List of Things Alaska Could Do Legally to Address the Fiscal Challenge

Queenstown, N.Z.--

I have been a very spotty blogger, but here is a piece I wrote for the Alaska Bar Rag--the official publication of the Last Frontier's lawyers--that gives a flavor of what I have been working on (both in Alaska and on vacation).

List of Things Alaska Could Do Legally to Address the Fiscal Challenge

By Cliff Groh

The deep slump in oil prices since the summer of 2014 has exposed and exacerbated underlying structural problems in the State of Alaska’s fiscal system.    These problems include:  

1. The dominant role of oil in the state budget—taxes and royalties from oil production account for more than 85 percent of the State of Alaska’s Unrestricted General Fund revenues (the Unrestricted General Fund is what most people mean when they say “the state budget”);
2. The long-run decline in oil production that has left the Trans Alaska Pipeline System (TAPS) carrying less than a quarter of the oil it was carrying in the late 1980s;
3. Increasing costs of producing that oil on the North Slope; and
4. Partly because of (2) and (3) above, the unlikelihood of oil prices rebounding enough to bail Alaska out of this dilemma.

With revenues sharply down, matters are complicated by the desires many Alaskans have for more state spending in various areas.

Add it up, and you have an ugly picture.   The budget this year (Fiscal Year 2015—or FY2015—which runs July 1, 2014-June 30, 2015) balances at oil prices of about $117 per barrel.   Oil prices are below $50 per barrel as of this writing, and the Alaska Department of Revenue has reduced its oil price forecast to $65 for the rest of FY2015 and $66 for FY2016.   With an approximately $6 billion state budget and revenues looking likely to be approximately $2.5 billion this year, the budget deficit at current oil prices and production would be close to $3.5 billion in FY2015.   This means that the State of Alaska would have a budget deficit of more than 50 percent in the current fiscal year.

What follows is an attempt at a comprehensive catalogue of the steps the State of Alaska could take to address the fiscal challenge.    This is an exercise in description, not prescription.   No endorsement of any course of action is intended, and there is no discussion here of the many pros and cons of these approaches, whether philosophical, practical, or otherwise.     Some of these items are obviously far less politically or practically possible than others.

Note also that although the list below includes dollar estimates for amounts possibly gained or saved regarding some of the items listed, not all of the fiscal impacts are easily predictable.   

The items below can be grouped into four categories, with a more detailed list following:

1. Change spending
2. Collect more revenues
3. Use our savings accounts and/or money generated by or in the Permanent Fund
4. Get someone else to pay

I.  Change spending

1. Reduce the budget as compared to the previous year’s spending (Notable facts about the budget include:  1.  The State of Alaska’s budget is widely understood to be No. in per capita spending among the states; 2.  Roughly two-thirds of the budget is composed of three items—K-12 education, Medicaid, and retirement assistance; 3.  The capital budget is only about 10 percent of the budget; 4.  cuts could either be either targeted or across-the-board)

2. Re-allocate unspent and/or lapsed appropriations in the General Fund

3. Impose another constitutional amendment limiting spending (Alaska has had a constitutional spending limit since 1982)

1. Limit spending as a percentage of revenues somehow defined
2. Limit spending as a percentage of savings somehow defined

II.  Collect more revenues

1. Adopt broad-based tax paid by individuals (Alaska is the only state in the union without either a general statewide sales tax or any form of a state income tax paid by individuals.  Alaska had a state individual income tax until it was repealed in 1980; Alaska has never had a statewide sales or property tax paid by individuals.   Note that a deficit of $3.5 billion works out to more than $4,500 per Alaskan, including children.   According to Prof. Scott Goldsmith of the University of Alaska Anchorage’s Institute of Social and Economic Research, U.S. Department of Commerce figures show that combined state sales and income tax per capita averaged $1,812 for the U.S. as a whole in 2010.)

