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Dunleavy administration awards 2 no-bid contracts to former chief economist

From left, Office of Management and Budget economist Ed King and Department of Revenue Commissioner Bruce Tangeman talk to Sen. Mike Shower, R-Wasilla, Wednesday, March 6, 2019 after a meeting of the Senate Finance Committee. (James Brooks / ADN)

The Dunleavy administration in June awarded two sole-source contracts to its chief economist Ed King, scheduling them to begin shortly after King left state employment to work in the private industry.

Both contracts — one hiring King to study oil taxes, the second to study public education funding — pay $150 an hour. Together they’re worth up to $95,000, with possible extensions for the tax study. They were awarded to King Economics Group, owned by King.

The contracts were signed by King over two consecutive days in mid-June, after King had given notice he would soon leave his position as the state’s chief economist for the Dunleavy administration, officials said.

The contracts began July 1, three days after King stopped working for the state to return to work at the company he founded.

After publishing a story Thursday morning about a contract hiring King to study oil taxes, the Anchorage Daily News learned of the existence of the other contract focusing on public education funding. King could not immediately be reached Thursday to discuss the second contract.

Mike Barnhill, policy director for the Office of Management and Budget under the governor’s office, confirmed its existence.

The contract to study the education formula

King will study potential changes to the state’s complicated education formula that helps determine how much state money goes to schools, the contract shows. He will assess the impact of those and other changes to local governments, which also provide funding for schools, according to the education contract.

The six-month contract may not exceed $45,000 unless it is amended, the contract states.

“We’re looking at different ways of funding state education, through the formula, and so he’s just running numbers to help us understand that better,” Barnhill said Thursday.

It’s unknown whether Gov. Mike Dunleavy will introduce legislation next year to cut education funding, Barnhill said.

“But if we do anything with education funding, my view is it should be done in the context of the formula,” Barnhill said.

The governor has made deep cuts to state programs this year to shrink a $1.6 billion deficit, sparking widespread outcry from many Alaskans. Dunleavy has said he hopes to cut hundreds of millions more from the budget next year, but has not released a specific plan detailing where those cuts would be made.

Before the education contract with King was finalized June 13, Barnhill said he received an email from “management” in the Office of Management and Budget that asked if anyone needed King for any contractual work.

“The question was circulated as to whether there was work Ed could do for us after he left,” Barnhill said. “The education formula work was something I was interested in.”

Barnhill said Thursday he thought the question was posed by OMB Director Donna Arduin, though a variety of people were involved in the email.

Requests for comment made to Arduin’s office were not immediately returned Thursday afternoon.

In an interview Wednesday about the oil-tax contract, King did not mention the existence of the contract to study the education formula.

Shawn Henderson, administrative service director in the governor’s office, said Thursday he is “certain” King has no other contracts with the governor’s office.

The contract to study oil taxes

King said Wednesday that he made $150,000 a year as chief economist, plus benefits. He always planned to work at the state temporarily and left at the end of June because he prefers being his own boss.

The no-bid oil-tax contract was awarded by the Department of Revenue, King said. That $50,000 contract lasts one year, with the possibility of two one-year extensions.

King signed that contract June 11, the day before he signed the education-formula contract.

The oil-tax contract was awarded in part to help the state get ahead of any oil-tax adjustments the Legislature might propose when they convene in January, said Bruce Tangeman, Revenue commissioner, on Wednesday.

The administration doesn’t want to change the tax code, said Tangeman, who requested that sole-source contract.

The tax system that went into effect in 2014 is working to attract new oil-field investment, Tangeman said.

Amid $444 million in operating budget vetoes from Dunleavy, some Alaskans in recent months have called on lawmakers to increase the production taxes oil companies pay.

Those requests, plus the Legislature’s decision in May to extend contracts for their oil-tax consultants, contributed to Tangeman’s decision to hire King under a sole-source contract, Tangeman said.

“I know the Legislature is geared up, and I hear the rhetoric,” Tangeman said. “If they gear up, I have to gear up.”

Tangeman said a sole-source contract was warranted because of King’s unique experience working for the state’s Revenue and Natural Resources departments on oil-revenue issues.

“He has a unique skill set for understanding price forecasting and oil production," Tangeman said.

King will produce a long-term oil production forecast before the Legislature convenes in January, the contract says. The report will assess the impact of potential changes to oil taxes.

King said he will not be biased.

“No. I’m a scientist and you follow the data. You don’t find the data that supports the outcome,” he said.

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