Alaska

1
Alaskas Unique Economic Structureand Fiscal
Challenges

• Scott Goldsmith
• Professor of Economics
• Institute of Social and Economic Research
• University of Alaska Anchorage

2
Alaska Economics

• The Structure of the Economy
• Recent Economic History
• Population Trends
• A Look to the Future
• State Local Finances
• The Economic Regions of Alaska

3
Alaska Economics

• The Structure of the Economy
• Oil and Government Dominate
• Recent Economic History
• Population Trends
• A Look to the Future
• State Finances
• The Economic Regions of Alaska

4
Alaska EconomicsThe 5 Sectors
5
Alaska EconomicsThe Traditional Resource Sector
6
Alaska EconomicsThe New Resource Sector
7
Alaska Economics The Federal Sector
8
Alaska Economics The Oil and Gas Sector
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Alaska EconomicsThe Personal Assets Sector
10
Alaska Economics

• The Structure of the Economy
• Recent Economic History
• Decelerating Growth
• Population Trends
• A Look to the Future
• State Finances
• The Economic Regions of Alaska

11
Employment Growth Rate is Slowing
12
Alaska Lost 4,000 Basic Jobs in the 1990s
13
Alaska Gained 16,000 Basic Jobs in the 1980s
14
Per Capita Personal Income Growth Rate is Down
15
REAL PERSONAL INCOMEGrowth Since 1990
16
REAL PERSONAL INCOME Growth 1980 to 1990
17
AVERAGE PAYCHECK Falling
18
Natural Resource Job Growth
19
A Large Share of Growth is Due to Oil
20
Population Growth Cycles Follow Job Growth
21
Growth Drives Down the Cost of Living
22
Economic Driver 1.FEDERAL AID PER CAPITA
HIGHEST STATES IN 99
23
Federal Grants 1999 (Million )

• TOTAL 1,932
• Highways 362
• Medical Assistance 282
• Indian Health Service 259
• Health/Human Service 142
• Bureau of Indian Affairs 109
• Impact Aid 101
• Environmental Protection 84
• Federal Aviation Admin 79
• K-12 Education 76
• Food/Nutrition Programs 61

• Jobs and Training Admin 56
• NOAA 37
• Justice Programs 32
• Rural Water/Sewer 32
• NSF 18
• Alcohol/Drug Abuse 15
• Disease Control 13
• Economic Development 12
• Energy 11
• Housing 11
• All Other 140

24
Federal Payments to Persons 1999 (Million )

• TOTAL 1,232
• RETIREMENT AND DISABILITY
• Social Security 453
• Federal Retirement 123
• Veterans Benefits 71
• Other 140
• OTHER
• Medicare 161
• Unemployment Compensation 120
• Food Stamps 49
• Public and Indian Housing 33
• Other 83

25
Economic Driver 2.The Importance of the
Permanent Fund Dividend
26
Real Personal Income Growth1990 to 1999

• Total PI Increase (million) 1,784
• Fed State Govt 1,251
• PFD 425
• Fed Trans 420
• ½ Fed Grants 405
• Govt Multiplier 375
• All Other 158

27
Alaska Economics

• The Structure of the Economy
• Recent Economic History
• Population Trends
• Older, More Diverse Urban
• A Look to the Future
• State Finances
• The Economic Regions of Alaska

28
Population Growth Rate is Down to US Average
29
POPULATION UNDER 40 No Growth
30
POPULATION CHANGE 1990 to 1999
31
Alaska Economics

• The Structure of the Economy
• Recent Economic History
• Population Trends
• A Look to the Future
• Uncertain Growth Prospects
• State Finances
• The Economic Regions of Alaska

32
Basic Sectors with Growth Potential

• Petroleum
• Tourism
• Mining
• International Air Cargo
• Footloose Services
• Military

33
The Post-Prudhoe BluesMarket Value of Oil (and
other resources)
34
Natural Gas Projects Construction Jobs(Total
Man Years)
35
MAP MODEL PROJECTION JOBS
36
Alaska Economics

• The Structure of the Economy
• Recent Economic History
• Population Trends
• A Look to the Future
• State Finances
• Chronic Overspending
• The Economic Regions of Alaska

37
Alaska State Finances PC State and Local Govt
Spending Highest in the Nation
38
Alaska State FinancesThe State Budget Pie
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Alaska State Finances GF Oil Revenues Have
Fallen with Production Decline
40
Alaska State Finances Other GF Revenues
Insensitive to Growth
41
Alaska State Finances Expenses gt Revenues
Fiscal Gap
42
Alaska State FinancesDraws from the CBR Balance
the Budget--Temporarily
43
Alaska State FinancesPermanent Fund Growth has
Offset Declining Oil
44
Alaska State Finances Permanent Fund Earnings is
the Biggest State Revenue Source
45
Alaska Economics

• The Structure of the Economy
• Recent Economic History
• Population Trends
• A Look to the Future
• State Finances
• The Economic Regions of Alaska
• Urban, Maritime, Interior

46
Alaska Regional Economics Most Jobs are in Urban
Alaska
47
Kenai Economic Base
48
KENAI Real Personal IncomeGrowth Since 1990
49
Special Characteristics ofRural/Native Alaska

• 13 Regional Native Corporations
• Village Corporations, Tribal Councils, Local Govt
• Small, widely scattered communities off roads
• Mixed economiescash and subsistence
• Narrow economic base
• Limited employment in market economy

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The Larger Rural Alaska Villages
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Composition of Personal Income in Wade Hampton in
1997
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1999 FEDERAL AND DIVIDEND COMPARED TO PERSONAL
INCOME(INCLUDES HALF OF GRANT )
53
Alaskas Unique Economic Structureand Fiscal
Challenges

• Scott Goldsmith
• Professor of Economics
• Institute of Social and Economic Research
• University of Alaska Anchorage