Face To Face

Interview with John Binkley

This interview with Republican candidate John Binkley took place July 21.

News-Miner: Let's start with asking you your view on the gas reserves tax that's on the November ballot.

Binkley: I'm opposed to the reserves tax act.

News-Miner: Why is that?

Binkley: I do not believe that the purpose is to try and get a gas line built and I do not believe that you can stimulate capital investment by taxing a commodity that may or not be economically feasible to get to market. Now that being said, I believe that our gas is economically marketable. The economies are out there to get our gas to market, and so we need to construct a gas line in order to get that to the market. But I don't believe that we do that with the approach of a stick to try and force somebody to invest capital to develop the line. There are other options the state has that we should utilize and can utilize to get a gas line built.

News-Miner: How about on the contract overall and the current push to get it adopted?

Binkley: This is an important issue that will shape Alaska for the next two generations, and we must be extremely careful in proceeding with this. It goes back to the old adage that the carpenters use—measure twice, cut once. It's more important that we take our time and get this right than to rush into something when it's being perceived as a window that is closing rapidly. That is not the case.

News-Miner: You just said it is not correct to say the window is closing rapidly on the pipeline. What leads you to think that?

Binkley: Well, the fact that this agreement, the fiscal terms of this agreement, do not dictate that there would be a pipeline built. So the industry itself is saying we don't know if we're going to build a pipeline. We don't know when that pipeline may be built. We're going to take our time and do all of the due diligence that we need to do and it may be two years, it may be four years, it may be 10 years before we determine whether or not we're going to build a pipeline and get the gas to market. So why is it the state needs to then rush in in an accelerated period of time or shortened period of time and without being prudent in examining the existing agreement...?

News-Miner: So let's say you're elected governor. What do you do about the gas line?

Binkley: I would re-negotiate the existing agreement. There are three things that I would do. No. 1, I would get a team of skilled negotiators who know how to put together an agreement and negotiate an agreement of this magnitude and size and scope. Currently, we have the chief of staff of the state of Alaska, who is responsible for the 14 commissioners, 17,000 state employees and making the trains run on time in Alaska. He is also the chief political adviser to the governor, and he's the chief negotiator on the largest privately financed deal ever in the history of North America. Those are three distinct different skills and three enormous jobs that should not be confused. We need a skilled negotiator leading the Alaska team in negotiating this agreement.

No. 2, we need to get back the leverage that we have given away. The biggest leverage that we gave away is Point Thomson. We need to hold the owners of that lease to their responsibility to develop that field. There are liquids, oil, in that field that are commercially developable, and they have a responsibility to develop those and we have taken that off the table.

And the third thing is we have to let them know that we have options, other viable options, that we can go to and we are willing to go to and we should be pursuing on a parallel track if we cannot get terms that are fair for Alaska.

News-Miner: What about the Alaska Gasline Port Authority's project?

Binkley: [I]t is a viable project. And so we need to make sure that we have those options, we develop those options, and maybe it's a combination of those. Maybe it's some combination if they can compete with their project on the exporting of LNG, as well as an independent third-party owner and constructor of the pipe, and operator of the pipeline. You don't know what all of those nuances will be until you pursue them.

News-Miner: So how about the freeze on taxes that the oil companies say they need in order to build the gas line?

Binkley: First of all, the oil taxes should not be associated with any gas line deal. Oil taxes are a separate issue that should be looked at separately and should not have linkage to any fiscal terms on a gas line contract... [F]undamentally they need to be separated from the issue of construction of the gas line.

News-Miner: The governor said in April that it was a nonstarter if you didn't have the 30-year freeze on oil taxes and the 45-year freeze on gas taxes.

Binkley: Renegotiate.

News-Miner: But the oil companies say that without a lock in on oil, you're not going to get a gas line.

Binkley: Well, the oil companies say a lot of things.

News-Miner: The foundation of the draft pipeline agreement is the assumption that the gas is stranded and therefore in need of state assistance to get it developed. Do you believe it is?

Binkley: No, I do not believe it is.

News-Miner: So do you believe that a project by the companies is viable now?

Binkley: I do believe it would viable. I think that it has been shown through the independent analysis that has been done of this project that it is economically viable. Now that doesn't mean that the industry, who is proposing to build this, isn't getting a better rate of return in other areas of the world on its invested capital and that it may not want to invest its capital in a gas line in Alaska because it can get a better rate of return on its capital in some other part of the world.

