Will Alaska pay price for ousting Stevens?

Anchorage Daily NewsNovember 30, 2008 

What happens to Alaska's notorious dependence on federal spending now that Ted Stevens' 40-year Senate career has come to a end? Without an "Uncle Ted" to redistribute America's wealth north and with an "Aunt Lisa" or "Uncle Mark" lacking his longevity and clout, will the state's economy come crashing down?

No, say some of the academic experts and critics who have studied the Alaska-federal relationship, though there's liable to be some hurt spread around. In interviews over the last week, representatives from a sample of agencies and nonprofits that have benefited from Stevens' earmarks and legislation expressed a mixture of hope, caution and concern.

Adding to some of the insecurity over Stevens' departure is the condition of the overall economy and how that might affect grants from corporations and foundations.

"So what happens now? It's a real timely question," said George Cannelos, federal co-chair of the Denali Commission, an agency that has parceled out about a billion dollars for infrastructure projects in Alaska's rural areas since its creation by Stevens a decade ago.

"If this were five years ago and Sen. Stevens left the stage, I think the commission would've been in great jeopardy," said Cannelos, one of the hopeful.

ENORMOUS IMPACT

Federal spending has enormous impact in Alaska, and Stevens had an enormous impact on federal spending, according to Scott Goldsmith, an economist with the Institute of Social and Economic Research of the University of Alaska Anchorage.

"About one-third of the jobs and household income can be ultimately traced back to federal dollars that come into the economy each year," Goldsmith said.

Goldsmith was able to correlate Stevens' rise to the chairmanship of the Senate Appropriations Committee in 1998 with an increase in the shipment of money to Alaska.

"It's a pretty dramatic jump," he said.

Through the 1980s and 1990s, Alaska generally got 30 to 40 percent more money per capita than the nation as a whole.

"Then we pretty quickly jumped up to 70 percent above the U.S. average," Goldsmith said, a leap of about $2 billion in real terms.

When term limits forced Stevens out of the appropriations chairmanship in 2004, he held on to the defense appropriations subcommittee and took over as chair of the Senate Commerce Committee. Appropriations to Alaska remained high, Goldsmith said.

Now, if Alaska must return to 40 percent above average, about $900 million would be lost to the economy, Goldsmith said.

"That would be a significant drop -- that would be like losing 10 percent of our federal dollars." Most at risk, Goldsmith said, would be grants to state and local governments and to nonprofits, including Native nonprofits that provide health, social services and housing.

"If I were someone depending on earmarks year after year, I'd be nervous about it too," said Diane Kaplan, president and chief executive of the Rasmusen Foundation in Anchorage. She said the situation in Alaska is reminiscent of Oregon when Sen. Mark Hatfield left office in 1997 after 30 years, including two stints as appropriations chair.

"Oregon really got whacked," she said.

If Alaska nonprofits hope to make up any shortfalls by applying to foundations or big corporations, they might be disappointed, Kaplan said. With oil prices in steep decline, the producers are unlikely to be feeling generous, while her foundation and others have been hurt by falling stock prices and are scaling back. Individuals seeing their retirement funds evaporate are also less likely to make charitable donations, she said.

SIGNIFICANT CONSEQUENCES

Dennis McMillan of the Foraker Group, which provides support services to nonprofit organizations, said he's been warning charitable groups about the future. In Alaska, they tend to be much more dependent on state and federal money than the rest of the country -- 57 percent versus 35 percent.

While federal grants to Native health corporations are likely to continue unabated, others are less safe, he said.

"We've been trying to help people be aware this was inevitable and the consequences would be fairly significant," McMillan said.

On the plus side, Alaska has an old friend taking over the Senate Appropriations Committee, Sen. Dan Inouye, D-Hawaii. Inouye was Stevens' best friend in the Senate and is a frequent visitor to Alaska.

"He really understands Alaska issues," Kaplan said. "He's been everywhere in Alaska, he's been in the small villages, and he has a particular affinity for Native issues."

Much of the military infrastructure in Alaska will continue to receive federal money simply because it exists and is necessary, said Keith Ashdown of the Washington budget watchdog group Taxpayers for Common Sense.

But that doesn't mean all Alaska's defense-related earmarks will continue, he said, pointing in particular to a $20 million earmark Stevens placed in a defense spending bill to help pay for an experimental, U.S. Navy-designed vessel that will serve as a ferry from Anchorage to Point MacKenzie.

"Maybe something like the high-speed ferry gets hit, but things that are related to major infrastructure, or things relative to those bases ... or to the operations of the teams based up there ... I don't see that going away," Ashdown said.

OBAMA'S ROLE

Ashdown said the state also will have a "soft landing" because of Inouye. But he suggested that Barack Obama's election is a greater threat to Alaska's pork prospects than Stevens' departure. Obama promised during his campaign to slash earmarked spending, and with uncertain economic prospects ahead, there's a belt-tightening climate in Washington that promises scrutiny of money earmarked toward projects of questionable value.

Cannelos, of the Denali Commission, has a different view. Obama is proposing an economic recovery plan that would pump billions of dollars into the economy through infrastructure projects -- the soul of the commission's activities. And Obama's ideas of investing in renewable energy and conservation also fit in with the priorities of the commission, which has been supporting wind farms, in-river hydropower and conversion of old diesel generators to more efficient ones, Cannelos said.