1. State income tax (A 2010 legislative report estimated that an individual income tax in Alaska taxing 2.8 percent of adjusted gross income on a flat-tax basis would generate $500 million annually.   This estimate was based on 2006 IRS data for Alaska residents and thus does not count income that could be collected from non-residents working in Alaska.)
2. Statewide sales tax (That same 2010 report estimated that a state sales tax of three percent without exemptions would bring in $450 million a year.)   
3. Statewide property tax
4. Others

2. Expand and/or increase selective sales and/or excise taxes

1. Alcohol
2. Tobacco
3. Fuel
4. Marijuana
5. Others

3. Adopt other taxes, such as head tax or estate tax

4. Increase fees

5. Increase petroleum taxes

6. Impose and/or increase taxes on other industries

1. Fisheries
2. Mining
3. Tourism
4. Others

7. Increase the intensity of auditing of tax and/or royalties returns filed by petroleum producers

8. Increase the rate of return on the state’s savings

9. Promote economic development that allows the collection of additional revenues under existing taxes

1. Increase petroleum production
2. Arrange for gasline/LNG export project to go into service
3. Others

III.   Use our savings accounts

1. Spend easily spendable savings—the Statutory Budget Reserve and Constitutional Budget Reserve contain together more than $10 billion as of January of 2015, and the Legislature could spend all of that money in the budget
2. Spend funds or accounts outside the General Fund, the Statutory Budget Reserve, the Constitutional Budget Reserve, or the Permanent Fund
3. Use Permanent Fund earnings in the budget in significant amounts (The Permanent Fund holds as of this writing more than $51 billion in assets.    Of that more than $51 billion, the Permanent Fund Corporation’s most recent balance sheet (November 30, 2014) posted on its website shows $38.2 billion in the constitutionally protected principal (also known as the “corpus contributions and appropriations”) and another amount of more than $5.9 billion “not in spendable form—unrealized appreciation on invested assets.”    More than $1.19 billion of Permanent Fund earnings are being distributed in Permanent Fund Dividends this year, and more than $660 million is reserved for inflation-proofing this year.   Another sum of more than $5.55 billion is “assigned for future appropriations,” with $4.55 billion of that amount in realized earnings and the rest in unrealized appreciation on invested assets.   The Permanent Fund’s principal is constitutionally protected and could only be spent by a vote of the people, while the earnings are as a legal matter available for legislative appropriation.   The earnings of the Permanent Fund have traditionally been used almost entirely for the payment of Permanent Fund Dividends and inflation-proofing the Permanent Fund itself, with a fraction being used in the budget for functions related to the payment of Dividends.)   

1. Reduce share of earnings going for Permanent Fund

Dividends

2. Reduce share of earnings going for inflation-proofing
3. Adopt a version of a Percent of Market Value (POMV)

approach through a constitutional amendment that would both change how the Permanent Fund is protected against inflation and also change the allocation of Permanent Fund earnings in a way that would allow spending of significant amounts of Permanent Fund income in the budget

4. Amend the constitution to allow spending of Permanent Fund principal in the budget

IV.  Get someone else to pay

1. Shift responsibilities from the State to local governments
2. Shift responsibilities from the State to the federal government
3. Borrow more money, perhaps through collateralization or from the   Permanent Fund itself
4. Securitization, perhaps by selling shares in the revenues from a gasline/LNG export project

There are variations on these basic steps.   Some of the most frequently discussed variations are:

1. Pump up the Permanent Fund’s principal to facilitate a slide into explicit rentier status, where the State of Alaska would finance its operations entirely or almost entirely through the use of Permanent Fund income (the word “Norway” has become shorthand in Alaska for this approach, apparently from a misunderstanding of Norway’s fiscal system)
2. Keep the Permanent Fund Dividend while bringing back the individual income tax
3. Guarantee some level of Permanent Fund Dividends in the constitution as a trade for using some Permanent Fund income in the regular budget
4. “Cash out” part or all of the Permanent Fund principal in lump-sum payments to all Alaskans as a trade for using Permanent Fund income in the regular budget
5. Cap the Permanent Fund Dividend to reduce the amount of money distributed each year so that the money not paid out can be used in the regular budget; such capping could occur either as a percentage of Permanent Fund income or as a hard dollar cap on either the size of the Permanent Fund Dividend or the amount of Permanent Fund income going annually to the Permanent Fund Dividend

The long-term decline in Alaska oil production—now compounded by the recent sharp drop in oil prices—poses tough questions for Alaska.   Those questions are made tougher by the effects that the journey down the Prudhoe Bay Curve will have on the economy as well as the government, given that the oil industry accounts—directly or indirectly—for approximately one-half of all the jobs in the state.    Alaskans need to think deeply and carefully about the implications of the various steps we could take to address these questions.

