Alaska's economic future looks dark

Posted: Friday, November 02, 2001

KENAI (AP) -- Changing demographics and jobs, the decline of traditional industries and the emergence of new ones are slowly changing the economic face of Alaska, according to an economist at the University of Alaska Anchorage. And the changes aren't likely to help the pocketbooks of Alaskans in the next few years.

''The next decade is really going to be a challenge for the Alaska economy,'' said Scott Goldsmith, a professor of economics at the Institute of Social and Economic Research at UAA.

With North Slope oil production declining, Goldsmith said, there is little that can take up the slack. And Alaskans aren't likely to continue to benefit from federal spending that's far greater per capita than in any other state.

''Oil and government really dominate the economy,'' Goldsmith told the Kenai Chamber of Commerce this week, ''and much more so than people realize.''

Goldsmith used money flowing into Alaska households as his barometer of the state's economic situation.

Five sectors pump about $18 billion annually into Alaskans' pockets, he said. His categories are oil and gas, the federal government, traditional resources, new resources and personal assets.

Oil accounts for $6.1 billion of Alaskans' income. Of that, $1.7 billion is attributed to getting the resources out of the ground, processed and shipped to market.

Royalty payments and taxes to state and local governments account for $2 billion, while earnings from oil revenue in past years -- the Alaska Permanent Fund and the Constitutional Budget Reserve -- contribute $2.3 billion yearly.

The federal government injects about the same amount as oil, with military spending totaling $2.1 billion. That includes local purchases as well as wages for employees and active duty personnel.

Civilian federal spending, including grants to state and local governments and to nonprofit corporations, totals $4.17 billion a year or more than $6,500 for every Alaskan. Federal retirement and Social Security checks are part of that figure.

Oil and government dwarf the traditional resource sector of commercial fishing, timber and mining. The seafood industry is producing $860 million a year, mining $400 million, and timber $200 million. So those three together only bring in a quarter of the amount that comes either from the federal government or oil

The industries Goldsmith puts in his new resource sector are tourism and international air cargo. The first creates more income than commercial fishing, at $900 million a year, while air cargo is right up there with mining at $200 million.

''These are relatively new industries with a lot of growth potential driving them,'' Goldsmith said.

Personal investments and private retirement income account for $3.69 billion in Alaskans' pocketbooks. A lot of that stems from the aging of the state's population and the retirement checks and investment proceeds that older Alaskans receive.

''Alaska is adding senior citizens faster than every other state but one, Nevada,'' Goldsmith said, and now accounts for 6 percent of the state's population. The income of those seniors helps stabilize the economy, he said.

During the decade of the '80s, Alaska gained 16,000 of waht GOldsmith calls ''basic'' jobs, mostly in tourism, oil and gas and seafood.

During the '90s, tourism continued to add jobs, as did air cargo, seafood and mining. However, oil and gas, timber, federal civilian and military jobs shrank.

The net effect was a loss of 4,000 of those basic jobs, and erosion of Alaska paychecks.

''The average (Alaska) paycheck has been falling for two decades,'' Goldsmith said. ''The average was quite high in the '60s and '70s, but now Alaska is closer to the national average.''

While higher-paying jobs have shrunk, Alaska's economy has been propped up by big increases in two categories -- federal aid and the Permanent Fund dividend, Goldsmith said.

In 1995, Alaska received about $2,000 per person from the federal government in grants and aid to state and local goverments. By 1999, that number was $3,000 per capita.

Goldsmith cautioned that federal spending and the dividend probably cannot drive the economy for the next decade as they did in the last 10 years.

''We can't be too out of line with the rest of the U.S. (in federal spending) for too many more years,'' he said.

Alaska's aid from the federal government is about $1,000 more per capita than Wyoming's, which is No. 2 among the states, and triple the national average of about $1,000 per person.

As North Slope oil production continues to dwindle, Goldsmith said, Alaskans will have to work through the post-Prudhoe blues, he said.

A natural gas pipeline, if it is built, will not take up the slack, he said. The trans-Alaska oil pipeline provided 54,000 man-years of work, he said, while the most expensive gas pipeline option, an in-state line with a liquefied natural gas plant at the terminus, would create just 18,000 man-years of work.

''If gas happens, the economic impact will be much less than the trans-Alaska oil pipeline,'' he said. ''It's big, but it's not on the same scale.''

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