News-Miner: So you might still see a need for state incentives or something?

Binkley: You could. [O]ne possibility is to have some state incentives if you think it's critical that the industry, the ones who own the leases, be the ones who actually build and operate and own the pipeline. Then you may want to use some incentives to incentivize that. But they should be only on the construction of the line, not on these extraneous things, like locking in taxes and capital credits on upstream facilities, the gas treatment plant, and all the upstream facilities—things that are really difficult to pin down. It should be clean, well laid out, and they should have a diminishing return. The longer you delay in construction, the less incentives there are.

News-Miner: You mentioned that incentives might be needed to get a pipeline even though you think the gas is not economically stranded. So, what's your understanding about the companies' obligations under their oil and gas leases?

Binkley: Well, they don't have an obligation to build the pipeline necessarily... But if, for example, a pipeline magically appeared today and it went from Prudhoe Bay to Chicago, they have an obligation to develop those fields and put the gas in the pipeline and send it to market. It's economically feasible to do that. So it's clear that if we have an entity who is willing to build the pipeline from Prudhoe Bay to Chicago and risk the capital... they have an obligation to perform under those leases. I think it's clear and I think it would be a difficult legal argument for them to say, "No, we can't do that" or "No, we're unwilling to do that" and be successful in not really pushing those leases. [T]hat's what is attractive to me about a third party like Mid-America that builds pipelines around the world, operates them, owns them. They know the pipeline business. They have the financial strength and ability and they have the business acumen to be able to put a deal together far beyond the capabilities of the state.

News-Miner: You have an idea on oil taxes?

Binkley: [A]s the tax rates, as the oil price, goes up, the... everyday Alaskans are suffering as a result of that. Paying higher energy prices in their homes, to drive their cars, to pay for electricity. Everything we do costs more because of the high price of fuel. Yet the only ones who are benefiting from that are the bureaucracies in Juneau. And so there should be a mechanism by which Alaskans benefit as well. So as prices of oil go high and the (tax rate) progressivity goes up, a corresponding formula that allows property tax relief would go down... So you would have a program by which as the price of oil went up, there would be an amount that is set aside for municipalities that would reduce as a direct amount the taxes that individuals would pay. So if you're paying 15 mills on a $200,000 home and your tax bill is $3,200, if the oil rates for the proceeding year averaged $70 a barrel and that equated to $500 million that was in this pot divided by the number of Alaskans, the Fairbanks North Star Borough would have access to $80 million and that $80 million would equate to X amount of taxpayers that would reduce that tax bill by $800. So now instead of $3,200 you would send in your check for $2,400...

This would only be residential. And it would only be based on the value of your home. It would be a flat rate per residential taxpayer.

News-Miner: Here's a jobs question about the gas pipeline. Do you support project labor agreements for the pipeline?

Binkley: Well I generally support PLAs... It doesn't really have a place in the (gas contract's) fiscal terms, you know, those are fiscal terms between the state and the proponents of building the gas pipeline. Where the PLA would really come into effect would be between the owner of the pipeline and the constructor of the pipeline, and that's an appropriate place for a PLA.

News-Miner: What's going to make them do one?

Binkley: Well I don't even know that you could, and I've got to think about this—if there's a legal mechanism to force an owner. I mean I think the state has leverage and it should use that leverage in order to encourage the owner of the pipeline and the contractor of the pipeline to incorporate a PLA. But I'm not certain it has got a place in the fiscal terms that would be negotiated between an owner and the state of Alaska.

News-Miner: But, as a potential governor, is that something you would ask for?

Binkley: I believe that any agreement is going to ultimately have to have a PLA in order to get a pipeline built, and so I think it's appropriate for the state to encourage that to happen. I think it ultimately will happen.

News-Miner: But as governor you're not going to require that they negotiate a labor agreement?

Binkley: I would require that the owners negotiate one—you guys are tough. Let me just think about that for a second. So what you're saying is and that would be, you know, presumably a negotiating item that the state would give up something on one side... [A]ny item that you insist on is going to cost you at the table.

News-Miner: But we want to know what your belief is, not what might happen to it in the negotiating process.

Binkley: I believe any project of this magnitude will need a PLA.