--------------------------------------------------

Cliff Groh is a lifelong Alaskan and a lawyer and writer.  Groh authored a chapter for the 2012 book Exporting the Alaska Model:  Adapting the Permanent Fund Dividend for Reform around the World (Palgrave Macmillan, 2012), and some of the material in this essay overlaps with that chapter.   That chapter was one of four chapters Groh authored or co-authored for that book or for the 2012 book Alaska’s Permanent Fund Dividend:   Examining its Suitability as a Model (Palgrave Macmillan 2012).   Groh was involved in the creation of the per capita Permanent Fund Dividend Alaska has today while serving as an assistant to the Alaska Legislature in 1982.   Groh was also Special Assistant to the Alaska Commissioner of Revenue in 1987-1990 and a delegate to the Conference of Alaskans in 2004.   A board member of Alaska Common Ground for almost two decades, Groh became that organization’s chair in May of 2014.   

More on the Discipline Imposed by the FBI in the Fallout from the Ted Stevens Case

Anchorage--


Additional useful perspective on the discipline apparently meted out by the FBI to its agent Mary Beth Kepner is found in Steve Aufrecht's blog post from last Friday.   Kepner clearly made some errors in the investigation of the late U.S. Sen. Ted Stevens.   I agree with Steve's point that the commentary on the "Polar Pen" federal probe into Alaska public corruption since the post-trial collapse of the Ted Stevens prosecution has often lacked nuance, partly because the investigations of those involved in the prosecution have helped contribute to the relative silence of those on the government side in the case.        

FBI Director Says FBI Agent "Severely Disciplined" for "Improper Conduct" in Ted Stevens Investigation

Anchorage--

I am of course late to this, but the Alaska Dispatch has a detailed account of the news in last week's hearing.

Alaska Bar Rag Column for the September, 2013 Edition

Anchorage--

Three Calendars and an Incomplete Set of Options

by Cliff Groh

Note:  This is an installment in a series of columns on the Ted Stevens case.

The Department of Justice was in an uncomfortable place with the Ted Stevens case in July of 2008, the month the indictment was handed down.    

The federal criminal investigation into the U.S. Senator’s conduct had gone on for more than two and a half years and produced a draft indictment focusing on charges of failure to report gifts and/or liabilities.   The probe had proceeded in fits and starts for more than a year, as the prosecution and defense had entered into a series of tolling agreements to extend the statute of limitations.   The motivations of course differed for the parties in making these agreements in which the defense waived the right to claim that one or more counts in a future indictment should be dismissed on statute of limitations grounds.   The prosecution was looking for more time to figure out how to proceed and to negotiate, while the defense was hoping use that time to persuade the prosecution to drop the case, perhaps with a referral to the Senate Ethics Committee.

Plea Negotiations Fail and Statute of Limitations Loom Large

The prosecution team was divided between Washington, D.C., and Anchorage, with the Alaska-based attorneys feeling out of touch with what was going on in D.C.    Thinking that the Stevens prosecution would not proceed, one of those Alaska-based prosecutors who had worked the most on the case—Assistant U.S. Attorney Joe Bottini—took on a high-profile capital murder prosecution.

Back in D.C., the prosecutor’s traditionally favorite method for resolving a case—the plea agreement—had not come together.    The Justice Department’s stick of a threatened felony indictment had not gotten Ted Stevens to plead guilty under a plea agreement, even when combined with the carrot of a guarantee of no jail time.  

Far from pleading out, Ted Stevens seemed to be feeling pretty good about his chances, fortified by a firm conviction that he had done nothing wrong and a strong legal defense team.    Representing Stevens was Brendan Sullivan—billing at a reported $1,000 per hour—and Williams & Connolly, probably the country’s premier white collar criminal defense firm.

Given that the more than 1,000 total pages in the autopsies of the Stevens prosecution focus on how failures in providing discovery led to its dismissal, writing about the motivations in the decision to indict is difficult and inherently speculative.   That said, three calendars seemed to complicate the Justice Department’s decision-making.  

