Face To Face

Interview with Frank Murkowski

This interview with Republican candidate Frank Murkowski took place July 19.

News-Miner: Voters want to know that your natural gas pipeline agreement with the three big oil companies is the best deal for the state. Is it?

Murkowski: We think it's the best deal for the state for a number of reasons. One, when you negotiate a basic business proposal, which is a contract, OK, there is a lot of give and take. It is not a simple process. It's very complex. In fact, it's getting more complex than this just because of the nature of the beast and the role of the partnership organizations: The role of the state, the role of the federal government, it goes on and on, so I don't want to typify that it is simple.

News-Miner: You're closely associated in the public's mind with the oil industry. So given that and that people might be naturally skeptical, are you looking out for the state or for the oil companies?

Murkowski: Well, you know, that particular analogy I don't appreciate, OK? I'm the only governor that has been able to increase the tax on oil. I don't know whether you're going to recognize that or you're going to say, well, that's a gimmick, but it's fact. Others have talked about it and, all right, now I've got a deal that doubles the tax on oil and they have accepted it. Nobody else has been able to do that. Is that fair or isn't it? I think it is. If you want to question it in great detail, I'd be happy to do the best I can for you. But all I can tell you is here are the facts, as I know it, relative to how it stands on government take, and it's at the high end. And I think you'd agree that these companies are up here because they're in the oil business. They're here to make a return on investment and they're looking for the highest return at the least risk. And they can go all over the world.

News-Miner: But part of this would be clearer in the public's mind if all the consultants and legislative leaders and the administration were singing the same tune on the gas agreement, but they're not. Legislative consultants and many legislative leaders are disputing many of the things that the administration is saying about this.

Murkowski: [I]f your objective is to get a pipeline—the people of Alaska expect a pipeline, all right?—then they expect a deal. And you can second-guess this thing and you can hire consultants—and, you know, there's motivations all over the ballpark on this issue. Some of them are selfish. Some of them are political. Some of them, you know, want this pipeline to go and they think this is a fair deal. I mean the intrigue associated with the fight ...

News-Miner: Did you make a mistake in cutting off the talks with others who have a pipeline proposal?

Murkowski: We never had any other people. We never had anybody. Hell, Mid-America, they wanted a five-year option. They wanted to go shopping for five years. That was an exclusive they asked for, right? I wouldn't expect for 30 seconds that anybody in the state with any knowledge or commitment of business would support a five-year exclusive just negotiated by the administration on a one-to-one basis, and that's what they wanted. The (Alaska Gasline) Port Authority, what is it? It's a paper tiger. It's had two major corporations walk away from it.

News-Miner: OK, but by not pursuing negotiations with them...

Murkowski: Yeah, come on. You folks live here. There's nothing there. There is nothing to pursue. They don't have any gas. Is that our fault? They have gone to the producers. The producers said "Hey, no, we've got a proposal. We're not sharing it." What are we supposed to do? Are we supposed to file a suit against the producers and make them? That gas is under lease.

News-Miner: We asked you that question a long time ago.

Murkowski: Did you get the same answer?

News-Miner: We got an answer that said going to court would be time consuming, that it was not possible.

Murkowski: If you go address how you're going to get the gas and you leased the gas to the producers under a competitive bid some time ago and the producers have a proposal in developing the gas, where do you think you're going to be in court?...

[I]f we're going to seriously pursue a gas line, this is the only game in town. They've got the components necessary to build a pipeline and deliver the gas and market the gas.

If Alaska and Alaskans are coming into this thing with the idea that somehow this is a game or subterfuge that is contrary to the interests of the producers not to build this thing, well, we're never going to have a project. It is like some people—any time that the producers accept something in our negotiations, some people suggest that, well, there's something wrong with that because they accepted it. You know, we developed a mentality of mistrust, OK? You can't enter into a partnership with mistrust.

News-Miner: Why do you think that mistrust exists?

Murkowski: It's traditional. I mean, the oil companies have been dominant in providing us with the cash flow that runs the state. You know, 80-some percent of the revenue comes from the oil industry, so it's a natural distrust. It is just there.