News-Miner: On the Healy Clean Coal Project. Do you have any ideas on getting it going?

Binkley: I don't believe it is through a lawsuit. I think the state ought to get that plant producing electricity. I think the entity that is most capable that should be the ones who actually operate that plant are Golden Valley. They are the ones who participated in constructing it and as I understand it they own I believe the land that it sits on... I mean so it intuitively makes sense for me that Golden Valley is the one who should be operating that plant. Now the governor needs to make certain that his commissioners understand that that is the goal ... to have that plant operating, have it operating efficiently and by the ones who can most efficiently operate it and who are the most likely users of the power, and that's Golden Valley.

News-Miner: On to some state fiscal and budget questions here. The argument against the current budget is that it is not sustainable at its current rate of growth. What are your thoughts on that, and what sort of budgets would we see from you?

Binkley: I was disappointed in this budget that was presented by the current governor. You know I was in the Legislature (1985-90). I served as cochairman of Senate Finance. I was responsible for the operating budget just four years in the Senate... so I have an understanding of it. I know how it is put together. I know the importance of the work, the working relationship between the governor and the Legislature on the budget and how the influence of the governor can really dictate the outcome of what that budget is...

What is our goal going to be and what are we going to accomplish? What are the levels of spending that we're going to agree to and have the fiscal discipline to adhere to? So that has been completely lacking. So that's the first thing I would do is get together with leadership before I presented my budget to the Legislature in December as required under the Constitution and establish with the Legislature what the parameters of the budgeting should be.

News-Miner: What's your fiscal philosophy?

Binkley: I'm a fiscal conservative... Government should only provide the services that are necessary for the people that it serves.

News-Miner: Seems it's pretty tough for fiscal conservatives when there's all this money floating around.

Binkley: Well it gets tough for some fiscal conservatives.

News-Miner: So what size budgets would you be submitting?

Binkley: We cannot allow them to grow at the rate that they currently have grown, particularly in this last year. We have to hold this level, you know, we have to determine what the adequate level of services are and provide those on a sustainable basis....

We have seen virtually all of the excess revenue that has come in, and it has been substantial, that has been expended in this legislative session and I believe that has been a result of this governor not having the fiscal discipline to and not having the ability to work with the Legislature to set an overall fiscal plan and fiscal level that they can adhere to.

News-Miner: You spend a lot of time talking about what you think this governor has done wrong. If the budget is not sustainable at its current level, does that mean that you are going to pull it back?

Binkley: Well, you have to look at what the revenues are, but as I said going in, you need to work with the Legislature to have an overall spending plan. What is our fiscal plan going forward? And that is something that shouldn't be done in a vacuum or by the governor himself. It should be done in cooperation with the legislative leadership.

News-Miner: So how do we state your view on this? You would like to see a slower growth rate in the budget?

Binkley: Yes, in a fiscal plan going forward so that those excess revenues that we have, we don't just look at ways to spend those, that we, No. 1, save. You know the bulk of those excess revenues that we have over and above what we had the year before, we should put aside in savings... No. 2, put them into infrastructure but infrastructure that creates jobs, that actually gets us to positions where we can develop resources to create jobs. They don't have to be development of resources that necessarily puts a lot of money back in the treasury but resources that develop jobs, and No. 3, help constituents through municipalities (with) revenue sharing. It's an important item that needs to be reinstated on a predictable level so that municipalities can provide services to people at a local level. That is where it is done the most efficiently. It is the same people that we're serving. Local communities can do it more efficiently.

News-Miner: So you want to return to the way municipal assistance and revenue sharing was?

Binkley: Correct.

News-Miner: The governor makes the point that he did set aside hundreds of millions of dollars.

Binkley: It's not in savings though. ... Those are dollars that are appropriated that are available for expenditure, so any time the executive branch or the Legislature can spend those dollars. ... I'm talking about putting them into the constitutional budget reserve or the (permanent fund) earnings reserve... We need to put it in something that has a fence around it that takes some effort, some action by the Legislature, to go in and get that money.

News-Miner: Here are two questions on the retirement system shortfall: Should the state help municipalities pay their share of the retirement system shortfall, and would you go back to the defined-benefit plan rather than the 401(k)-style approved last year?

