During a recent education panel in Washington, DC one of the panelists, Peter Edelman (Center on Poverty, Inequality and Public Policy), stated that “It’s time to stop arguing whether schools prepare students for the future and launch a full scale attack on poverty”.

The first purpose of raising this point is what is known as a diversionary tactic in the military. Divert attention from the real issue and change the focus to a side issue.

The second purpose in raising this point is captured in the solution the NEA offers for solving poverty: put all 3 and 4 year old children into pre-K schools. Surely, these would have to be government pre-K schools because parents of poor children are not responsible enough to select a good private pre-K school for their children. The ranks of the NEA would necessarily swell with new members because all the government pre-K teachers would have to be certificated and belong to a union, just like organized labor did with daycare workers in Michigan. Even the U.S. Department of Education acknowledges that the Head Start program has not resulted in any long term gains past the third grade.

As long as those responsible for the education industry in America can blame “poverty” for low academic achievement, we all lose. Education has been the greatest lever for advancing people from the ranks of poverty to the middle class and even higher in our country. Following WWII, the GI Bill enabled those who served the opportunity to go to college and provide well for their families. This was, perhaps, the greatest growth of our middle class. Many others since then have pulled themselves up by their bootstraps, worked hard, paid their own college expenses and advanced in our society. Just look at what Dr. Ben Chavis has done in his American Indian Public Charter School in Oakland, CA. In the early 2000s he took the worst performing school in the Oakland School District and transformed it into the best middle school in the entire state of California. Some call this miracle work. I call it leadership and empowerment.

Dr. Chavis, unencumbered by many of the District’s rules, set very high goals for his students, challenged them every day, instituted a structured environment, selected teachers from Craigslist based on their credentials (not their years of service), and held everyone accountable. Teachers, students and parents were accountable for outcomes. He worked miracles on a student population that consisted of 98 percent minorities, 85 percent low income and 45 percent English language learners. Many of his students have gone on to Ivy League schools, many have returned to the American Indian Public Charter School to teach and help other poor, disadvantaged students strive for achievement. Dr. Chavis believes there is no achievement gap; there are just kids who are not challenged by the current education system.

So, let’s stop blaming the kids’ backgrounds for their lack of achievement. Let’s empower parents to choose the best education fit for their children. Let’s not relegate children to a failing school because they just happen to live in the wrong neighborhood. Let’s really solve the poverty problem-educate children to their maximum potential.

David Boyle is a Research Associate with the Alaska Policy Forum.

Dr. Nina Pierpont, M.D. Ph.D., has written about medical problems of people living within 1.25 miles of wind turbines. It seems that some suffer from what she calls “wind turbine syndrome”. Symptoms include nausea, depression, agitation, blurred vision, vertigo and difficulty reading/remembering. She attributes these maladies to low frequency and infrasound generated by the turbines. Some people have even left their homes to escape from the effects of the wind turbines. Will the endangered species Cook Inlet beluga whales also be affected in some manner by the low frequency waves transmitted from the wind turbine tower through the ground and then into the water? These low frequency sounds are very easily transmitted through earth and water media.

If you want to read more, read this article by Paul Driessen at Townhall.com.

It seems as if economic segregation prevents many students from receiving a quality education. If one looks at Anchorage, one will note that the under-performing schools are concentrated in the lower socioeconomic areas of the city. But does the cost of housing really affect a school’s performance? Mr. Rothwell believes one can use zoning laws to change education. By subsidizing low income housing and locating this housing in wealthy neighborhoods, the author believes large educational gains could be achieved for low income children. He actually suggests housing vouchers to allow low income families to move to neighborhoods with high performing schools as well as mandating low income housing in higher income neighborhoods.