News-Miner: So does it have anything to do with record oil prices and record oil profits?

Murkowski: Of course it does, but you know who's the beneficiary of record high prices, and it's the state of Alaska in the increased revenue. Where do you think we'd be today if we didn't have high oil prices, because our oil production is down? That's what is so important about this contract. It provides incentives for reinvestment. The greatest risk we have isn't getting a production tax doubling, which is what they would pay at current prices, OK? It's two other factors. One of them is the reserves tax (on the November ballot), which is an absolute killer. It is designed to kill this project. It is not designed to incentivize. But the most important single thing is to replace, if you will, the decline in oil production by having incentives sufficient enough to initiate continued exploration production. That's why it is so imperative that we get this contract done and get it done now...

And that's important for the public to understand. It is the most important single thing.

News-Miner: One of the key issues in the gas line is the proposal for a long-term freeze on oil and gas taxes. In April you said the pipeline was a "nonstarter" without a long-term lock in, that the project would not go ahead without a 30-year freeze on oil taxes. The reason you backed off that statement?

Murkowski: I didn't back off.

News-Miner: How long of an oil freeze then do you now support?

Murkowski: Well, we were talking about a reopener, OK? And that's going to be presented to the legislature when they go back and it is a formula to try to address the concerns. Hell, you go down to the bank, you want a fixed rate or you want a variable rate. That's what it is all about. They want to know what they are going to have to pay. Now Alaskans say, "Hey wait a minute." They don't feel too comfortable with that because we don't want one legislative body binding another, and I can appreciate and understand that. So we're trying to address that in negotiations, and I think we've been successful at it.

News-Miner: Let's leave oil and gas for a minute and talk about the stalled Healy Clean Coal Project. You mentioned that it is necessary to get that power plant going again. Tell us a about your plans.

Murkowski: It's in legal heaven you know... [I]t's hung up and the judge has ordered a mediation. That is where it is. But you know, I'm not here to get into a long-range discussion with GVEA on the merits. We need that power and the nice thing about that power is coal costs are fixed. They don't rise with OPEC.

[I]t is in the interest of the community to get it back on line. It ran for two years.

News-Miner: Here's a lighter question disrupting the flow here. Your two primary opponents are quite a bit younger than yourself and...

Murkowski: That does happen.

News-Miner: ...younger voters, maybe 18 to 30, don't vote in as great a number as older people. What do you say to younger Alaskans to get them to vote for you?

Murkowski: Well, you know if I've done anything since I came back from Washington, it is emphasize my belief for the future of this state... You build the economy by building the resources. And that's the oil, gas, fishing, tourism, and so forth, and I think we've made a significant contribution in that... [T]hese are things that the future of the state is all about, because it provides jobs and gives people hope.

[F]or some time, four or five years ago, we were losing some of our young people because we weren't providing job opportunities .

I've always been interested and committed to resource development and I felt like I could do something about it. And the only sad thing is that we've got a Legislature in which there is no strong leadership. In other words there is nobody I can go to and work with. There are a couple of people, but very few that say OK, you know, we're the majority.

News-Miner: Talk about your education plans.

Murkowski: We're catching up on our school maintenance... If we can anchor this (gas pipeline) project, we're talking about stabilizing the economy of Alaska for the next 50 years. [W]e have an opportunity before us, within our grasp, and what does that mean? Gosh, it means you're looking at education, the university, K through 12, doing things we've only dreamed about because you're going to have a revenue stream based on the projected price of gas... And that means quality schools, (solving) problems associated with RS 2477 where we can put some roads across areas, open up mining.

News-Miner: Alaska has one of the fastest growing population's of seniors. What is the state's role in preparing for this boom, and what are you going to do about that in a second term?

Murkowski: We have provided a bridge for prescription drugs... There are AIDEA projects all over the state for low-cost housing for low-income people.

News-Miner: With regard to seniors, though, who might not be mentally incapacitated and just want to remain in the state but need a little help, what about planning for more of them? Should the state have a role?

