Alaska needs to get a handle on AIDEA’s unfettered spending spree.
By Dawnell Smith
The Alaska Industrial Development and Export Authority spends millions on project proposals that enrich Outside interests while Alaskans scramble to get basic needs met.
The coastal plain of the Arctic National Wildlife Refuge – Photo by Danielle Brigida
Late last month, we filed a complaint with the Alaska Ombudsman requesting an investigation of AIDEA for violating the Alaska Constitution and the law. The ombudsman is a neutral state entity that investigates and makes recommendations when state agencies break the law.
AIDEA has unilaterally authorized spending nearly $54 million toward the proposed Ambler road and oil and gas leases in the Arctic National Wildlife Refuge without legislative oversight or approval. All of this is happening at a time when Alaska schools, road systems, social services, and the Alaska state ferry system face shortfalls with direct and devastating impacts on Alaskans.
AIDEA has repeatedly funneled money toward these projects in a sleight of hand that throws money at capital projects without the oversight of the Alaska Legislature. As reporter Dermot Cole wrote when reporting on our complaint, “One tactic the corporation has employed to avoid public review and transparency is to withdraw money from an account set up within the corporation called the Arctic Infrastructure Development Fund. It is supposed to be a loan fund, but it has been used as a slush fund.”
A slush fund indeed—public money intended for loaning money to feasible business proposals directed instead to boondoggle projects without any promise of repayment. Yes, the money goes somewhere—some corporate interests and political leaders are enriched and empowered—while draining the state coffers.
Let’s put it this way: A 2022 report shows that if the money AIDEA spent to prop up mining and fossil fuel companies were invested in the Permanent Fund Dividend instead, Alaska would be $10 billion richer.
More to the point, under Alaska’s constitution, the legislature is supposed to review and approve spending decisions like those throwing millions at industrial proposals. AIDEA has skirted that process and the law over and over in the context of the Ambler Road and the Arctic Refuge leases. In fact, its decisions seem to rise from skewed principles and a seeming allegiance to the goals of a small number of people rather than the benefit of all Alaskans.
Trustees has asked the Ombudsman to investigate these illegal practices and make recommendations to the legislature to stop AIDEA from operating outside of the law. As our complaint to the ombudsman states, “AIDEA’s actions are directly contrary to the Alaska Constitution, the principles of separation of powers it embodies, and the Executive Budget Act. Its actions are also beyond the scope of AIDEA’s delegated statutory authority.”
Wait, new reports show how AIDEA works against Alaskans
Our complaint focuses on AIDEA’s active involvement in furtively redirecting money toward the Ambler road proposal and Arctic Refuge leases, but the agency has a long legacy of concealing how it makes decisions and siphoning money into fiscally irresponsible projects. Three new reports show how the state agency works with little to no transparency while squandering public funds.
Graphic courtesy of Alaska Wilderness League
One report shows how AIDEA’s loan participation program benefits commercial real estate landlords who would have qualified for conventional loans and did not need the public to subsidize them. This means AIDEA gave much of its $417 million in large loans between 2008 and 2023 to subsidize the ownership of commercial property, not to help businesses get started. Not only that, but these loans failed to create permanent jobs.
Meanwhile, AIDEA’s endowment continues to grow even as state revenue declines, yet it repeatedly works to pay low dividends back to the state, according to a second report. In other words, it has strayed from its mission since the 1990s. The agency now sucks money away from needed public services for Alaskans while failing to get a return on investment.
The Mustang project provides just one example. AIDEA threw bad money onto bad when it put $20 million toward a $27 million gravel road about five miles long and a 19-acre pad to support the Mustang oil field. Two years later, AIDEA put another $50 equity investment into the Mustang processing facility, despite elevated risks as oil prices crashed. Then in 2015, the Alaska Department of Revenue loaned the failing project another $22.5 million in an attempt to salvage AIDEA’s already losing investment in the oil field.
AIDEA ended up holding the hot potato in 2021, taking years to finally sell the oil field at a loss. Adding insult to injury, AIDEA in 2023 attempted to slash the $17.8 million cash dividend it owed the State of Alaska by trying to “pay” the bulk of its dividend obligation with the “asset” known as the Mustang road.
Offloading a bad investment onto another state entity may bring great relief to AIDEA’s small, unaccountable decision-makers, but AIDEA’s plans would have only passed the burden onto Alaskans. The legislature needs money to pay for schools, roads, and other vital community needs, not an unwanted road with costly baggage.
The point is, AIDEA spends a lot of money on risky projects of questionable viability without oversight, and then it tries to shift responsibility for its bad decisions—and it does so without complying with the law or the best interests of Alaskans.
AIDEA evades accountability
It’s not surprising, then, to see that the third recent report outlines how AIDEA has fought to avoid basic public input and oversight processes while evading established mechanisms for accountability.
In short, this state-funded and staffed agency, with the help of governing bodies that have failed to hold it accountable to the law, public interest, and public scrutiny, now squanders public money to benefit Outside industrial interests and commercial landowners instead of the people of Alaska.
Fortunately, Alaskans can do something about it. They can demand the system of checks and balances established in the Alaska Constitution. They can tell their legislators to reclaim oversight of AIDEA and provide the public scrutiny this so-called public agency requires.