Binkley: The state does have a responsibility. There is almost a $7 billion unfunded liability, and we can't ignore it. We have to address it. We have to start paying down that unfunded liability. I think there is a sharing that needs to take place with other entities who have participated in the system. They certainly have their responsibilities, but the state bears some of that responsibility as well.

News-Miner: Where does the money come from to pay for that?

Binkley: [F]ortunately we are blessed with $70 a barrel oil right now, and we are blessed with the resources to be able to start to tackle that problem and we need to do that.

News-Miner: Does it come by raising the rates that employees pay?

Binkley: Well, you know those are negotiated. Those are negotiated each year, and that... is one of the things that is going to be facing (the next) governor, is renegotiating virtually all the public employee contracts within the first several months of the administration.

News-Miner: If you were governor, is it possible that you would seek to raise the employee contribution rate?

Binkley: Well I'm not going to talk about the details of how I'm going to negotiate...

News-Miner: But philosophically though. We're not asking for specific numbers.

Binkley: Well I think everything will be on the table when we start negotiating wage and benefit package[s].

News-Miner: Should the state should be helping the local governments pay the retirement bill?

Binkley: I think the state has some responsibility. You know the degree to which that state participation should be is one that is debatable, but I believe the state bears some responsibility in helping municipalities and school districts in dealing with this issue.

News-Miner: On the other retirement system question: Do you support last year's change to a 401(k)-style program for new state employees?

Binkley: Well you know it's difficult to go back and second-guess the Legislature in what they did. I know they worked through a difficult process, ended up with a conclusion and a system that they felt was the best way to move forward for the state of Alaska. I'll just give you the way that I've dealt with similar issues. At the railroad we looked at that same issue. Should we change from a defined-benefit program to a defined-contribution program? Our judgment was that the... advantages of a defined-benefit system outweighed the disadvantages of a defined contribution plan because of the fact that it is important to recruit good people. It is important to have people in your organization that view themselves as being long-term employees, that they view themselves as committed to this entity, this corporation and that they want to be here for the rest of their working life.

News-Miner: Let's go on to another municipal question. There has been a big push among some in the Legislature for the mandatory formation of boroughs. Your thoughts on that?

Binkley: I'm opposed to that... I think you need to set the stage for economic development in areas that will encourage people to form boroughs. That's the key to it. We need to develop the resources in those areas so that people see a benefit for having a localized government. If you look at the northwest project where we were able to develop Red Dog, as a result of that a borough formed around that. The same with Pogo, looking at that. So that's the key to me. [I]n my opinion, you can't force an area into a mandatory government when they don't have an economic base to support that government. It is a recipe for disaster.

News-Miner: Let's talk about the longevity bonus and assistance to low-income seniors.

Binkley: I think the governor was wrong in terminating the longevity bonus, a program that was set to reduce itself and eventually go away. I know that Pioneers and the AARP went to the governor and tried to convince him to at least give them five years to transition. He said no.

News-Miner: Would you bring it back?

Binkley: I don't believe you can structurally bring it back because that is a class of people that was established over time that you cannot reconstruct. And that's what I've heard from legislators, that that was the opinion that they got in trying to reinstate the program. You'd have to start with a whole new program.

Editor's note: John Binkley asked on Aug. 8 to amend his response to reflect new information. He says he supports restoring the longevity bonus.) "The statute is still on the books. The governor line-item vetoed the actual dollar amount, so we can put the appropriation back. The legal question would come in re-establishing this class of people. Someone could make a case that since the class of people has been recreated, they could come into the system."

News-Miner: Let's talk about subsistence. Are you satisfied with the way things are now?

Binkley: No, I'm not. I think we're seeing over time an erosion of the state's ability to oversee and manage fish and game in Alaska and it has just been a continual erosion since ... I think it was '88. Since the McDowell decision in '88 we have continually stepped back and stepped back, and the federal government has stepped forward and forward and forward in managing fish and game in Alaska, and I believe that's wrong. The initial thought the way to stop that and control that was a constitutional amendment that was proposed back in the eighties shortly that. It was never able to get passed by the Legislature and put on the ballot for Alaskans to make that decision. That, in my opinion, is passed us as a way to get (rid of) federal control.

The way that we need to move forward is to start to regain control from the federal government and there are ways, specific ways that we can be doing that, but we're not. For example, as the federal subsistence groups go forward and promulgate regulations, many times—I have spoken to people within the Department of Fish and Game—those are outside of the scope of their federal legislation and we need to assert ourself when that happens and the challenge them on that so that they don't continue to take more and more management of fish and game.