The timeline that mattered officially was the statute of limitations.   The charges under consideration dealt mostly with the Senator’s failure to report as gifts or liabilities unrecompensed expenditures made by VECO and/or its long-time CEO Bill Allen to improve Ted Stevens’ official residence/vacation home in Girdwood, Alaska.  

Those expenditures in that multi-year renovation process at the structure Stevens called “the chalet” were front-loaded in that most of them occurred before 2002.   This meant that much of the conduct at issue was in a count most at risk under the statute of limitations (which for federal crimes would—absent a tolling agreement between the prosecution and the defense to extend the time period—run five years from the commission of the offense to the date the charge is brought).   This also meant that a tolling agreement (or a series of tolling agreements) was needed to keep alive the possibility of the prosecution bringing charges against the Senator for failure to report his receipt of those things of value without paying for them as either gifts or liabilities.   In July of 2008, another tolling agreement was needed to leave open the option of charging the Senator directly for the disclosure report he filed in May of 2002 for calendar year 2001.

Clock-Watching Election Day and Inauguration Day

Along with the statute of limitations, the other two calendars at play in this highly unusual case focused on November 4, 2008 (the day that Stevens stood for re-election for a seventh full term in the U.S. Senate, this time against a strong Democratic opponent) and on January 20, 2009 (the last day of the administration of President George W. Bush).

The imminence of the election made the Justice Department concerned about the political impact of the timing of any charges, as the Department’s guidelines required that no charges should be brought to affect any election.   The report of the Office of Professional Responsibility (“OPR”) on allegations of prosecutorial misconduct in the Stevens case notes that Brenda Morris, Principal Deputy Chief of the Justice Department’s Public Integrity Section, stated that line prosecutors had early on suggested that this issue be avoided by making Ted Stevens the first trial of the federal government’s Polar Pen probe into Alaska public corruption, which would have meant that his trial would have come in 2007.   Morris also stated that the higher-up who heard this pitch “was not comfortable with this approach and wanted to build momentum with other trials.”    

Ultimately, Matthew Friedrich, the Associate Attorney General in charge of the Criminal Division, made the call in July of 2008 to go ahead and seek an indictment of Stevens.   Operating with the approval of Attorney General Michael Mukasey, Friedrich decided not to enter into another tolling agreement to extend the agreement beyond the July 31 date previously agreed on.    Friedrich told OPR that his thinking was “[I]f we were going to move on this, we shouldn’t be doing this on say November 1^st[.]”    

One of the line attorneys who would actually be “doing” the prosecution did not see the timing the way Associate Attorney General Friedrich did.   Lawyers for Assistant U.S. Attorney James Goeke told Henry Schuelke, the special counsel probing the prosecution, that for “some of the Department’s then highest ranking officials” the timing of the indictment was “possibly driven by exogenous political factors….”   

The chief lawyer for Goeke declined an opportunity to elaborate on that reference, but developments in the news separate from the four corners of the Stevens case file seemed to shape the actions of Justice Department brass.   Those “highest ranking officials” were new in their jobs and well aware of the limited time they would be in those jobs.   Mukasey had been Attorney General less than a year as of July of 2008, and Friedrich had then only been in his job for two months.    Both men had had to testify before Congress regarding the controversy over unusual political influences on the removal of U.S. Attorneys during the tenure of Alberto Gonzales, Mukasey’s predecessor as Attorney General.  

Known as a no-nonsense judge who had served in the 1970s as Chief of the Official Corruption Unit of the U.S. Attorney’s Office for the Manhattan-based Southern District of New York, Mukasey had a reputation for toughness on public corruption.   That reputation led one commentator to note in September of 2007 that Mukasey’s nomination as Attorney General was probably bad news for Ted Stevens, whose Girdwood home had already been searched that July by federal agents.   In a speech delivered in March of 2008 that cited the Justice Department’s Polar Pen probe, Mukasey said that “We have and we carry out a duty to ensure that the Department’s investigations of public corruption are conducted without fear or favor, and utterly without regard to the political affiliation of a particular public official…. Let me be clear: Politics has no role in the investigation or prosecution of political corruption or any other criminal offense….”