Would moving low income families to the Hillside area of Anchorage lead to better schools? Or would the wealthy place their children in private schools? Maybe we should mandate that the higher income folks build in the lower income neighborhoods so they could share the “wealth” of the lower performing schools! How about giving all parents the right to choose where they want to send their kids to school? (Now that’s a rather novel idea.) Mr. Rothwell does mention the successful school voucher programs in Milwaukee, WI and Washington, DC and how the lower income students have increased achievement. He further suggests, “Led by the federal government, school funding could be linked to individual children rather than schools, such that a child could apply to multiple public schools in his or her area.” A better idea would be to link school funding to individual children and let the parents choose any school, public or private, for their kids.  So which do you prefer-housing vouchers or school vouchers? It’s time to make a choice.

(read the Rothwell study…)

The Pew Center on the States has recently completed an evaluation of all 50 states and the District of Columbia and rated them according to the following criteria: (1) is evaluation of the incentives built into legislation and budget decisions, (2) are all tax incentives reviewed regularly for impact on economic development, (3) is the economic impact measured by using proper data and analysis, and (4) are these incentives achieving the desired goals. Unfortunately, Alaska meets none of these criteria and is rated as “falling behind”.

Many times, the economic impact is exaggerated by both the tax credit beneficiary and the state doling out the credit. For example, in Minnesota the Department of Employment and Economic Development estimated that each job created through an incentive program cost the state about $5,000. However, the Legislative Auditor’s Office estimated the cost to the state somewhere between $26,900 and $30,800. As one can see, the economic impact should be based on evaluation of objective data by an office removed from the department responsible for the tax incentive. (read more…)

Should Alaska Create a New Program for Preschool? (2.8MB)

Common Core Standards: Federal Curriculum By Proxy

David Boyle and Jeremy Thompson interviewed Michael Cannon from the Cato Institute about the danger that Exchanges pose to Alaskans. In short, if Alaska wants to bring down the cost of health care, not only are Obamacare exchanges not going to get the job done, they will actually drive up health care costs for Alaskans.

Here are several clips from the interview with Michael Cannon.

What is a Health Insurance Exchange and Does it serve a legitimate purpose?

An argument often made by even those who are opposed to Obamacare.

Won’t Alaska have more autonomy if it runs its own exchange?

Some point to the state of Utah as an example of how an Exchange can work in a free-market friendly way. Not true. In fact, Utah shows how Exchanges will drive up health care costs.

Didn’t Utah create an Exchange that is friendly to free markets?

If Alaska refuses to set up an Exchange, it’s unlikely the federal government will do it. They’re broke and they didn’t set aside any funding in the actual law for setting up Exchanges.

What it Alaska doesn’t set one up? Can the feds do it?

Another argument that is often used in favor of Exchanges is that setting up one will give us more leverage. Cannon says that one can’t protect oneself from being hit when one is providing the club.

If Alaska sets up an Exchange, can’t we band together with other states to leverage the feds into a better deal?

Exchanges are expensive. They won’t save money, but they will cost plenty.

Is setting up an Exchange fiscally responsible?

Thompson asks Cannon why the law is going to be so detrimental to the economy.
Why is Obamacare so dangerous to the economy?

Women tend to be in more control of the health care spending dollars in the home than men. Will Obamacare tend to affect women more than men?
Is Obamacare worse for women than for men?

What are some of the adverse incentives that the law will encourage? Will insurance companies be able to cherry pick their customers?
Will Obamacare encourage insurance companies to cherry pick?

Why is there a subtle assent to the implementation of this law from some business leaders and from the health care community?
Why don’t the hospital and insurance lobby fight the implementation of this law more?

By: Jamie Kenworthy

There may be no better Alaskan example of a big spending government project misrepresented as a “public-private partnership” than the Knik Arm Bridge, Alaska’s second and only surviving “Bridge to Nowhere”.  This study examines the financial aspects of the Bridge project and looks at the long term financial impact to the State of Alaska.

The Knik Arm Bridge has always been a wholly government-funded project seeking more government funding to get off the ground.  Funded early on by an original $230 million Congressional earmark, with the state taking about half for other projects, the Knik Arm Bridge and Toll Authority (KABATA) has spent $60 million to date on studies and salaries.

