Skip to main Content
Opinions

The Alaska money dam bursts — 1981-82

  • Author: Charles Wohlforth
    | Opinion
  • Updated: October 17
  • Published October 17

Editor’s note: In this final installment of a four-part series, writer Charles Wohlforth tells the story a legislative coup and spending spree in 1981 and 1982, when state spending hit its peak, the first Permanent Fund dividend was paid, and the shaky foundations of today’s Alaska were set.

Russ Meekins. (Anchorage Daily News archive)

House finance chairman Russ Meekins and Senate finance chairman George Hohman were still negotiating the capital budget in 1980 when Meekins visited the state’s chief prosecutor. He said Hohman had offered to split a bribe with him, $10,000 each, if he would approve purchase of a pair of Canadian firefighting airplanes.

The prosecutor sent Meekins back to talk about it again, but Meekins refused to wear a recording device and returned with the same story. While the legislature met, a grand jury investigated Hohman, secretly, until Meekins leaked the news to a reporter. Hohman was indicted.

An old Ad Hoc Democrat told me 1980 felt like he had stayed at a party too long. He had enjoyed the youth and relative poverty of the legislature in the 1970s. Members didn’t travel home from Juneau during the session in those days. Isolated together for months, they boozed, danced, did drugs and had freewheeling sex. In 1975, the legislature decriminalized marijuana. The Ad Hoc kids called a “joint caucus” off the House floor.

It must have been fun, but the legislature also worked in the 1970s, navigating the most challenging and formative decade in Alaska history. Legislators commissioned detailed policy analyses, which the newspapers also published. Committees and the governor held meetings in communities around the state to hear views about how to become an oil state.

They were spending their constituent’s money and they were careful. A House Finance Committee member recalled debating in 1979 whether to buy new uniforms for a state trooper post or to put off the purchase for a year to save money.

A year later, the money had arrived and they passed the Cheechako Tax and the Permanent Fund dividend, which rewarded longevity in the state while taxing only newcomers (as I described in Part 2 of this series). And two months after that, a judge struck both down. A young lawyer couple, Ron and Penny Zobel, questioned the constitutionality of being taxed more because they hadn’t lived in Alaska long enough.

Ron was a former Green Beret and he and Penny had served together in the Peace Corps before coming to Alaska — bright, interesting young people — but when they won their case, Alaskans vilified them in a way rare in pre-internet days, including telephone calls and letters demanding they leave the state and threatening violence. Anti-Zobel bumper stickers and T-shirts turned up, including one that said, "Zobels Eat My Shorts.”

Ron Zobel, shown in a 1992 file photo. Zobel challenged the first Alaska Permanent Fund formula and succeeded in blocking payments for about four years. (Anchorage Daily News archive)

The name Zobel became an epithet, permanently ending Ron’s dreams of politics — he remained notorious for decades. Yet the Zobels were obviously right. The judge said the residency preference violated the constitution’s equal protection clause and served no legitimate government purpose. Ron summed up the attitude of his attackers as, “I’ve got my money, I don’t care if it’s constitutional, so don’t get in my way.” Time Magazine declared the Zobels Alaska’s most unpopular couple.

The Zobel case on the dividend went on appeal to the U.S. Supreme Court a couple of years later, but the state courts killed the Cheechacko Tax right away, restoring the old income tax. With elections nearing, the legislature rushed into special session to repeal it as quickly as possible. The state’s tax collector was so sure of the outcome he stopped all withholding even before legislators convened.

Gov. Jay Hammond briefly held out, proposing a suspension of the tax instead of outright repeal, so that the levy could be restored automatically when needed. With a repeal, bringing back the tax would require a majority of legislators to take a courageous vote, but with a suspension it could come back without any action being taken.

Hammond knew the tax would be hard to reinstate — and it has been impossible. But legislators brushed aside his suspension idea and repealed the tax permanently, and even refunded the previous year’s taxes. Hammond considered a veto, but knew he would be overridden. He said repeal of the income tax was his biggest regret.

Former legislators regretted it, too, but Clem Tillion was the only senator to vote no, his last vote before retiring from politics. The income tax, originally passed after years of struggle in 1949, had been a key accomplishment leading to Alaska statehood, demonstrating that the territory’s citizens had the political maturity for self-government. Its repeal marked the other end of that era.

George Hohman won re-election that fall despite his indictment for bribery. In fact, he was unopposed in his Bethel-based district.

Bethel in those days was a large Yup’ik village, windswept on the tundra, where some people lived in shipping containers and there was little work other than what the government would bring. People supported Hohman because he appropriated so much money to the area, as they made clear to an Anchorage reporter who came asking. They assumed the process of splitting up oil money would involve some sleezy dealing. And, rationally, why would they care?

If government levies taxes to spend on common needs, then a corrupt politician is a thief. But if government merely delivers unearned wealth, then a politician is more like a gladiator, the voters’ representative in the scramble beneath the broken piñata of the treasury. If he does well but keeps something extra for himself, then good for him. Against the benefits he brought to Bethel, any Hohman bribery seemed insignificant.