Murkowski: Well obviously you can never do enough for those who are less fortunate or those that are dependent, and we have to continue to meet their needs, but it has to be fair and equitable and what this gets me back to always is, well, "Governor, you cut the longevity bonus." [It] was a very, very unfair program, because it was not means tested. And if you weren't into it before the end of 1998, you didn't get anything...

News-Miner: Do you regret the decision to cut the longevity bonus?

Murkowski: Now, you have to make decisions based on the circumstances that existed at the time, and I think your pile of papers will show that we ... had an $800 million deficit when I came into office, OK? We had a PERS and TRS (retirement system) that the previous administration had just ducked out on. They hadn't addressed in real terms what was going to be necessary to try to turn that around, and I had to make some decisions, so I cut it. Some things that I felt had to be cut—and revenue sharing was one of them, the senior program—because I felt it was unfair. It was unfair. Of course people that lost it were very upset.

The Legislature sits back there and they didn't attempt to override my veto. Oh, they said, the governor will take care of that because it is off the table. They didn't override me, didn't attempt to override municipal revenue sharing. What they did is just like the airplane, OK, "We'll duck and let the governor take the heat." So I understand that and I'm willing to take the heat, but I can justify my actions because we had to make some cuts. It is like going to your checkbook and finding you don't have a balance. And are you going to write another check to the movies or are you going to face reality?

News-Miner: You just mentioned municipal revenue sharing. There's a continuing call for a restoration of that.

Murkowski: I proposed a thousand dollars. I'm not going to give it to them, the municipalities. I want to give it to the taxpayers direct because I fear the municipalities would have to use it for administrative process... It would be a onetime deal on the basis of the knowledge that next year we're going to have a surplus, and after that we'll look at it individually.

News-Miner: The municipalities continually ask for a sustainable, predictable source of assistance.

Murkowski: Yeah, and you remember what I tried to do here on the POMV (permanent fund-related)? We almost got it through but we didn't. That was a solution I felt was responsible. It was reasonable. It got through the House. I couldn't get it through the Senate. I couldn't get it through some of the Fairbanks legislators. We all know who they were. That was a solution. That was a good solution because it provided funding for education. It provided more of a return for the dividends for Alaskans, provided a revenue sharing.

News-Miner: Do you think that the municipalities and other government entities should pay all of their share of increased costs associated with the state-run retirement systems?

Murkowski: They're going to need help to do it, but here's what this whole thing is about. If the Legislature passes a responsible PPT (oil tax), we're going to double our revenue by a billion dollars at the current prices. [I]t is going to fund power cost equalization and it is going to give one hell of a shot of revenue this year. I say let's give some to the property owners, thousand bucks, direct.

News-Miner: The oil companies want a tax freeze before proceeding with the gas pipeline. It's a debatable topic.

Murkowski: Well, I understand, but if you're, you know, the uniqueness of this is because it has to be done in a public arena because you're dealing with the state as opposed to another corporation... They're genuinely committed to this project. It is to their interest. It is in the state's interest. This is a better project because of the state's participation. You know, does anybody ever write about what's right about this contract? No. And that's not the job of media by any means, but, you know, this is a good contract... Now you can question how much more blood is in the turnip or what's left on the table or how can we tighten it up. These are legitimate questions that we're trying to do, but I'm not losing my objective and that's to get this gas line and get it now during this session of the Legislature. And we haven't talked about the reserve tax but if that reserve tax passes I don't care who is governor. I don't care who is in the Legislature, this project is (dead).

News-Miner: What are your plans for education funding if you do have a second term?

Murkowski: Well we're going to have a second term. We are going to continue our commitment to the university. I feel very strongly that we have to encourage the university to play a more major role in working with the major corporations that are coming into Alaska to tie in a confidence... I intend to bring more and more people up to the university. I brought my Cabinet up, give a familiarity of just what the capabilities of the university are. We made a commitment to catch up on major maintenance in all our schools, and of course it is kind of interesting 'cause we said, OK, what's a figure for major maintenance? They gave us a figure. We gave them the money next year—this next year—bigger than all the past maintenance. So I mean it's not a perfect science, but we're trying to address it. But we're also trying to address something else again that hasn't been done before... and just not throw money at it but have a measurement of how these kids are doing in comparison to kids in other areas, and that's a hot topic...

