies.

Oil is so central to the state’s economy that basic responsibility compels on-going review of our revenue sources. Standing still in a changing world is a recipe for falling behind. Doing what we have been doing – relying on a net profit tax — is, at best, standing still and does not adequately advance Alaska’s competitiveness. In a post-recession economy, facing a rising global tide of demand for energy, it is not “more of the same”, but bold innovation that will lead to a secure, independent future for Alaska.

The Corporate Citizen – Really?
By Bob Poe

I’m a business guy. I have an undergraduate degree in finance and a master’s degree in business, and I got them in the late 70’s, when there were still relatively few MBA’s running around. I like business, I find it fascinating, I like doing it, I like helping companies be successful. To me business is an endlessly creative experience.

In Alaska, a vital and diversified economy is the key to ours’ and our children’s future here. Our economic growth will come from business. I’m all about helping small and large businesses be successful here in Alaska. The overall benefits businesses yield to the state in terms of jobs and taxes are critical to our economic future. That said the Supreme Court’s recent decision in the Citizens United v. Federal Election Commission case really has me questioning the concept of the corporate citizen.

I’m running for the Democratic nomination for Governor in Alaska. Conventional wisdom says the Court’s decision favors Republicans over Democrats since business decision-makers tend to skew toward the conservative side of politics; I guess as a Democrat I should be personally concerned. But that’s not what’s really bugging me, we’ll work through those campaign fundraising challenges. What is bothering me is the whole direction this concept of attaching individual rights to corporations is taking in our country.

Back in September of 2008, when the American public was told that certain banks, insurance companies, and trading companies were “too big to fail”, I remember wondering aloud, “How did that happen?” Never in my six years of business school did a professor walk us through the “too big to fail” strategy. A fundamental course in a finance degree is an economics course called Money and Banking. The course is about reserve requirements and other regulatory controls placed over banks to assure, as banks leverage their deposits to loans in the community, there are still enough liquid reserves in the bank to meet daily depositor needs. Think back to Jimmy Stewart’s explanation of his savings and loan in “It’s a Wonderful Life”. Obviously, and this has now become clear even in our nation’s capitol, our regulators weren’t regulating.

All of a sudden it became the taxpayer’s responsibility to bail out the big banks and insurance companies. Taxpayers didn’t even get an apology. Now here is where the rub is. Corporations want rights as an individual person when it suits them, and don’t want the personal responsibility when it is inconvenient.

A corporation is treated as an individual for tax purposes since a corporation pays income taxes and the shareholders again pay taxes on the dividend income they receive; hence the oft bemoaned corporate “double taxation”. A corporation can sue and be sued similarly to taking civil court action against another individual. Back in business school all this made pretty good sense to me. But, in the last decade or so corporations began asserting they have First Amendment rights like any person, huh.

Let’s revisit that “too big to fail” strategy. Do any of us think the US taxpayer would be asked to bail out Warren Buffet, Bill Gates, Oprah, or any other billionaire if they had to declare bankruptcy? My bet is we would say, as individuals, they made their investment choices and they have to live with their downside just as they benefit handsomely on the upside. As a business guy I could probably make a plausible argument that the bankruptcy of any of these individuals would have a significant economic impact. But that’s what’s great about America – as an individual you have the freedom to succeed and the freedom to fail.

In his book Unequal Protection – The Rise of Corporate Dominance and the Theft of Human Rights, Thom Hartmann points out the Boston Tea party was actually against landing tea brought into the colonies by the British East India Company, essentially a corporation of the British throne. The crown had given this company specific tax breaks not available to local colonial importers affording the large corporation unfair advantage. He points out during America’s first 100 years, federal and state lawmakers took a wary eye toward the existence of corporations; they had to justify their existence every 30 years. Some states didn’t even allow them access to politicians under penalty of prison. Then in 1886 in the case Santa Clara County v. Southern Pacific Railroad, the Supreme Court concluded corporations did not have personhood, but the court reporter inaccurately represented the decision in the header notes (i.e. a case deciding corporate personhood). Incredibly since then, he argues, courts have upheld as precedent, under stare decisis, corporate rights as an individual that were never actually a precedent.

The above history makes the Supreme’s recent decision in Citizens United v. Federal Election Commission even more amazing because it reverses a decades-long view that corporations could not contribute to candidates or actively spend to affect a political election. What happened to stare decisis here? It is not that corporations are unheard in the political process. Corporations employ the vast majority of lobbyists at the state and federal level. So called “527” groups can mount major political campaigns with few contribution disclosure rules – right now.