News-Miner: So you're saying the subsistence board has overstepped its authority?

Binkley: Correct, and the state needs to assert itself to not allow them to do that, and if that's through legal avenues, that's what we need to do. The second thing is the state needs to have a seat at the table and with many of these federal subsistence decisions it is the Federal Subsistence Board charged with issues of allocation, the state's primary responsibility is to sustain yield, to make sure that the resource itself is protected, and so we have to again assert ourselves to be involved in those decisions so that we know that we are protecting the resource, that we are looking to sustain yield principles, not just allocation issues as these come up before these Federal Subsistence Board.

News-Miner: So that's a good segue into asking your thoughts about predator control.

Binkley: Well, I think that predator control is a useful tool in the toolbox of wildlife managers.

News-Miner: Do you compare yourself to Knowles or Murkowski on this issue?

Binkley: Murkowski.

News-Miner: Do you think the Board of Game is out of balance in any particular way as far as user groups?

Binkley: I will review all of our boards—the boards of fish, boards of game. [T]he most important thing to me, and I guess I say particularly on the fish board, is that a lot of the appointments have been sometimes just individuals that represent interest groups, and that troubles me. It shouldn't be representing interest groups. That shouldn't be the purpose on the board. All the board members should be there to represent the best interests of Alaska, and even though they may be from the fish processor side or they may be from the sport fish side, they need to be looking at what is the best policy for Alaska and not just represent their industry or their special interest on that board, and so the governor needs to make that clear through the commissioner of Fish and Game, through the people that he appoints to those boards, that that is their No. 1 responsibility.

News-Miner: On education funding, Gov. Murkowski might be called the education governor by some. He's overseen a substantial increase in education funding. Some educators say it's not enough. What are your thoughts on education funding?

Binkley: The problem is that the money is not translated into the classroom. Despite the fact that we spent another $280 million over the last several years, very little of that has translated into real impact in the classroom. And so it is not just enough to take money and put it into the existing system. I believe you need to be bold. You need to be innovative and you need to challenge the way that we're spending the money.

News-Miner: Do you have any ideas yet?

Binkley: Well I'm not an expert in education. You know, we've had four kids that have gone through the school system so I have some of my own ideas... One of the most critical things that the governor does is attract good people to their administration. People who are willing to serve that have the skill sets that are not just looking for a job but are motivated by the vision that you have, and education is the prime example of where you need somebody who really has those skill sets who is not just looking to further their career but somebody who really wants to make a difference in education in Alaska and that's the type of person that I'm going to get.

News-Miner: How about the University of Alaska funding?

Binkley: I think President Hamilton has done a tremendous job really in starting to get the adequate funding levels to be able to have the university system really meet the mission that it has providing education, post-secondary education, for Alaskans.

News-Miner: Gov. Murkowski has agreed to President Hamilton's request for a 5 percent increase each year, and he seems pretty proud of that. Is that something you would continue?

Binkley: Well I'm going to look at every request and I'll look at it hard, too. It isn't always just about more money. It is how wisely we spend that money and making sure that money is put to good use. So any request for an increase is going to be met with scrutiny, with hard questions, and making sure that we are getting value for the dollars that we're spending.

News-Miner: How do you try to get votes from the 18 to 30 crowd, which doesn't vote as much? What do you say to them?

Binkley: The decisions we're making now are critical for their future and for their kids' future. So that's what I talk about is, "Think about your children"...

News-Miner: OK, want to sum up?

Binkley: We came back to Fairbanks, we settled in here so the kids could work alongside their grandparents, their aunts and uncles and cousins and alongside us, so that we really had a chance to pass on our values to them, the same as their grandparents and really give that to them to hopefully make them better people. And that's what we focused on for the last 16 years and that's why I got out of politics. And you know besides that I've served nine years as chairman of the railroad board, a large complex organization, I understand the economies of the Railbelt all the way from Seward up through Anchorage and the Valley and Fairbanks, North Pole, and Eielson. You know, that's a breadth of experience...

I represented the people in rural Alaska. I've got small business experience. I made a payroll for 25 years. I've been involved in the Legislature. I know the workings. I just really believe that I've got a broad background of experience that I can bring to the table.