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In the coming weeks, the Alaska Legislature will agree on and clarify its priorities for the year by passing a budget. This is a complex process that requires a huge set of documents packed with huge numbers.
Alaska's constitution has special provisions to preserve a clear separation of powers between the executive, legislative, and judicial branches. The system is intended to protect citizens from the concentration of power and potential abuses, and to seek compromises to achieve divergent interests.
Alaska's executive branch can veto item spending, making it one of the most powerful in the nation. But the Alaska Constitution makes clear that the power to divert funds belongs to the state Legislature.
That seems simple enough. But over the years, it has become much more complex.
When I first learned about the Alaska Industrial Development and Export Authority, also known as AIDEA, before serving for 20 years in the Alaska Senate, I supported it. The program, which began in the late 1960s, was a way to pass on savings from federal tax-exempt bond interest that were eligible to states but not to individuals. Banks originated this process and were interested in making sure their investments were made properly.
But in the late 1970s, interest rates skyrocketed. Meanwhile, the state was rich in oil money. During Jay Hammond's second term, while I was still a state representative, Congress made the decision to fund his AIDEA with his $183.6 million cash and loan portfolio. In today's dollars, that's more than $500 million. This funding enabled subsidies, below-market investments, and ultimately provided cash for unilateral decisions.
AIDEA's mission is to create jobs and economic development. But AIDEA's track record over the past 40 years, and a series of detailed reports by Milt Barker and Greg Erickson, longtime and respected Alaskan economists, cast doubt on AIDEA's costs and financial performance. . They look at a history of shrinking and sometimes questionable returns to states, poorly supervised loan participation programs, and a history of moving toward autonomy away from legislative oversight. All of this reveals that AIDEA is not only failing to achieve its mission, but is also a major source of waste on Alaska, a huge waste of resources, and a significant imbalance of power between the legislative and executive branches. This means that
As of 2024, AIDEA is a $1.4 billion publicly funded public enterprise. Despite the track record of high-profile and hidden failures uncovered by these reports, they have increased their power to effectively spend without legislative approval through debt issuance. Currently, AIDEA has the authority to raise up to $25 million without legislative approval. They are trying to increase that amount to $100 million.
These spending generally result in very negative outcomes for Alaskans. Barker and Erickson's initial report found that AIDEA's poor investment decisions cost Alaskans $10 billion. That money would have stayed if it had simply been invested in an entity like the Permanent Fund that was better at managing its funds and more responsive to the needs of Alaskans. . AIDEA's high-profile projects are more likely to fail than succeed. Many of the successful companies would have done so without AIDEA financing. This means that state funds have left the state, primarily used to increase the profits of foreign companies that own state-owned enterprises. AIDEA's Loan Participation Program, which issues recurring loans primarily to commercial property landlords, has created only 6% of Alaska's jobs the company claims over the past 15 years, according to a recent report. It was shown that
AIDEA does all of this with state public funds. The $1.4 billion in AIDEA donations, the $323.7 million in losses when projects failed, and the $10 billion in bad decisions that cost us all are state public funds. That's every Alaskan reading this opinion piece's money. Consider what $10 billion could do for deferred maintenance, education funding, and other state needs.
All state expenditures from the national treasury can be used for authorized constitutional expenditures. And an “investment” below market interest is a payment to something or someone.
AIDEA has historically been tightly controlled by individuals occupying the governor's office. The absence of legislative oversight constitutes a serious violation of the constitutional balance of powers and legislative control of spending. The executive branch doesn't compromise because it doesn't have to. Congress transferred continuing spending authority to the executive branch.
Congress is supposed to have a wallet, but no limbs. The executive branch is supposed to have arms and legs, but it doesn't have a wallet. Giving governors their wallets would further centralize power and defeat constitutional guarantees and incentives to seek reasonable compromises.
Now is the time to restore the constitutional balance of power.
Rick Halford is a lifelong Republican and former president of the Alaska State Senate. He served in the state legislature for over 20 years.
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