This decision is sure to cause real change in the Alaska political process. Alaska Attorney General Daniel Sullivan, at least on first reading, believes corporations will be limited to the $500 per year contribution limit to a candidate, but their opportunities to spend unlimited funds in the category of campaign law called “independent expenditures” is a real game changer.

Recently we have seen independent expenditure battles in Alaska over the Pebble Mine where one of Alaska’s wealthiest residents, Bob Gillam, has contributed individually over $11 million to oppose development of the project. Truth is, there are very few people in Alaska wealthy enough to take on a battle like Mr. Gillam has, it is much more likely a corporation could. Alaska is often a battleground state over issues brought by outside interests. We will no doubt see better funded campaigns around initiatives here due to the Court’s decision – “527” groups have often already played a big role in these types of campaigns.

Perhaps the most chilling aspect of the Court’s ruling is the impact the threat of a corporate-funded independent expenditure campaign may have on the legislature and the Governor. It will be almost impossible for Alaska voters to know whether a politician took a vote, took an action, or signed a bill under the threat of a campaign against them. Threats like these can be made very quietly. And, in light of the very recent taste Veco Corporation left in Alaskans’ mouths; we know the influence corporations, even without their new rights as an individual, can have on the public process.

Maybe it’s time to really ask the question. Are Corporations truly individuals with the same rights of individuals or are they just another form of business organization like the ubiquitous LLC (Limited Liability Company). After all, LLC’s of all sizes are operating all around the country without the double taxation and without the rights as an individual. I for one, even as self-confessed business guy, am starting to really doubt this whole concept of corporate citizen.

Bob Poe has served four Alaska Governors in roles including Commissioner of Administration and Executive Director of Alaska’s largest investment bank AIDEA. He has worked for top international consulting companies including Price Waterhouse and Coopers & Lybrand and has led a variety of Alaska business efforts including attracting the FedEx and UPS cargo hubs to Anchorage, formation of the Alaska Heart Institute and most recently the Pegasus Aircraft Maintenance sale to NANA Development Corporation. He is currently seeking the Democratic nomination for Alaska Governor.

No, not even a blizzard could keep me away from the Bartlett Democratic Club luncheon today.  Diane Benson was going to be “announcing her intentions,” which means she decided to run for something, or not run for something, and I wanted to be there to see which it was.  She ran against Don Young 2 terms ago, and got 40% of the vote with a lot less money, and a lot less name recognition.  It was incredibly impressive.  Last time she tried again, but couldn’t defeat Ethan Berkowitz in the primary.  And Berkowitz couldn’t defeat Young.  So there he still is, stripped of plum committee assignments, looming indictments, $2 million in payments to his lawyers, and crooked as a dog’s hind leg… daring the next contender to knock him off.  Rep. Harry Crawford threw his hat in the ring and will be giving it a shot in November.  Harry’s a good egg, a hard worker, a bridge builder and a great guy.  I have high hopes.

Would Diane go for a third attempt at Young?  Or maybe something else…  I left work very early so I wouldn’t miss it, which was a good thing since I had to drive about 15 miles an hour the whole way and could barely see the car in front of me.  I drove past two major accidents, and a couple cars that slid off into the ditch, but finally – Denny’s – the home of the Bartlett Democratic Club’s weekly luncheon!

I had a nice chat with Rep. Pete Petersen who faces a challenge this November from a “Kodiak Karpetbagger” named Gabrielle LeDoux.  She’s well funded, and will be a legally qualified resident of district 19 with 10 days to spare.  Timing is everything.  Pete had a fundraiser recently, and could really use some of your support before the session starts.  He can’t take donations after January 15th, so if you want to throw a few coins in Pete’s stocking this Christmas, we’ll ALL be grateful.  He can take in-state and out-of-state donations.  Pete is a really decent guy, and a great progressive who I actually knew “in real life” before I started blogging and before he ever ran for office. He’s one of those people you actually want to be in government.  So, even if he’s not in your district (or your state for that matter), you’ll be adding to the net sum good of the whole process.  I just did, and I liked it!

But back to Diane Benson.  She started off witha a great talk about women in politics in Alaska.  She noted that despite the fact that Alaskan women lead the nation in rates of professional jobs, we elect few women to executive positions and we have never elected a progressive woman to statewide office.  We lack a Women’s Commission in the state, and we have no women’s caucus in the state legislature.