In practice, wrote New Yorker writer Jeffrey Toobin, the constraints on Mukasey created by the circumstances of his arrival as Attorney General meant that he “was more or less obligated to defer to the judgments of career prosecutors like [Nicholas Marsh of the Public Integrity Section].  If the leaders of the Justice Department had been more politically secure, they might have asked harder questions about whether the facts justified the criminal charges against Stevens.”

Another factor loomed—the rapidly approaching end of George W. Bush’s presidency.   It is not just that politically appointed superiors always have less power over career professionals at the end of an administration; political cycles can have effect in another way.   "One of the things that happens in a political or high-profile case like this is that there’s a huge push to get it done before a change in the administration," a former prosecutor told writer Steven Andersen in an article about the collapse of the Stevens case appearing in InsideCounsel magazine in 2009.   “As government lawyers think about re-entering the private sector at the end of an administration, they want to leave a mark with a big case.”

A Constricted Set of Choices

Setting aside the various possible motivations for charging Stevens (including the belief apparently shared by the line prosecutors that the facts and the law justified an indictment), it seems that Matthew Friedrich unjustifiably limited the options he considered in July of 2008.   The man in charge of making the final call on the indictment seemed to see three choices:

1.   Indict Ted Stevens immediately on more serious charges of accepting bribes or honest-services fraud;

2.   Indict Ted Stevens immediately on less serious charges of failure to disclose gifts and/or liabilities; or

3.   Not indict Ted Stevens

With the Justice Department having squelched line prosecutors’ push for 

option (1), Friedrich appeared to think that option (2) was the moderate middle ground and thus the “safe” choice.   The choice of "Wait to indict Ted Stevens until we are more organized and prepared" did not seem to come up.   Granted, absent another extended tolling agreement with the defense that would run for some months—even to a date after the election in November of 2008—waiting to indict would have meant that the indictment could not have directly charged the Senator with failure to report the bulk of the allegedly unreported expenditures.    But the prosecution would still have had the benefit of the low reporting threshold—never more than $305 per year for the relevant time period—as well as the ability to get the evidence of uncharged crimes before the jury.  

Instead of taking this course, Friedrich and his chief deputy Rita Glavin seemed to think that success could be secured for the prosecution by pouring the special sauce of Brenda Morris over the case.   

Next:   Brenda Morris takes first chair and the miscalculation over the Speech and Debate Clause

Cliff Groh is an Anchorage lawyer and writer who has worked as both a prosecutor and a criminal defense attorney.   He has blogged about the “POLAR PEN” federal probe into Alaska public corruption for years at www.alaskacorruption.blogspot.com, which in its entry for May 14, 2012 features an expanded and updated list of disclosures.    Groh’s analysis regarding the Ted Stevens case has appeared in media as diverse as C-SPAN, the Los Angeles Times, Alaska Dispatch, the Anchorage Daily News, and the Anchorage Press.    The lifelong Alaskan covered the five-week Ted Stevens trial in person in Washington, D.C. in the fall of 2008.   He welcomes your bouquets, brickbats, tips, and questions at cliff.groh@gmail.com.   

Vic Kohring Runs for Public Office Again

Anchorage--

Vic Kohring's defining characteristic may be a lack of shame.

John Rader: Legal and Legislative Pioneer on the Last Frontier

Anchorage--

Here is my column for the current edition of the Alaska Bar Rag.

John Rader:   Legal and Legislative Pioneer

 

 on the Last Frontier

 

by Cliff Groh

It was 1949 or 1950.   A law student at the University of Kansas was thinking about where he would make his way upon graduation.   The young man thought of Alaska, and decided to make written inquiry about the prospects for lawyers in America’s farthest north territory.   His letter went to the Attorney General of the Territory of Alaska—an elected position—and in due course the law student got a letter back.   The reply of Attorney General J. Gerald Williams told the young man that there were no prospects for lawyers in Alaska.

The law student looked at the letter and thought to himself “That’s where I need to go.”

Less than 10 years later, that law student took the job of Attorney General from J. Gerald Williams as Alaska transitioned from territorial status to statehood.

