OPINION: It’s time for the Legislature to restore Alaska’s constitutional balance

In the next few weeks, the Alaska Legislature will agree on and articulate its priorities for the year by passing the budget bills. It’s a complicated process involving a massive set of documents filled with enormous numbers.

Alaska’s constitution has specific provisions to reserve clear separation of powers between executive, legislative and judicial branches. This system is intended to protect the public from concentration of power and potential abuse, and to require divergent interests to reach a compromise.

Alaska’s executive branch can line item veto appropriations, making it one of the most powerful in the nation. But the Alaska Constitution makes clear that the power to appropriate money belongs to the state Legislature.

It seems simple enough. But over the years, it has become far more complicated.

When I first learned about the Alaska Industrial Development and Export Authority, aka AIDEA, prior to my two decades in the Alaska Senate, I supported it. Begun in the late 1960s, it was a vehicle to pass on federal tax-exempt bond rate savings for which the state was eligible but individuals were not. Banks originated the process and had an interest in making sure their investments were good.

But at the end of the 1970s, interest rates skyrocketed. Meanwhile, the state was flush with oil money. In the second term of the Jay Hammond administration, while I was still in the state House, the Legislature made the decision to fund AIDEA with $183.6 million in cash and loan portfolios. In today’s dollars, that would be more than half a billion dollars. The funding allowed subsidy and below-market investments and eventually provided cash for unilateral decisions.

AIDEA’s mission is to create jobs and economic development. But its track record over the last four decades, as well as a set of in-depth reports from respected long-time Alaska economists Milt Barker and Gregg Erickson question AIDEA’s cost and financial performance. They look at the history of shrinking and sometimes questionable returns to the state, its poorly overseen Loan Participation Program, and its march to autonomy and away from legislative oversight. All making clear that AIDEA has not only failed to accomplish its mission: It has become a drain on Alaska, an enormous waste of resources, and a significant contributor to an imbalance of power between the legislative and executive branches.

Now, in 2024, AIDEA is a public corporation endowed with $1.4 billion dollars of public money. Despite a track record of high-profile and hidden failures made clear by these reports, it has increased its power to effectively make appropriations without legislative approval through issuing debt. Currently, AIDEA has the power to make up to $25 million available without legislative approval; it is seeking to increase that amount to $100 million.

Those expenditures, by and large, turn out very poorly for Alaskans. Barker and Erickson’s first report found that AIDEA’s poor investment decisions have cost Alaskans $10 billion that we would have on hand if that money had simply been invested with an entity that’s both better with money and more responsive to the needs of Alaskans, like the Permanent Fund. AIDEA’s high-profile projects are more likely to fail than succeed. Many of those that did succeed would have succeeded without an AIDEA loan, meaning our state money has just gone to increase the profits of largely foreign corporations that own them — and has left the state. AIDEA’s Loan Participation Program, which a recent report showed primarily issues repeat loans to commercial real estate landlords, created only 6% of the Alaska jobs it claimed to in the last 15 years.

AIDEA does all of this with state public money. All of it — all $1.4 billion in AIDEA’s endowment, the $323.7 million it has chalked up as losses when its projects failed, all $10 billion it has cost us with its poor decisions — is state public money. It is the money of every single Alaskan reading this opinion piece. Think of what $10 billion could have done for deferred maintenance, education funding, or any other state need.

All state expenditures from the state treasury can be used for any authorized constitutional expenditure. And “investments” at less than market rates are payments to something or someone.

AIDEA has historically been closely controlled by whoever occupies the governor’s office. As it has marched away from legislative oversight, it has become a serious breach in the constitutionally-created balance of powers and legislative control of appropriations. The executive branch doesn’t compromise because it doesn’t have to. The Legislature has handed over ongoing spending power to the executive branch.

The Legislature is supposed to have a wallet, but no arms and legs. The executive branch is supposed to have arms and legs, but no wallet. When we give the governor a wallet, we concentrate power further, defeating constitutional safeguards and the incentive to work out reasonable compromises.

It’s time to restore the constitutional balance of power.

Rick Halford is a lifelong Republican and former president of the Alaska Senate. He served as a state legislator for more than two decades.

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