She also spoke at length about her own experience after getting dissed by the Alaska Ear on Sunday.  She talked about her experience as a mother, managing a home, directing and overseeing a large number of events for the Arctic Winter Games, a NOW conference, and a huge amount of volunteer work.  She has been an outspoken advocate on the issue of violence against women, and has been involved in advocacy, teaching, public speaking, holding workshops and being featured in several publications.  She’s taught upper division courses at UAA about Native women surviving violence, and women and social action.  She served two terms in the Alaska Native Sisterhood, and served on the board of Healing Racism in Anchorage.  She also was featured prominently in the PBS documentary “For the Rights of All” where she played the role (brilliantly) of Alaska Native civil rights pioneer Elizabethe Peratrovich.

I know I’ve missed a lot because my fingers were flying trying to keep up with her many accomplishments.  She summed it up well by saying, “Leadership comes from many places.”

~Benson getting the mic from KTUU

She talked about Governor Sean Parnell’s recent moves toward addressing the issue of violence against women in the state, and noted that it was well past time that this became a political issue that got some attention.    She noted that Parnell’s plan fails to address the cause. “We don’t just need more arrests and more shelters,” she said.  “We need it to stop.”  This happens through education, addressing the issues in the open and talking about it, supporting drug and alcohol treatment, addressing wage equity, affordable child care, and good mental health treatment.  She also suggested that forming a Women’s Commission is in order.  What is good for women is good for society as a whole and everyone benefits.

She talked about our former Commissioner of Public Safety Walt Monegan and his great idea about having teams of judges and law enforcement that work together on sexual assault issues.  Restructuring into localized teams improves response times and gets help to victims more quickly.

Then she shared a fact that stunned the room.  Anchorage right now has forensic rape kits that it has not tested.  Victims do all the things they are supposed to do, samples are taken and they are sitting there unlooked at, untested.  The city doesn’t even know how many of these untested kits have been set aside.  Why are they not being tested?  Lack of funds.  What does that say about our priorities?

Palin chose to charge the victims of rape to have their evidence examined and their rape kits tested.  We don’t charge the families of murder victims for forensic tests.  “How is it just to charge a victim, or to just disregard evidence altogether?  Do only those with money have justice?  If protection of our citizens is not a fundamental priority, then what is?” Benson asked.

In the 2008 election, she was advised not to talk about these things because she’d be considered a “one issue candidate.”  The election cycle before, she was accused of being a “one issue candidate” about veterans’ issues.  She was accused of being a “one issue candidate” about the war.  All of these are important issues and we need to talk about them.

She talked about how progressives need to really get out there and support women candidates.  More than just weighing resumes, we need to find and support sensible, intelligent, thinking women to run for office.

As we neared the end of our time, she confessed, “I wanted Don’s seat so bad, and I still do.  I wanted to win that more than anything, and we had a chance.  We came close.”  But at this point, she noted, she doesn’t have the personal wealth it takes to survive the lengthy campaigning for office for that position. “As much as it pains me, I won’t be seeking to unseat Don Young in 2010.”  She noted that Don Young has called her several times since the 2008 election.  She also told about how she and Young’s late-wife Lu had become friends.  He would say, “Uh-oh.  My wife and Diane Benson are friends. Should I be worried?”  Then she told us that Don Young had said to her that if she had won the primary, she might very well be sitting in his seat today.

And then, the moment we’d all been waiting for. “I’ve given this a lot of thought,” she said. “People have been saying I’m ‘too green’ in every sense of the word.” With a twinkle in her eye she said, “They think I’m one of those Native women who cares too much about the land and the people.”  Then she asked the question, “Would anyone be interested in seeing me as the Lieutenant Governor?  Are you willing to step up and put money on the table to see me there?”

The room erupted in applause, and everyone stood.  She got almost a full minute of enthusiastic clapping.  “I’ll take that as a yes,” she said, smiling.

Welcome to the ring, Diane Benson!

~Diane Benson (D) Candidate for Lt. Governor and Bob Poe (D) Candidate for Governor.  If these two end up in office together, we will totally win the “Battle of the Teeth” competition with Governos and Lt. Governors of other states.  OK, well… we should start one.

The Alaska Federation of Natives convention is in town, and Anchorage takes on a whole new character. I love when AFN happens, and enjoying the happy feeling of those who gather. Even though sometimes the topics can be serious, and even sobering, there is an abiding sense of community and closeness. The AFN is like a big friends and family reunion. it’s impossible to look around without seeing people smiling and laughing and hugging friends they have not seen since last year.

And for anyone who enjoys Native arts and crafts, it’s the place to be. The large exhibition hall in the Dena’ina Center is packed with people from across the state showing off their wares. There are ivory and bone carvings, masks, all sorts of seal skin gloves and hats, paintings, tile, baskets, dolls and beaded jewelry galore. It’s a shoppers paradise of authentic Alaskan items and many people from Anchorage come to do early holiday shopping for people who appreciate unique and beautiful things.