Alaska’s tradition of political corruption and unaccountability began around that time, not because of Hohman but for the same reason. Since then, corrupt politicians have tended to be reusable, like mesh shopping bags. Plenty got in trouble, low and high, but kept their purpose.

Bill Sheffield, the governor after Hammond, was caught rigging a bid on a building lease for a campaign contributor and was referred for impeachment by a grand jury. But he went on to a 30-year career in positions of responsibility and remains Alaska’s most influential senior statesman.

Don Young, Alaska’s sole congressman since 1973, was caught altering an appropriation bill after its final passage to reward a supporter from Florida with a highway interchange. House leadership stripped him of committee seats and the full House and Senate referred his conduct to the FBI for investigation. Voters didn’t care.

State Sen. Ben Stevens received $243,000 in consulting fees from Veco, the oil services company that was bribing other legislators at the time. Convicted Veco owner Bill Allen said Stevens’s money was for lobbying colleagues and taking official acts. Stevens was never charged with a crime. Today, he is Gov. Mike Dunleavy’s chief of staff.

It’s a strange phenomenon, because these aren’t exceptional men who are too valuable to lose, like star quarterbacks or gifted artists. Alaska’s recycled politicians are more like lucky pennies than champions. They are talismans for a cargo cult that only, really, hopes for more wealth, by whatever means.

Russ Meekins, on the other hand, met a bad end politically. Colleagues stopped trusting him. As several told me, legislators didn’t doubt that Hohman would take a bribe, but they didn’t believe he would have offered one to Meekins. Politically, it didn’t make sense. At the time, Hohman controlled huge expenditures on his own, larger than the one he supposedly tried to bribe Meekins to approve.

Rep. Russ Meekins, D-Anchorage, sits in the speaker's chair in the Alaska House chamber after a coalition of Republicans, Libertarians and disaffected Democrats took charge Friday, June 12, 1981. (Photo by Paul Helmar / ADN archive)

Something about the bribe story was missing. There were various theories, but clearly Meekins was too smart for his own good. When the State House organized in 1981, a process that took three weeks as factions within the Democratic Party maneuvered for control of the money, Meekins was left without his Finance Committee chairmanship, shunted off to the honorary but less important position of majority leader.

The 1981 session remains the most expensive in Alaska history, the apex of the oil wave, although no one knew it at the time. The money itself created pressure to spend. Hammond tried to slow it down with the help of Rep. Sam Cotten, the 34-year-old fisherman son-in-law of Clem Tillion, who had taken Meekins’ Finance Committee chair.

Cotten was a thoughtful, slow-speaking gentleman, conservative in his personality although a moderate Democrat politically. He tried to tamp down spending with delay, but as the session dragged on into the summer, rural legislators, also Democrats in his caucus, grew frustrated, seeing his slow-roll as an obstacle to getting more for their districts. Meekins secretly took advantage of their unhappiness to scheme a coup and take back his finance chairmanship.

On a Friday afternoon in June, Republican legislators quietly gathered on the empty House floor, where no session had been planned. At 2 p.m., Meekins and a group of rural Democrats rushed in after them and locked the doors. Meekins seized the speaker’s podium and declared himself temporary speaker under a rule that allowed the majority leader to take over if the speaker was incapacitated.

Democrats heard Meekins’s voice on the public address system and ran to the House floor, but couldn’t get in. Sixteen Republicans, two Libertarians and three rural Democrats remained inside and voted to excuse the rest of the House for the rest of the session (a Sleetmute Democrat said he had switched sides for “free love and nickel beer”).

The rest of the Democrats finally broke in, shouting points of order. Meekins overruled them and talked over their objections, charging ahead to vote out the old organization and elect a new speaker. But the new organization lasted only hours. Going into the weekend, it wasn’t clear who was speaker. While the new majority negotiated, Democrats argued their case in an emergency court hearing.

The most skillful player in the chaos emerged from nowhere. An Inupiaq freshman legislator from Kotzebue, Al Adams, worked behind the scenes, outmaneuvering even Meekins. Over a weekend of backroom street fighting, Adams emerged as the House Finance chairman, with a Republican as Speaker of the House, and Meekins was expelled from both caucuses.

Adams went on to a twenty-year career as the mastermind of Alaska legislative spending, parlaying a few Native votes in the legislature into a generous flow of money for rural projects. On his death, the House Finance committee room was named for him.

The money could not be held back. The coup showed that. The new majority, led by supposedly fiscally conservative Republicans and ultra-conservative Libertarians, spent more than any legislature before or since. To settle the conflict and adjourn, they simply divided the revenue evenly.

Hammond again brandished his veto power to bring restraint, but ineffectively this time. He called for a constitutional amendment to limit spending, threatening a “cascade of vetoes” if the legislature wouldn’t put the measure on the election ballot. He got his way, but the amendment never saved a dollar. Spending never again rose near the level of 1981, so the limitation always remained far higher than the money Alaska had available to spend.

