Government remains potent economic force

Posted: Saturday, April 22, 2000

Problem or solution, burden or asset -- different people on the Kenai Peninsula see different things when they look at government.

But beyond the myths and opinion, two facts are irrefutable: Government is a major force in the borough economy -- on several levels -- and it is changing in response to cutbacks at the state level.

The employer

The government sector employs more people per capita in Alaska than in any other state in the union, Sen. Frank Murkowski told the Legislature in his annual address on Jan. 28.

The Kenai Peninsula Borough follows the same pattern. Nearly one quarter of borough workers bring home a government paycheck. For the fiscal year ending June 30, 1999, they earned nearly $150 million in wages, according to numbers from the Alaska Department of Labor.

The government sector -- encompassing federal, state, borough and municipal workers -- is larger than trade or services, the next two sectors in size. It employs more peninsula people than manufacturing, construction, finance, insurance, real estate, fishing, forestry and mining (including oil and gas) put together, the state reported.

Trends over the past several years show government employment leveling out and falling behind population growth. That contrasts with previous years.

Preliminary figures from 1999 show that government employment soared 147 percent during the two decades since 1980, while the peninsula population grew 88 percent. The sector also outpaced population growth during the early 1990s. But since 1995, the government sector has increased only 1 percent, despite 6 percent population growth.

The change reflects a shrinkage of the state government and its delegation of functions to the borough and municipalities, which account for most of the peninsula's government sector.

Seward, for example, took over possession of its harbor from the state during the past year, said city personnel officer Yvette Welsh.

"They also want us to have the airport -- which we don't want," she said.

State employment was static during the latter half of the 1990s and down a few percentage points from what it was a decade ago, when the Exxon Valdez Oil Spill bumped up the numbers.

"As a percentage of the overall employment picture, state government has been shrinking," wrote labor economist John Boucher in a January report in "Alaska Economic Trends."

That decrease runs counter to trends in other parts of the nation, where states are taking over functions from federal agencies. But, even with the decrease, Alaska still has about twice as many state workers per capita as the national average, he said.

Boucher attributed the size to the many unorganized rural areas dependent on the state for functions normally carried by counties, unusual programs such as the Alaska Permanent Fund Dividend and the high costs of operating in the enormous, primitive and harsh state.

Statewide, the U. S. government is the No. 1 employer and the state is second. But, because the Kenai Peninsula is an organized borough and contains no military bases, both the state and federal governments have a relatively small presence here.

Local government entities on the peninsula have more employees than the state and the feds combined.

The school district, considered a subset of the borough government, remains the peninsula's largest single employer. In the peninsula's smaller communities, it may be the prime source of winter work and stable, livable wages.

Todd Syverson, the assistant superintendent in charge of personnel, said the district will be losing staff because of declining enrollment but will continue to operate on a vast scale.

"A lot depends on the local economy," he said.

Richard Campbell, who heads the borough's human resources department, said staffing numbers have edged up over the past few years at about the same rate as the borough population.

"I think with this new administration, the number of employees won't be going up," he said of the hiring forecast.

Employment counts are only part of the picture.

Government pay tends to exceed the borough average, which was about $30,000 in 1997, the last year for which full statistics are available.

Federal workers earn the most, averaging about $48,000 each for the year ending June 30, 1999. In the same period, state workers earned an average $36,000 per year and local government workers a bit below $33,000.

Total payroll expenditures have decreased in some areas, despite stable or increased head counts, because of retirements and restructuring.

Syverson reported a younger staff and lower labor costs at the school district this year. The cities of Kenai, Soldotna, Homer and Seward reported budgets and employment levels as roughly status quo.

Financier, contractor

and partner

Payroll is not the only direct cash government recycles into the peninsula economy.

Government money pays for construction, contracted services, grants to organizations and public facilities, to name just a few.

Federal largess has made its mark on the Kenai Peninsula in recent years. Just a few examples include funds for starting the After the Bell after-school program in Soldotna, construction money for the Alaska Challenger Learning Center in Kenai and upgrades on the Seward and Sterling highways.

State money is harder to come by, but has contributed to projects like riverbank restoration along the Kenai River and construction of the new Kenai River Center in Soldotna.

Municipalities make grants to groups such as Soldotna Community Schools, the Pratt Museum in Homer, emergency response squads and the Caring for the Kenai scholarship competition. They hire services from private businesses running the gamut from harbor dredging to snow removal to secretarial services.

Indirectly, the infrastructure government builds, maintains and manages contributes concrete assets to area business people. It provides the roadways for the independent trucker, the harvest guidelines for the fisher, the water for the car wash, the technical certification classes for the tradesman and the library for the entrepreneur to research a potential product.

Increasingly, government entities are working with private business people or independent organizations on joint projects. Examples include: the hospitals in Soldotna and Homer; the Alaska Regional Aircraft Fire Training Center (owned by the city of Kenai and run by AAI/Engineering Support Inc.); cooperation between the city of Soldotna and the Kenai River Sportfishing Association Inc. to improve salmon habitat; and the Economic Development District, which began as an offshoot of the Kenai Peninsula Borough Planning Department and offers services and counseling to new business ventures.

The economic development committee of the city of Homer is one work-in-progress. It recently deactivated -- but only so it could reform under a partnership with the EDD or the Chamber of Commerce, said Homer City Manager Ron Drathman.

"We're sort of in a state of limbo," he said. "But I assure you that is temporary."

Good neighbor

Government on the peninsula provides other economic benefits that are harder to quantify.

Jim Stogsdill, a member of the Soldotna City Council interested in the area's economic development, spoke about leadership and quality of life as vital roles for municipalities here.

Soldotna budgeted $30,000 last year to foster economic development for the town. In January city officials began meeting with business leaders in informal roundtable discussions to solicit feedback and ideas.

The government should provide things that are unprofitable but have value beyond money. Such ventures attract people, improve the business and personal climate for others and, sometimes, have the potential to grow into self-sustaining entities, Stogsdill said.

He cited the example of the Soldotna Sports Center, which serves thousands of people and cost city taxpayers $110,000 in subsidies this year.

"Those kinds of things just create jobs and money," he said. "Those are part of my taxes. I help pay for those things. I don't expect them to pay their own way."

The city is talking about someday expanding the sports center into an entertainment mall complex, he said.

"We want people to come here, live here and do things here," he said. "We were trying to think of things the city can do."

Beautiful parks and family fun are valuable for the economy because they entice people to linger -- and spend money. Government support for such things generates a winning situation all around, Stogsdill said.

"It's kind of a community thing," he said.



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