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GCI spent millions in bid for budget reforms, new reports show

  • Author: Nathaniel Herz
  • Updated: October 3, 2016
  • Published October 1, 2016

Telecommunications giant GCI spent more than $2 million between January and June to convince Alaska citizens and lawmakers of the need for state budget reforms, according to new filings by the company with state regulators.

But for all its money, time and political power, GCI, led by CEO Ron Duncan, missed its biggest target when a House committee earlier this year rejected a bill to restructure the Alaska Permanent Fund and use some of its earnings on the state's multibillion dollar budget deficit.

The filings, with the Alaska Public Offices Commission, shed new light on how the company and the Alaska's Future coalition it supported launched a legislative and public relations campaign involving six-figure ad buys, consultants and lobbyists.

[Read the filings: GCI first quarter, 2Q, Alaska's Future 1Q, 2Q]

Alaska's Future members, lawmakers and staffers offered a range of opinions on why the effort failed. Several pointed out that before it died in the House, the Permanent Fund legislation sailed through the Senate in a 14-5 vote.

They agreed on one thing, though: GCI was unlikely to repeat any missteps next year, when state legislators are expected to confront a similar-size deficit, but with even less savings in the bank.

"Two million dollars and it didn't work? I'm pretty sure they're smart enough," said Wasilla Rep. Lynn Gattis, who worked with Republican colleagues on the House Finance Committee to thwart the GCI-backed Permanent Fund legislation. "I don't think GCI will make some of the mistakes that they made last time."

Alaska's Future executive director Ben Sparks, an experienced strategist who ran U.S. Sen. Dan Sullivan's successful 2014 campaign, said it was "too early to tell" how the group would approach next year's legislative session.

GCI spokesperson Heather Handyside, who was press secretary for former U.S. Sen. Mark Begich, who lost to Sullivan, declined to answer questions about the company's strategy in the last legislative session and how it might change in the next one.

But Handyside emailed a statement explaining why GCI, a publicly traded company, made such a big investment in its lobbying efforts — $3 million in the first six months of the year, after accounting for the costs of its executives' time.

"It's simple. Our commitment to Alaska's Future reflects our commitment to the state," Handyside wrote. "The success of our company, our 2,200 Alaska employees, and our state economy depends upon a sound fiscal plan.

"It's critical for our economy. It will require tough decisions and can take many forms but we need to get down to the business of developing the plan," she added.

Company founded out of an apartment

Duncan co-founded the company in 1979 out of an apartment in Bootlegger Cove, near downtown Anchorage. Now he earns $3.4 million a year, and the company has nearly $1 billion in annual revenue.

Over the ensuing decades, GCI, then largely a long-distance phone company, skirmished over regulations and access to markets, fighting political battles in both Juneau and Anchorage known as the "phone wars."

GCI now has big interests in cable, mobile phones, fiber optics and landlines; this year, it had four lobbyists under contract in Juneau — more than any other for-profit company — for a total of $185,000.

The company recently posted a job description for a "regulatory and governmental affairs" employee, whose job would include coordinating GCI's political fundraising and developing "annual plans for contributions and distributions."

The firm began its campaign on the state budget in late 2015. It was then, according to Rep. Bob Herron, D-Bethel, state employee union leader Jim Duncan, and Alaska AFL-CIO leader Vince Beltrami, that Ron Duncan approached them to ask for support.

GCI's business is concentrated in Alaska, and company leaders argue its own future could be imperiled if lawmakers fail to adopt reforms to the budget, which this year relies on more than $3 billion in savings to cover $4.3 billion in spending.

"Nearly all of our revenues are generated in our home state," Greg Chapados, GCI's executive vice president, wrote in an April opinion article. "When the Alaska economy weakens, GCI, our employees, our customers, and all Alaskans suffer together."

The company's contributions to the budget-reform campaign may have been partly driven by profit motive, but they also can be seen as altruistic, said Mike Navarre, the Kenai borough mayor and a former Democratic legislator.

"Was it a good business investment? Probably," Navarre said in a phone interview. "But can that type of effort also be in the public interest? Yeah, sometimes they can be one and the same."

The group that emerged, Alaska's Future, pushed to use some of the Permanent Fund's investment earnings to help pay for government services. That step, members argued, was the single most significant way to preserve the state's diminishing savings accounts, along with sustainable, though smaller, dividend checks.

The group's position echoed advice from the Legislature's own chief budget analyst, David Teal, who wrote a report in January that said using the state's accumulated oil wealth invested in the Permanent Fund "is the most painless and sustainable way to fill deficits."

Money from GCI

The Permanent Fund legislation was the core of a package of budget reforms proposed by Gov. Bill Walker, who crisscrossed the state with members of his administration trying to build support.

Several other groups mounted lobbying and advocacy campaigns on the budget problem during the past legislative session, including the AFL-CIO, and the Rasmuson Foundation, whose board authorized spending up to $2 million.

The Alaska's Future campaign, however, was one of the most expensive.

The group's co-chairs included former Democratic Gov. Tony Knowles, labor's Beltrami, and two Alaska Native corporation executives, Helvi Sandvik of NANA Regional Corp. and Sophie Minich of Cook Inlet Region Inc.

Dozens of unions and businesses signed on as supporters, and when the campaign kicked off earlier this year, Alaska's Future described itself as a "diverse coalition."