News-Miner: What is your K-12 education philosophy? What you would try to accomplish in that realm in a second term?

Murkowski: Well a couple things. Specifically, continue to increase per pupil funding, because that's where in theory it goes into the classroom and you can throw a figure in there for education and a third of it can get eaten up in administration... But when it goes into the classroom, that's where you're seeing it per pupil. So I think it's a measurement of real progress in comparison of some of the other measures. We have a teacher mentoring program for rural Alaska that seems to be working, where new teachers come in and they are taken under the wing so they have some advance degree of satisfaction about what it is like to be alone in a rural community, and then (there is) an incentive program, which I have and the Legislature bought into it, relative to incentivizing education personnel. It's not just limited to teachers on a performance measure where they basically get bonuses, and it's complicated but not too complicated system where there is a measurement of performance, and I think that has been an interesting incentive. It is kind of interesting to see how the unions react to that.

News-Miner: One of the questions that has come up about that particular program is that it is going to encourage the schools to focus only on those tests and that there wouldn't be an incentive for having programs such as music and band.

Murkowski: Well obviously you need the extracurricular activities, so I wouldn't make the generalization that you made.

News-Miner: Let's talk about the size of the overall state budget. Some say the rate of growth is simply not sustainable. What do you see in the future?

Murkowski: The budget process to a large degree is driven by revenue, OK? This year we had significant surplus... so I put it away, and the Legislature ultimately supported me on it and we put it away, fully funding education primarily. And you know where the rest of it went. I think out of that they got to spend about $300 million.

News-Miner: So what happened to Frank Murkowski, the fiscal conservative?

Murkowski: I think I saved two-thirds of it... Look at the financial situation, the condition of the state. When I came in we were running deficits, now we're running surplus. We've been running a balanced budget every year. We have the earnings reserve and the budget reserve. We've got over $4 billion in there.

News-Miner: What about the size of government? Any idea the number of employees?

Murkowski: And then they want more troopers and now they have a big flak about the brown shirts (Fish and Wildlife troopers), and, you know, we got twice as much coverage by giving them one shirt... [W]e've got people that are doing two things at once. Maybe they're not doing them as well, but you've got to work with what you've got, and there is a need for more troopers in this state... We put on 23, 24 more this last year. We've got to train them. They have to spend a half year down in Sitka. So it's all about how you meet the needs of the community.

News-Miner: How do you describe your fiscal policy?

Murkowski: I believe there's no question about it—I am a very conscientious conservative, but I recognize the needs of government, particularly in the areas of rural Alaska, where we have a transition going on where we don't have jobs. We're providing better educational opportunities out there, but it's a tough set of facts because there is just no tax base.

News-Miner: Doesn't a fiscal conservative have a real quandary when confronted with the prospect of all this additional revenue from a gas line?

Murkowski: Yeah and what I'm trying to do is create meaningful jobs. Because that, in my opinion, gives you the dignity of—and you know what the male role model in rural Alaska has gone through. You don't have to be a hunter and provider any more. Well that's a tremendous (change) ... you look at the graduation classes: They're all females. I don't say all, I mean larger. You've got some real, real challenges out there.

News-Miner: So what do you say to people who say that the growth of the budget is not sustainable?

Murkowski: Well, I mean this is what the gas line is all about. It's generating a revenue stream that a responsible Legislature can plan for the next 50 years because you're not going to have this tremendous escalation that you had on oil. There's a decline of production on one hand and increase in the price on the other which has been saving (us) and you know gas is going to be they figure around six bucks—and I believe that's a reasonable forecast. And with that we can plan for the development of this state, and, we haven't talked about it, but I'm going to propose an opportunity for Alaskans on a check off of their permanent fund dividend to have the option of purchasing stock and we've got it set up preliminarily through the Alaska Housing Finance Corp.