That young man was John Rader, a native of Howard, Kansas.   Now 86, Rader has enjoyed an impressive career on the Last Frontier.  This column will cover a few of the highlights:

Ø As a Special Assistant to Governor Bill Egan, as an important member of the first Alaska State Legislature, and as the first Attorney General for the State of Alaska, Rader played a critical role in getting the state government up and running;

Ø As a State Representative, Rader conceived and engineered the passage of the Mandatory Borough Act of 1963, which resulted in the formation of the local governments where more than four out of five Alaskans live; and

Ø As a State Senator in 1970, Rader led the successful effort to liberalize Alaska’s abortion law, more than two years before the U.S. Supreme Court issued its decision in Roe v. Wade. 

Health problems have hampered Rader for the last four decades, which helps explain the unfortunate fact that it’s mostly old-timers who recognize his name and know of his accomplishments.    This year is the 35^th anniversary of Rader leaving elective office, and it’s a good time to look back on the achievements of a great Alaskan.  

The Youthful Organizer of State Government:   16 Months that Shaped Alaska

After years of struggle, the Alaska Statehood Act passed and was signed into law in the summer of 1958, setting January 3, 1959 as the day Old Glory would get its 49^th star.   Along with great joy, these events brought a number of big challenges to Alaska.     

An entire state government had to be set up, including a structure for the executive branch and a staff for that executive branch.   These tasks were made significantly more difficult by the life-threatening illness of Bill Egan, the first State Governor, which left him incapacitated in a Seattle hospital for months.

Fortunately, Alaska had an ace in the hole.   Seven years into his legal career that had started with his move to Anchorage in 1951, John Rader had substantial legal and political experience.   He had more than six years in private practice and a year as the first in-house City Attorney for the City of Anchorage, a year in which he secured the approximate doubling of the size of the City’s territory through annexation.    As a candidate in 1958 for the House of Representatives in the first State Legislature, he won the highest number of votes received to that time by a person elected to the House, either in an election for territorial or state office in Alaska.   The 31-year-old pulled off this feat while simultaneously managing Egan’s successful gubernatorial campaign.

Rader served as a Special Assistant to the Governor-Elect and Governor in December of 1958 and January of 1959 before serving as chairman of the House State Affairs Committee after the first state legislative session opened in late January.   Along with his fellow lawyer State Senator Tom Stewart of Juneau, Rader played in that session a critical role in drafting and getting passed the State Organization Act.   The statute’s intent was “to provide a unified, integrated, and comprehensive plan of organization for the exercise of all executive and administrative functions of the State.”  This statute established 12 departments and the Office of the State Governor in the executive branch, while abolishing dozens of agencies, including the Territorial Banking Board and the Coal Miners’ Examining Board.  

As the legislative session was ending, Rader was appointed by Egan to serve in one of those cabinet positions as the first Alaska State Attorney General (and at 32 apparently the country’s youngest).   He worked with an initial staff of five lawyers to handle the legal affairs of the brand-new state, a big contrast from the more than 285 attorneys now employed by the Alaska Department of Law.      

The self-described “country lawyer” had to move quickly to confront a variety of issues.   He had to litigate the abolition of fish traps, thought to have been done away with at statehood but whose legality remained a live issue if operated by Alaska Natives.   The Ninth Circuit Court of Appeals withdrew more quickly than expected from its role as the appellate court for Alaska, leaving Rader scrambling to help set up an entire new state court system.  

The Attorney General personally handled a successful defense of a challenge brought by bar owners against regulations adopted by the new State Alcoholic Beverage Control Board, including a prohibition on liquor establishments being open between 3 a.m. and 8 a.m. on weekdays.    This case—Boehl v. Sabre Jet Room, Inc., 349 P.2d 585 (Alaska 1960)—was notable both for the new Alaska Supreme Court’s embrace of a broad view of the Legislature’s power to delegate authority to administrative agencies and for the identity of the lawyers representing the bar owners—Wendell Kay of Anchorage and Warren Taylor of Fairbanks, Rader’s two most prominent rivals to become Attorney General.      

In a 1994 interview with University of Alaska Anchorage Professor Stephen Haycox, Rader—then 67—wondered in amazement at the scope of the decisions he made in his early 30s as Attorney General, suggesting that it was the “recklessness of youth” and being “presumptuous” that allowed him to do it.