But a significant portion of Alaska's Future's money came from GCI, according to the new filings made with APOC, which collects state-level lobbying reports.

Alaska's Future disclosed it spent $2.3 million through the first six months of the year. The group hasn't reported the size of its donors' contributions.

But in a separate set of reports, GCI said it contributed just over $2 million to Alaska's Future in the first six months of the year, plus another $150,000 last year.

One other high-dollar donor to Alaska's Future was transportation company Lynden, which gave $50,000, according to the company's own lobbyist filings.

Sparks wouldn't say whether his group had raised more money than the $2.3 million it spent.

Campaign targets lawmakers, public

The ensuing campaign by GCI and Alaska's Future took two tracks. One spoke to the public about the state's deficit and how the Permanent Fund could fix it, using advertising, volunteers and paid advocates.

A second track targeted state lawmakers. Alaska's Future hired four lobbyists, including two, Reed Stoops and Ashley Reed, who were also GCI lobbyists.

Early in the legislative session, they began going from office to office at the Capitol, armed with polling data that showed 60 percent of respondents were willing to use the Permanent Fund's investment earnings to pay for government services.

The initial push, however, didn't sit well with some lawmakers, especially some House members.

Democrats questioned the coalition's decision to hire a GOP political consulting firm, Black Rock Group, from the East Coast as well as Sparks, the executive director, who'd worked on the U.S. Senate campaign of Sullivan, a Republican.

Some Republicans were also put off by Sparks' approach, which Gattis and others described as heavy-handed. Gattis, who in August lost her primary election for a state Senate seat, said Sparks' message was off-putting, coming from someone "not being from Alaska and understanding Alaska."

"I heard he was heavy-handed and he was offending people — people he was expected to have a bond with," said Chris Clark, a veteran legislative aide who was working in the office of Rep. Cathy Tilton, R-Wasilla. "Even Republicans were complaining."

Sparks responded that "certain legislators have made excuses from Day One, and I have no doubt they will continue to do so."

The lobbyists weren't the only people tied to GCI who were meeting with state officials — so were executives at the company, according to its reports.

They showed Duncan, Chapados, Senior Vice President Tina Pidgeon, and four other employees reported "lobbying activity" in the first six months of the year — though the reports didn't distinguish how their time was split between state budget issues and other GCI interests.

Those same employees were also part of GCI's public campaign on the budget, which included meetings and communications with employees and residents. The company donated more than $230,000 worth of "ad space" to Alaska's Future, according to its lobbying reports.

Alaska's Future itself spent more than $1.8 million on its advertising campaign, with commercials running online and on television, the new reports show.

GCI and Alaska's Future also hired more than a half-dozen consultants. Blogger Craig Medred was paid $7,800 by Alaska's Future, which he said was for editing opinion pieces, while Cheryl Frasca, a former state budget director, earned $9,500 for speeches and appearances with other organizations.

The group paid Ian Laing, who built a budget-balancing game with wood blocks and a giant scale, $10,000 to present it in Kotzebue and around Southcentral Alaska.

Crowell and Moring, the law firm where former Alaska Senate President Drue Pearce is a senior policy advisor, was paid $13,000 to advise GCI on its efforts in Juneau. And Tim Fitzpatrick, a media consultant, earned $12,000 from the company for "facilitating employee communications and social media support for Alaska's Future."

Vote fails in June

After months of public and private advocacy, the effort came down to a single vote on the Permanent Fund legislation, in the House Finance Committee in June.

The committee's 6-5 rejection of the bill cut across party lines, with two Democrats and three Republicans in favor, and two Democrats and four Republicans against.

At the time, one of the "no" votes, Anchorage Republican Rep. Lance Pruitt, said he understood the state wouldn't be able to balance its budget "in the next few years" without turning to the Permanent Fund. But he remained opposed, saying efforts to build public support had fallen flat.

"We still have not, I don't think, done the work in making sure that constituents out there are onboard with walking in lockstep with us in trying to fix this thing going forward," he said.

Gattis, another one of the "no" votes on the committee, said she'd was frustrated hearing from lobbyists instead of "regular Alaskans."

Members and allies of Alaska's Future and GCI were quick to defend their efforts, saying they had seen a shift in public opinion about using the Permanent Fund's earnings to help pay for government — a move considered the "third rail" of state politics, said Knowles, the former Democrat governor.

"Thanks to the efforts of Alaska's Future, that is no longer the case," Knowles wrote in an email. "There is now a broad, statewide, bipartisan understanding that it is essential to use Permanent Fund earnings as a key part of balancing the budget and preserving a dividend program."

In the end, the task the budget reform advocates set out for themselves was simply too large to accomplish in one year, said Clark, the legislative staffer.

That argument is underscored by the recent backlash to Walker's veto of half of residents' dividend money, with noisy critics accusing the governor of thievery.

It's also an election year, making lawmakers especially reticent to reduce constituents' dividend checks, Clark said. And the Permanent Fund legislation was mixed up in the larger fight about which budget cuts and taxes would be included in the state's broader financial plan, he added.

"Trying to get anything done of this magnitude is going to be hard no matter how much money you throw at it it, and no matter who is doing it," Clark said. "They were already going up a major hill, with a boulder bigger than the one that Sisyphus had to push."

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