On defense, some experts like Winslow Wheeler, a former Republican Senate budget staffer, argue that a possible drop in federal spending in Alaska might be good for fiscal responsibility.

Wheeler, who now serves as a senior fellow and director of the Straus Military Reform Project at the Center for Defense Information, said Stevens choked up defense bills with fisheries earmarks and other pet projects unrelated to the military.

Such earmarks "displaced good spending" on legitimate national defense needs, Wheeler said.

Likewise, Lois Epstein, director of the nonprofit advocacy group Alaska Transportation Priorities Project in Anchorage, would welcome a decline in Congressional earmarks, though not necessarily federal spending. Earmarks are "top-down" decisions about how to spend money, bypassing local decisions made through public process, she said.

The infamous "bridges to nowhere" earmarked for Ketchikan and Anchorage were expensive projects that preempted other, more pressing transportation needs, Epstein said. Earmarks are often generated by people with special access to power, she said. Other projects that are wasteful and not needed, she said, include the Anchorage port expansion, the railroad terminal at the airport, and abandoned efforts to expand the airport runways.

The executives who run two of Stevens' projects that have struggled economically -- the state-owned Kodiak rocket launch facility and the nonprofit Alaska SeaLife Center in Seward -- say they anticipated the day Stevens would leave the scene and are prepared.

Dale Nash, the new chief executive of the Alaska Aerospace Development Corp., said the Kodiak launch facility has some special advantages that make it competitive: it's the only new launch facility in the United States, and it has a wide downrange area with a good shot for polar orbits.

"Sen. Stevens has always been a friend and we wouldn't be what we are without him," Nash said. But Nash said he deliberately avoided using Stevens' office to press for military contracts with the missile defense program, the Kodiak facility's bread and butter. He wanted to prove the facility can stand on its own.

"We have continued to win contracts based on lower cost, lower risk to come here," Nash said.

SEALIFE CENTER

In Seward, Ned Smith, interim chief executive of the SeaLife Center, said the research and visitor center conducted a search for a new top official with the idea that it would have to do without Stevens' subsidies.

"I don't want to say that we can foretell the future, but it did occur to us over the past few years that we might face a situation where Ted Stevens was no longer going to be able to funnel some research money to the SeaLife Center, and research is a very big part of our operating plan. Our strategy is to diversify our research interests and therefore diversify our funding sources for research," Smith said.

Their new Australian-born chief executive, Ian Dutton, starts work this week. Smith said Dutton "comes to us from the Nature Conservancy and with a great track record of fundraising and lots of good connections."

THE ALASKA BUSH

Stevens' support for water, sewer, energy and health projects in the Alaska' rural bush areas, and his assistance to Native corporations, usually assured him bipartisan support among voters in villages and the off-road regional centers.

Not this time. Anchorage Mayor Mark Begich did well among Bush voters in his victory over Stevens.

That's not surprising, said Albert Kookesh, chairman of the Sealaska Native Corp., co-chair of the Alaska Federation of Natives and a Democratic state senator from Angoon. Kookesh was one of a number of Native leaders who supported Begich.

It wasn't that people disliked Stevens, Kookesh said -- "this guy was a god to us" -- but Natives took a very pragmatic approach, risking short-term losses for long-term gains.

"I think most of the people that I've talked to, especially those in rural Alaska, or Natives, were looking at Sen. Stevens' age, and not so much worried about what we were going to lose," Kookesh said. "Those of us who supported Mr. Begich were looking at his age, at 45. In 20 years he'll be 65 and he'll have developed his seniority."

Stevens, at 85, was not going to last forever, Kookesh said.

"Senator-elect Begich was available, people trusted him, people saw the work he did in Anchorage. We had somebody young and articulate, and it was maybe a good time to make the change," Kookesh said. Besides, Sen. Lisa Murkowski and Rep. Don Young are also friends of the Native community and not without clout of their own, he said.

REASON FOR OPTIMISM

University of Alaska Anchorage history professor Stephen Haycox, who has written extensively about the relationship of Alaska to the rest of the country and the federal government, said he doesn't see any precipitous decline in federal spending here.

"The federal commitment to Alaska is long and rich," Haycox said. "It goes back to 1867. There never was a period when the federal government was not putting very significant resources into Alaska to nurture settlement and economic development, and to provide basic services for Native Americans."

Under a Democratic administration, spending for land and environmental management may increase, he said. If a contraction takes place, it's probably in areas like ports and airports, which are often funded based on congressional seniority.

And what does Begich himself say?

As the first Democrat elected to Congress from Alaska in a generation, he believes the Senate leadership will go out of its way to help him move more rapidly than a freshman otherwise might into important posts. When he gave the Democrats a 58-42 majority, that also turned additional committee seats over to Democrats. He hopes to follow Stevens to the Commerce Committee and to an open seat on Appropriations, though he acknowledged the latter would be a long shot, at least in this Congress.

"For me not to ask would be a mistake," Begich said. "Without me, they wouldn't have had that open seat, and I reminded them of that fact."

Begich could be helped by some unusual connections for a brand-new freshman. Rep. James Oberstar, D-Minn., the chairman of the pork-distributing House Transportation Committee, was a staffer to his father, Rep. Nick Begich, when he represented Alaska, and Mark Begich has been talking to Oberstar about the state.

Begich said he understands that "earmarks are going to be difficult for everybody" in the current climate. In his favor, he added, "stimulus bills, capital investment, that's right up my alley."

For more coverage on Sen. Stevens, at adn.com

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