In March, 2010 KABATA told the Anchorage Assembly that the private sector would assume the financial risk of making up the inevitable toll shortfall to pay off the bonds.  In fact, KABATA had already applied for another government $300 million loan declaring that annual appropriations from the State would be needed to backfill the lack of toll revenue. (See p. 7 http://www.knikarmbridge.com/documents/TIFIAcoverandLOI.pdf) 

With the toll shortfall, what might the state’s liability be over 35 years of cumulative private contractor payments?  In KABATA’s latest federal loan application, it estimated this liability at $ 3 billion. (See p. 4 http://knikarmbridge.com/TIFIA/2011/12-2011-KABATA-Model-PABs.pdf)   And this may even be on the low side.

A public records act request to the State Transportation Department revealed that the toll revenue forecast may be overestimated by a factor of two.  When Scott Goldsmith’s (University of Alaska, ISER) estimate of future population was modeled into vehicle trips by Ch2M Hill, it concluded 17,700 vehicles would  use the Bridge daily in year 2035.  However, KABATA’s comparable number that it uses for its toll revenue projection is 36,000 trips a day. This is difficult to imagine because today there are less than 30,000 trips now between the Mat Su and Anchorage on the Glenn Highway.

This possible 103% overestimation of toll revenue by KABATA over the ISER-CH2MHill toll numbers is consistent with the study of a retired federal economist. This economist documented a 118% average overestimation error by the KABATA traffic and toll consultant, Wilbur Smith Associates, for the first five years a toll facility was open in all US projects.  (See http://www.scribd.com/doc/79582705/RCA-Study-Wilbur-Smith-Traffic-amp-Revenue-Forecasts-012712.%3Cbr%20/%3E.)

The vast majority of the present MatSu commuters would continue to use the Glenn Highway since Palmer and Wasilla are closer to Anchorage via the Glenn than via the proposed Knik Arm Bridge. In addition, these commuters would not have to pay a $5 one-way toll rising 2.5% a year.

An independent estimate of the Knik Arm Bridge costs concludes that it would accumulate $1.1 Billion in deficits by 2035. (See http://knikbridgefacts.org/wp-content/uploads/2012/02/The-Real-Finances-of-the-Knik-Arm-Bridge-v3.pdf).

We will spare ourselves having to debate over population and traffic projections and just focus on which consultants are paid by KABATA and watch who is left holding the bag.  If the private sector were willing to finance the project, it is more than likely the project would already have been financed. But there were no takers.

Instead, KABATA went to the legislature last year with two bills tapping the General Fund to provide another $150 million for the project and also to make any contract KABATA would sign with the private contractor  “obligations of the state”  –  the inevitable blank check.   As David Boaz of the free market-oriented Cato Institute observed of the Knik Bridge project:  “Yes, the largest investment companies — and the largest construction companies — would be delighted to work on this project, if someone else would actually put up the money. “  http://www.huffingtonpost.com/david-boaz/bridge-to-nowhere_b_984839.html

Clearly, the private sector is not interested in taking any risk on having sufficient toll revenue to pay off the Bridge bonds and operating costs. Rather, KABATA has promised the two losers of three short-listed consortia bidding for the expected $1.1 billion contract a “stipend” of $2 million each to submit a final proposal.  Supposedly, KABATA will pay for the intellectual property of the losers’ bids, but industry observers consider this amount excessive. 

If the KABATA legislation (HB 158-159 and SB 79-80) passes this session of the legislature, the winning contractor will have 35 years of state-guaranteed “availability payments” that KABATA estimates will total $3 billion.  Even this $3 billion assumes KABATA will get $350 million in federal TIFIA and TIGER loans and grants which it failed to get in the past three years.  

The next phase in the battle of the Bridge is likely to take place over the approval of the Anchorage Metropolitan Transportation Plan (MTP) beginning with a public hearing April 10, 2012 at the Anchorage Assembly.  The Knik Bridge remains in the MTP with the new transportation plan, unlike the existing one, overturning the Assembly’s previous position that no further State or local funds would go to support the Bridge.