There’s a simpler explanation.   Rader is bold, a quality he showed when he resigned after less than 11 months on the job as Attorney General.   He said at the announcement of the decision in 1960 that he wanted to return to private practice in Anchorage, and Haycox wrote in his 1998 book The Law of the Land that Rader felt that by the time of his resignation “the principal focus of his attention, the transition from territorial to state government, had been accomplished.”   In a 2013 interview with this column’s author, Rader explained the timing of his resignation as also being influenced by his desire to have a successor confirmed during the 1960 legislative session, when that confirmation appeared likely to be more easily accomplished.

Haycox also noted in his book Rader’s interest in running for Governor, as Egan was not a certain candidate for re-election in 1962.   By late 1961—at age 34 and just 10 years after his arrival in the state—Rader was an announced candidate for the Democratic nomination for Governor.

Although Rader campaigned for months while also practicing law at Hartlieb, Groh & Rader (see the author’s note below), he withdrew when Egan finally announced his intention to run for re-election.   Rader was still able to get back into policy-making, however, by again getting elected to the State House in 1962.  

Dive Bars, Dirty Water, Loose Dogs, and Tax Inequity:  Father of the Mandatory Borough Act of 1963

Once back in the Legislature, Rader did something many politicians talk about a lot in theory but often avoid in practice.    He picked an important problem and took the lead in proposing a solution he thought was good policy, even though that proposed solution was controversial.   

That problem was the lack of regional government, which differs in Alaska from what is seen in almost every other state.  Although there are cities in Alaska as in other states, there are no counties in the Great Land.    Instead, boroughs are the units of government that stand in between cities and the state government.   The Alaska Constitution provides that boroughs “shall be established in a manner and according to standards provided by law,” but the establishing process was going very slowly in the years immediately after statehood.    By 1963, only one—the Bristol Bay Borough—had been formed.    A substantial and growing percentage of Alaskans lived outside of cities with no form of local government. 

This vacuum left room for a slice of Wild West in the north, generating numerous problems.    Sleazy bars staffed by B-girls operated around the clock outside the city limits of various communities, generating crime that spilled over to local citizens.   With no animal control, loose dogs threatened children and adults.    Public health was at risk with the difficulty of getting water and sewage facilities to untaxed areas, and tax inequity was increasing.   On the other hand, those enjoying their lack of local taxes howled at attempts by cities to grow by annexation and vigorously resisted the voluntary formation of regional boroughs that would bring them into a local government’s tax base.  

Rader looked at this mess in1963 and saw the matter of boroughs as “the greatest unresolved political problem in the State.”    With his sharp insight and experience as a local government lawyer, the lawmaker concluded that the combination of the big problems caused by the areas without local government and the low probability of success of local efforts to form boroughs—particularly those of an appropriate regional size—meant that it was up to the Legislature to require the formation of a number of boroughs.    What’s more, this formation had to be forced immediately and in a single stroke.

Rader introduced legislation that would require formation of boroughs around the state with sweetening provisions that provided those new boroughs with grants of land and cash from the state.   The measure’s lack of popularity showed clearly in Rep. Rader’s inability to find a single co-sponsor for this bill.   The subject of boroughs might sound boring, but this was one of the most controversial and hotly debated bills ever considered in the Alaska Legislature.   Picking this issue to go out alone on was a risky move for an ambitious politician like Rader who continued to harbor ambitions for statewide office and looked like what one legislative colleague called “a man to bet on.” 

Rader had some assets in this struggle.   In only his second year in the Legislature, he had a leadership position, serving as House Democratic Leader and chairman of the minority caucus.   (Although split 20-20 between Democrats and Republicans, the body was run by a Republican-dominated coalition.)   Rader also used some of the best skills of an attorney in the Legislature—reading widely, thinking broadly, researching intensely, writing articulately—to develop and sell the bill.  

Not all of what Rader used to get the Mandatory Borough Act of 1963 enacted was the straightforward tactics and strategy found in law books or recommended by professors.    The editors of the book The Metropolitan Experiment in Alaska reference in an introductory chapter the “intense parliamentary maneuvering” involved in the legislation’s passage, but more striking are the adroit political moves Rader sets out in his own chapter in that same book, published in 1968.   (That book was published the same year Rader lost a race for the Democratic nomination for Alaska’s single seat in the U.S. House to State Sen. Nick Begich of Anchorage, who lost the general election that year before winning it in 1970.)    In his chapter—blandly entitled “Legislative History”—Rader recounts that to get the bill out of the House he rallied “the competently-controlled Republican-controlled House” against “an incompetent Democratically-controlled Senate.”    Then—after the bill had become law but while there was an outcry for a special session to repeal it—Rader told the State Democratic Convention that all Democrats should join to fight off a Republican attack on a bill mostly supported by Democrats.