News-Miner: In your campaign in 2002, you promised to control state spending and make government live within its means. And you said you would aggressively limit state spending, and then here we are today with a pretty good-sized budget.

Murkowski: And what have we done with it? I've told you.

News-Miner: But have you aggressively limited state spending?

Murkowski: I think I have been responsive to reality. We have needs. We debate the needs. I've tried to be somewhat, I think, reasonably responsive to the Legislature. But there are some terrible inaccuracies in that budget... [I]t's all about the politics of the local members... I'm talking about the capital budget, the manner in which they pass out to each school in their districts and so forth. And it should be based on need and it's not. In other words, those lower-income (districts) where you have lower income students and you don't have the parental oversights and so forth are the ones that should be getting more attention.

News-Miner: Subsistence has been a quiet issue for a couple of years. What's your view of the issue? Your predecessor had a few special sessions about it. Do you see it as something you would try to tackle in a second term?

Murkowski: It has got to be tackled and I'm not going to change the state Constitution, OK? And so the other one is an obligation I used to have as a (U.S.)_senator... And you know some people are afraid to get into it. They don't want to get into it.

News-Miner: Is there anything to be done or do we just operate the way we have been, with federal management?

Murkowski: Well, no we can't operate the way we have been. I think we've got a secretary (of the Interior) who is going to be more sensitive to our needs as a Westerner, and we've got some problems with this subsistence that we've got to have some greater input on and more impact in policy matters, but we don't have a vote on it, unfortunately.

News-Miner: Shifting topics here, what are your thoughts on "wellness courts" as an alternative court for some drunken-driving cases? Would you like to see those expanded into more communities?

Murkowski: Yeah.

News-Miner: Anchorage has one. Bethel has one.

Murkowski: And they seem to have worked, and, you know, you can't give a reasonable rehabilitation. Motivation is just to throw them in the slammer and they get out again and hit the road, but it takes a lot of patience and a lot of counseling.

News-Miner: You like the idea though?

Murkowski: I think it is certainly has a success rate associated with it.

News-Miner: There's been a push in the Legislature in recent years to force the creation of boroughs. What do you think of that idea?

Murkowski: In so many areas there is more and more awareness that you've got to have some kind of local government and, you know, if the people are opposed to it why—and then you force it down their throat, the Legislature has decided that.

News-Miner: Would this be on your list of things to try to accomplish? To get more boroughs formed?

Murkowski: People ought to have a right to express what they want... (But) that brings up what can they practically afford or be expected to do. If you haven't got anything, you know, I mean some of these boroughs out there they almost exist because they have to have revenue that comes in from the state's assistance or federal assistance or grants or some thing.

News-Miner: What's been your biggest success and biggest mistake as governor?

Murkowski: I had assumed that we would have a legislative structure that had stronger leadership, and I find it frustrating to find ourselves in a majority, and the implication is majority rules but it doesn't happen that way. We've got the House. We've got the Senate. We've got the governor, and in theory we ought to be able to come together, agree, and rule. That's the whole idea. It doesn't work that way and that is not a mistake. It is just, I guess, an awakening of reality.

News-Miner: Biggest success?

Murkowski: Biggest success. I think contribution to establishing a definitive direction for the future of the state through resource development and doing it in a responsible way.

News-Miner: Your final thoughts, perhaps as you're looking at an undecided voter on the street?

Murkowski: Well I guess we just don't talk about it we do something. And it is a conviction again of resource development and the priorities of the pipeline, and the priority is the pipeline simply because of the contribution it is going to make to the state over an extended period of time. And for the life of me I cannot stand by and just let whatever is going to happen to the pipeline happen. I feel I've got to help direct an action that is associated with the three points I've made with the start of the PPT (oil tax), address the reserve tax with a resolve and, finally and most importantly, recognize that what we have at the end has to be—has to be—an environment where we incentivize exploration for oil and gas to keep that pipeline going.