Unfortunately, readers of the new draft MTP would learn nothing of the size of the downside risk to the State on this $1.1 billion project.  The draft “assumes” the KABATA bills will pass and that if the State has to make up what has been independently estimated as an average of $55 million a year in deficits, that none of this expected body blow to State transportation funds will impact funds going to South Central Alaska.  (See pp. 6-29-31  http://www.muni.org/Departments/OCPD/Planning/AMATS/Documents/MTPChapter-6_123011.pdf

A diligent reader of the MTP would see only the sources and uses of funds to finance the $1.1 billion project. He would not see any of the overall financing costs and ballooning annual availability payments to the private contractor which go from $34 million in year 1 to $133 million in year 36.  (p. 4 http://knikarmbridge.com/TIFIA/2011/12-2011-KABATA-Model-PABs.pdf)

The draft MTP shows an estimated $79 million in private equity from the contractor which may seem impressive.  Not disclosed is that under the proposed state-guaranteed contract KABATA estimates a 12% compounded return of net cash flow to repay the contractor’s equity.   So that $77 million in private contractor equity would end up costing the state a KABATA-estimated $920 million before the bonds are paid off in 2050.

While the final RFP competition may only result in a compounded return to the contractor of, say 10%, the whole proposed deal structure begs an obvious question: Why would a state with a AA credit rating that can borrow long term at 4% guarantee a contract providing a contractor a 10-12 % compounded return?  The State assumes all the risk, the private contractor assumes none.  Only in the world of crony capitalism would this make sense. 

The marketing of the Bridge project has been an ongoing exercise in the euphemisms necessary to mask a typical bottomless government liability.   The proposed $150 million in additional State funds is just a loan that will be paid back according to the rosy trip forecast.  A small print footnote to KABATA’s 12/30/11 federal loan application notes that “if” – more likely “when”– the reserve fund dips below $50 million, it will trigger an automatic appropriation request to the legislature to have the fund “replenished” back to $50 million ( see p. 8 in KABATA’s latest Financial Plan   http://knikarmbridge.com/TIFIA/2011/12-2011-KABATA-Model-PABs.pdf). 

 So, this reserve fund will apparently be automatically replenished by annual legislative appropriation, regardless of the state of Alaska’s budget.

The fundamental misleading description of the selling of the “public-private partnership” project by KABATA is its assurance to the legislature that the contractor will “finance” the project.  Technically, the contractor will take the State of Alaska-guaranteed contract to the credit agencies and the State’s credit rating will likely be the evidence the contractor needs to provide the investment grade necessary for the firm to then go to the bond market for the funds to build the project.  So in reality it’s the proposed State guarantee on the KABATA contract – or the continually replenishing $150 million “reserve fund” by the State — that finances the project and not the balance sheet of the contractor which is put at risk. 

The original legislation establishing  KABATA made clear that the new agency could not pledge the State’s credit or sell bonds without earning an investment grade.  But in a 11/30/11 legislative briefing, KABATA now seeks to “clarify” that prohibition to make the bonds “obligations of the State” by amending the original statute “to reflect current market realities.”

Senate Finance Chairman Bert Stedman (R-Sitka) is opposed to the State guarantee in the current bills but  KABATA Board member Senator Linda Menard (R-Wasilla) is now rewriting the KABATA bills to overcome that objection. However, it is still likely that the continual replenishing of the $150 million reserve fund will remain in the bills to provide a backdoor State guarantee.  Without the State holding the bag, it is unlikely KABATA will be able to put the RFP on the street this year.

Hopefully, both the Anchorage Assembly and the Alaska Legislature will pay close attention to the risk-free financial arrangement of this “public-private partnership” and recognize it for what it is. Public assumes the risk, private sector assumes the benefits.

(Jamie Kenworthy is the former Executive Director of the Alaska Science and Technology Foundation and has served on the Board  and Audit Committee of a $60 million/year remote sensing defense contractor, the former Environmental Research Institute of Michigan.  He lives in South Anchorage and has been the volunteer financial analyst opposing state support for the Knik Arm Bridge.)