The law stuck, and it had a big effect.   The Mandatory Borough Act produced the formation of boroughs in Ketchikan, Sitka, Juneau, Kodiak Island, the Kenai Peninsula, Matanuska-Susitna, Fairbanks, and Anchorage (unified in 1975 into a municipality).    Those local governments cover well over 80 percent of Alaska’s population.

Leader of Fight to Liberalize Abortion Laws in 1970

Following his defeat in the 1968 Democratic primary for the U.S. House, Rader managed that same year to get elected again to the Legislature, this time to the State Senate.   In his first term in that body, Rader led an effort to liberalize abortion laws that resulted in one of the biggest political reversals in Alaska history.   

At the beginning of 1970, abortion was illegal in Alaska except to save the life of the pregnant woman.    Rader saw that policy as unjust and resolved to try to change the law.

As with the Mandatory Borough Act seven years before, Rader started off alone in the Legislature, introducing an abortion reform measure without a single co-sponsor.    Then came help from a wave of grass-roots organizers who helped build a broad and diverse coalition that included the Alaska Medical Association, conservationists, and a number of religious figures.   Just over three months after Rader put in a bill by himself, the Legislature overrode a gubernatorial veto to enact a bill that allowed a woman to obtain an abortion of a non-viable fetus by a physician in a hospital or other approved facility.  

Adopted more than two years before the U.S. Supreme Court handed down the Roe v. Wade decision, this law made Alaska one of only four states to substantially decriminalize its abortion laws. 

The ACLU gave Rader a Champion of Women award in 2010, and Planned Parenthood of the Greater Northwest makes an annual award for advocacy in Rader’s name.

Explanations of Rader’s Impact

Health issues led Rader to end his 15-year legislative career by declining to run for re-election at the conclusion of his service as State Senate President in 1977-1978, two of most significant legislative sessions in Alaska history.    With the exception of two stints as an advisor, that decision essentially marked Rader’s withdrawal from public life.

Rader had great influence in the quarter-century of his public life in Alaska, and it’s worth thinking about how he did it.   Part of it is his exquisite timing in disregarding the Territorial Attorney General’s advice and heading north when he did.   In that sense, Rader resembled A.B. “Banjo” Paterson, author of “Waltzing Matilda,” who wrote near the end of his life that in living in Australia as it was gaining its independence, he was like an animal that “had the luck to walk on the lava while it was cooling.”   

But it wasn’t just good fortune that made Rader influential.    His intelligence and boldness have already been remarked upon.    Also important are his deep thoughtfulness, dedication, skills as an orator, and manners of an old-school gentleman.   

While endorsing his re-election in 1972, the Anchorage Daily News called Rader “one of the ablest legislators Alaska has ever had” and stated that “Alaska has produced few more capable men in public life than John Rader.”

Commenting in 2004 on Rader’s tenure as Attorney General, Professor Haycox wrote that Rader “set a high standard of legal competence, political acumen and straight-on honesty.”   

We would do well to think about John Rader’s public life as a role model for us as citizens, as lawyers, and as lawmakers.

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Cliff Groh is an Anchorage lawyer and writer who has worked as an aide for the Alaska State Legislature and as Special Assistant to the Alaska Commissioner of Revenue.    John Rader was a law partner of Cliff Groh’s father and was one of his father’s closest friends.   The author has reason to believe he would have the same view of John Rader even if he hadn’t grown up calling him “Uncle John.”   The author thanks John Rader and the relatives, friends, and former colleagues of Rader who assisted in the preparation of this article, but the interpretations and conclusions are solely those of the author.   Cliff Groh will return in future Alaska Bar Rag columns to analysis of the investigations and trials arising out of the federal government’s probe into Alaska public corruption.   He welcomes your bouquets, brickbats, tips, and questions at cliff.groh@gmail.com.