That December, Russ Meekins testified against Hohman in court. Other legislators testified that they thought Meekins was lying. But Hohman had lied about the whole affair, too. The jury convicted him on Christmas Eve. A judge sentenced him to three years in prison, of which he served a year.

But his constituents didn’t give up on him. One village supposedly sent grant documents to him in his jail cell for his consulting advice to get money from the state. After Hohman completed his probation and returned to Bethel, and found work as a bingo caller, voters elected him to the City Council by a wide margin. He hadn’t campaigned much, telling a reporter, without irony, “I felt that my record would stand on its own.”

Former State Sen. George Hohman works at his prison job at the Palmer Correctional Center FEB. 8, 1985. In the early 1980s Sen. George Hohman was expelled from the Alaska Senate and was sentenced to three years in prison for a bribery conviction. (Photo by Mark Kelley / Juneau Empire / ADN archive)

Meekins became a political pariah, publicly declared untrustworthy by colleagues. He moved to Massachusetts, where he still lives.

In 1982, as Hammond’s term was ending, the U.S. Supreme Court finally, emphatically ruled in favor of the Zobels, throwing out the Permanent Fund dividend law, with its larger payments for longer residency. But the legislature had passed a simpler version in case that happened, giving everyone a dividend of the same amount.

Hammond at first hesitated to sign the bill. His original purpose, with higher payments for more years in Alaska, had been to transfer resource wealth to the true owners, the indigenous people and those who had dedicated their lives to the state, who cared about its future because they planned to raise families and be buried there. Alaska had been infested too often by wealth-seekers, he believed, the rip-and-run development crowd. An equal-for-all dividend would turn Hammond’s idea on its head. It would induce people to come for the money, not reward commitment to Alaska.

On the other hand, advisers told him, the divided would still meet his other goals, to create a constituency for the Permanent Fund and to equalize incomes, especially helping cashless Native villagers. He finally signed the bill. Checks for $1,000 went out to every Alaskan almost immediately. Hammond retired.

The law Hammond signed for equal dividends in 1982 remains on the books, but Gov. Bill Walker reduced the dividend by veto in 2016 and the legislature appropriated a smaller dividend than the 1982 law envisions in 2017 and ’18. Dunleavy ran in 2018 promising to return to the old formula and to top up payments with the amounts reduced the previous three years, for a mega-dividend of $6,700.

As a cab driver in Seattle opined to me, any politician in America could get elected by credibly promising to pay everyone $6,700.

Some opposed the dividend from the beginning. I was 19 in 1982. I got $1,000 that fall. It felt wrong to accept money without doing anything in return.

I never bought Hammond’s idea, which has since become a religion, that the dividend represented money due for ownership of Alaska. I have never felt Alaska could be owned — that would be like owning the ocean or the sky. The more years you spend exploring it, the bigger Alaska becomes, until the reality sets in that it is too big even to fit in your mind, much less in your pocket.

The ownership idea was just a conceit, the notion that landing at the Anchorage airport made you an owner who deserved cash for mere presence. People angrily defending their right to the dividend needed a reason, and that was it, but it was nonsense.

Instead, a more important kind of ownership was lost, which comes from having a voice in a democracy. American democracy works partly because voters believe the government belongs to them and assume responsibility and speak up. As an old-time politician said to me, “You stick a goddamned pacifier in their mouth, called a dividend, and you will never hear from them again.”

And that’s true, unless you try to take away the pacifier. Then you hear from them.

With such a system in place, change becomes impossible.

Today, some Alaskans do recognize the dividend as an incentive for selfishness and speak in favor of taxes to provide for collective needs. Gov. Dunleavy and his political supporters instead use talking points imported by the Koch brothers, denouncing taxation that doesn’t exist and indignant about diminishment of dividend payments they see as a property right.

Anti-tax conservatism doesn’t stop when there is no taxation, it merely moves on, demanding liquidation of public assets.

In that sense, Alaska’s predicament is more than an oddity. It is the end-stage of a disease.

How could it have been different?

Less money would have helped Alaska. If Prudhoe Bay had not been such a huge, sudden bonanza, Alaska might have handled the money better. Likewise, if deposits to the Permanent Fund had included much more — or perhaps all — of the new oil income, that would have prevented the money from changing the state so much and produced more investment returns now to replace the decline of oil.

Likewise, the constitutional amendment creating the fund could have provided the safety for it that Hammond wanted, making it unnecessary to have a dividend as an incentive. Or the dividend could have been allocated to communities rather than individuals.

History cannot tell us, however, whether any of those different outcomes would have been possible. The leaders of the time didn’t have the knowledge we have now.

Alaskans’ responsibility now is for the future. The mistakes are clear and it is time to fix them.

The views expressed here are the writer’s and are not necessarily endorsed by the Anchorage Daily News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser. Read our full guidelines for letters and commentaries here.

Local news matters.

Support independent, local journalism in Alaska.

Comments