Uninformed House members show no inkling that AIDEA holds $600 million in cash

As the state House debated the proposed operating budget, it rejected an amendment to subtract $12.5 million from the enormous cash reserves of the Alaska Industrial Development & Export Authority.

Rep. Donna Mears introduced the amendment, saying, “Given our current budget discussions, maximizing AIDEA’s contributions to the general fund is warranted.”

She is right about this, though the House voted 14-26 to reject it.

The Senate has already opted to plug the $12.5 million into the budget, so I expect the House will agree because it’s easily justified.

But I was struck during the House debate at the stunning level of misinformation about this corporation’s finances. Many legislators showed that they know nothing about AIDEA’s stack of surplus funds, yet they pretend to be informed.

Here are nine legislators who said that taking $12.5 million, which would set the AIDEA dividend at the maximum allowed in the law, would cause big problems. None of these problems are real.

The comments in italics are mine.

Rep. Chuck Kopp complained:

“AIDEA has statutes that grant the board authority to conduct AIDEA business, make decisions with regard to these funds and how they’re expended. They are authorized to set a dividend in statute by which to further separate AIDEA from other legislative appropriation authority. And the statutes say the AIDEA receipts and revenue are exempt from the Executive Budget Act,” he said.

“The language also raises a long-standing legal question Mr. Speaker about whether the Legislature can appropriate the assets of a public corporation of the state,” he said.

(The Legislature has withdrawn cash from AIDEA many times over decades. The claim that AIDEA’s cash is not accessible to the Legislature is absurd. AIDEA did not debate the dividend size in public when it decided to set the amount at $12.5 million below the maximum.)

Rep. Mia Costello complained that removing $12.5 million would damage the AIDEA bond rating.

“As mentioned previously, the dividend is statutorily set and we have seen the other body increase that number. My concern has to do with AIDEA’s bond rating. I believe that this amendment could negatively affect that,” she said.

(AIDEA has no General Obligation bonds outstanding now. AIDEA’s assets have no impact on revenue or conduit bonds.)

Rep. Kevin McCabe complained:

"Enacting this amendment would violate the confinement clause," he said.

McCabe said the law says that  "AIDEA is a private corporation of the State of Alaska and the receipts belong to AIDEA, they do not belong to us."

Taking the money would cause "tremendous consequences" such as a hit to the bond rating and "legal wrangling."

(AIDEA’s cash can be appropriated by the Legislature. The confinement clause has nothing to do with this issue. That clause says that an appropriation bill has to deal with appropriations. Subtracting the $12.5 million will not cause tremendous consequences.)

Rep. Will Stapp complained:

Taking AIDEA receipts this way would "decapitalize AIDEA and cause financial problems especially when it comes" to the gas shortage in Cook Inlet. He claimed it would endanger the corporation’s “ability for AIDEA to backstop a feed study for a pipeline."

(AIDEA has $600 million to $700 million in cash and/or assets that can be quickly converted to cash. The $12.5 million will not decapitalize AIDEA or cause financial problems.)

Rep. DeLena Johnson complained:

"When we just take money out of AIDEA receipts, that's a big deal, I mean whether we're talking about the backstop language for potential gas pipeline or other projects in Alaska, other business opportunities. This is taking those away."

(It’s not a big deal. It has nothing to do with the gas pipeline or any other project.)

Rep. Cathy Tilton complained:

"Just because you can, doesn't always mean you should. AIDEA does have obligations for other projects that are helping Alaska to grow and to be a better Alaska."

(AIDEA has $600 million to $700 million in cash and/or assets that can be quickly converted to cash that it is not using.)

Rep. Frank Tomasewski complained:

"Frankly I'm surprised that a member from Anchorage would bring an amendment to appropriate funds from a corporation who is trying to bring gas to the state. And it wasn't long ago Mr. Speaker that Anchorage was having gas shortages, you know, and I'm sure the residents of the state who rely on gas would like their lights to stay on and their houses to stay warm."

(The $12.5 million will have no impact on the gas shortage in Cook Inlet. It will have no impact on whether the lights stay on and houses stay warm. It will have no impact on AIDEA’s operations.)

Rep. Dan Saddler complained:

The real question is "should we be cannibalizing AIDEA?"

No, Saddler said. "There's also kind of philosophical reasons. AIDEA is set up for a specific purpose. It's got funding for that purpose."

(Taking $12.5 million is not cannibalizing AIDEA. AIDEA has far more cash than it needs for a “specific purpose.” The law requires AIDEA to pay an annual dividend to the general fund. The $12.5 million fits within the legal framework.)

Rep. Elexie Moore complained:

Taking the money would "hinder AIDEA's ability to expand Alaska's economic pie and grow its private sector through natural resource development. As Wally Hickel once said, we can't cut our way to prosperity. It's curious to me that we would penalize AIDEA because the Legislature can't balance a budget. It's negligent and it's underhanded."

(This is not about penalizing AIDEA. It’s not about stopping AIDEA from expanding the economic pie. And it’s not negligent or underhanded.)

As I have written here before, the law says that AIDEA must pay a dividend of between 25 percent and 50 percent of its net earnings to the general fund. The amount is supposed to be set by the AIDEA board, but there have been times in the past when the Legislature made the decision.

One reason the Senate appropriated the $12.5 million is that the AIDEA board did not give any consideration to setting the dividend at 50 percent when it acted on this in December.

Instead, with no debate, the AIDEA board set the dividend at $20 million, about 30 percent of its earnings. This has happened at a time when AIDEA is boasting about its financial record and how well it did last year.

The Senate bumped that dividend up to 50 percent, adding the $12.5 million that prompted the uninformed House members quoted above to fret about AIDEA’s finances.

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