Three generations of doll-makers display their wares.

Native youth dance and drum to an appreciative crowd that gathered at the back of the hall.  The drums filled the large hall with energy.

Incredible grass baskets, dance fans, and masks.

I splurged on a few tiles.  That one with the sea lions was incredible.  It looked almost three dimensional, and had a depth and shimmer like you were really looking through water.

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Animal spirits and bright fluid colors made this display catch the eye.

Fur mittens and hats, ivory beaded jewelry and carvings, and a rack of traditional Yupik kuspuks.

Last night there was a fantastic celebration that I wanted to share.  A new company called ArXotica, run by triplets Michelle, Amy and Cika Sparck of Bethel was having a party to launch their new line of skin care products.  Their goal is to expand this business which they have created with input from elders familiar with the uses and applications of the arctic plants of the region, to employ people of the region and create an industry using the abundance of nature that is available in Western Alaska.  Past winners of an Alaska Marketplace award, they used the seed money to research and develop skincare products.

Harnessing the power of this flora, Sparck Triplets Michelle, Amy and Cika have created ArXotica, Inc. to produce a range of designer skin-care products of which key ingredients are those traditionally hand gathered from the wilderness that characterizes much of the 42 million acres of the Yukon/ Kuskokwim Delta. ArXotica’s philosophy is to act as a socially and sustainably conscious Cup’ik Eskimo owned and operated bath and beauty company, to bring compatible industry to our Subsistence way of living. 

Our success will be defined by our ability to act as agents of change, to benefit our people through cultural pride and promote the works of our native artisans, create employment, education opportunities and wellness.

And boy do they know how to throw a party!

Chef Rob Kineen of Orso, who loves using local Alaskan ingredients made some amazingly delicious delights!  Here, he is preparing crisp sesame crackers topped with Alaskan scallops, crow berries from the Yukon-Kuskokwim Delta, and pumpkin from the Mat-Su Valley.  It probably sounds like a strange combination, but they were absolutely awesome.  I don’t know how he does it, or how many years it would have taken me to come up with a scallop/crowberry/pumpkin hors d’oeuvre, but I didn’t ask too many questions because I was busy enjoying!

They ended up looking like some kind of fabulous sea star.  It made the eyes as happy as the tongue!

And look!  It’s two of my very favorite people, Vic Fischer and Terry Monegan!  Other notable attendees from the political world were Walt Monegan, Jane Angvik, Rep. Jay Ramras, Rep. Leisel McGuire, and a few others you’ll see below.

And what better to wash down the delectable fare than with wines from Bear Creek Winery in Homer.  The selection was unbelievable – fireweed honey wine, rhubarb, strawberry, blueberry…  How to choose?  I ended up with a glass of the black currant wine and thought I would die of delight.  If I had not had to drive, I would definitely have sampled some of the others!  There were also some unbelievable chocolates infused with crowberry that were amazing.  And I have very high standards.  They were Alaskan too, of course, from Pete’s Treats in Cordova that uses local berries like nagoonberries, blueberries, rose hips, currants, raspberries and cranberries to make truffles the size of golf balls.  All I can say to them is GET A WEBSITE!

Introductory remarks were made by gubernatorial candidate Bob Poe (D) who praised the creators of this amazing product, triplets  (L-R) Michelle, Amy and Cika, also known as the Sparck sisters.

Further remarks were given by Senator Lisa Murkowski, also wearing a kuspuk.  The Sparck sisters’ kuspuks were sewn by their mother for the occasion.  This project has been three years in the making and there was no doubt that this was a very special occasion.

Michelle Sparck stands with her sisters on the Skybridge of the Performing Arts Center and thanks the people who made this project possible.  They went around giving people little spritzes of a skin serum that was absolutely amazing.  It felt almost like aloe – cool and slippery and absorbed quickly into the skin.  It uses natural tundra plants,  berries and omega-3s.

The crowd gathered round to watch a short video about the mission of the project, and what the founders hope it will bring to their native region.  After the video there was much applause.

The Deputy Undersecretery of Rural Development from the Dept. of  Agriculture for the entire U.S., Dallas Tonsanger was present too.  And he handed Michelle his card and said he’d be the first to buy the new product when it was ready to go to market, to the cheers of the crowd.

Senator Mark Begich came to support these three very happy women.  The night was just perfect, and the turnout was huge.  Congratulations to them for having a dream and a vision, and persisting.