For Alaska's Economy, The Future is Now: Guest Author Column By Betsy Lawer, First National Bank Alaska
Betsy Lawer, Vice Chair
First National Bank Alaska
You've heard a lot about the future of Alaska's economy lately, and I
hope this article will add something positive to the discussion. But
before we look ahead, let's take a look at Alaska's economy a short 50
years ago. Those of you who were here, as I was, know that life was good
but very much different than today, economics-wise.
In 1960, our economy was small, with only 90,000 jobs, and half of those
were with the federal government. It was extremely seasonal - the
number of private sector summer jobs was double the amount in the
winter. Household income for Alaskans was 10-20% below the US average,
and the new state's infrastructure was primitive by today's standards.
We all know that picture has brightened considerably. Today, Alaska is
home to more than 350,000 jobs, income has risen from $3 billion in 1960
to $24 billion, and population from
230, 000 to 660,000. In terms of raw numbers, Alaska's economic growth
has been a huge success story. So what happened to fuel that growth?
We all know the answer to that one, too. Prudhoe Bay happened.
With the discovery of billions of barrels of oil on the North Slope,
Alaska entered a new era, one where the economy was significantly and
permanently changed. With oil revenue flowing into the state's coffers
(85% of general fund revenue is from petroleum sources), the economy
became a dynamic engine for accelerated growth and increased income,
with a certain stability, too. The petroleum industry became a key
support for the "three-legged stool" of Alaska's economy - petroleum
being one leg, federal spending another. All other basic industries
combined, such as fishing, tourism and mining, make up the remaining
We've been extremely fortunate to have the petroleum industry
underpinning the Alaska economy. For 40 years, we've enjoyed
unparalleled prosperity in all corners of the state, in all sectors of
our economy. The construction industry knows better than any how
important the petroleum industry has been to our state and to the
build-up of our infrastructure.
But things are changing.
The easy-to-reach oil on the North Slope is running out. Production has
been declining for a number of years, a fact masked by the higher oil
prices of recent years. The petroleum industry has taken a wait-and-see
attitude on additional investment in Alaska because of uncertainly in
tax structure and fiscal policy matters.
In the 1980s, the price of oil dropped precipitously. Income from
petroleum industry taxes and royalty oil sales dropped just as
dramatically, leading to an unprecedented fiscal crisis in Alaska. With
one of the legs of the stool seriously shortened, the economy wobbled
uncontrollably. Thousands of jobs disappeared, income plunged, the
bottom fell out of the housing market. People left the state in the
proverbial droves, with 12% of Alaska's population, more than 60,000,
No one expects to see a repeat of these dramatic events, but if we don't
quickly change the course we're on, I predict we'll see a long, slow
strangling of the economy, bringing on conditions just as challenging as
those of the late 80s.
It's a fact of our economic life: a healthy petroleum industry is
essential to a healthy Alaska economy, which helps all sectors of the
economy thrive, including the construction industry. Our state must
become more business-friendly to encourage continued investment by
industry. That's an uphill battle in a state recently ranked at the
very bottom of CNBC's "America's Top States for Business."
So what can you do? AGC's executive director John MacKinnon put it very
well in the last issue of this magazine: Your voice counts! Alaska's
leaders need to know that it's time to take definitive action on the
future of Alaska's economy. I suggest that you pose three very specific
questions to your elected officials and candidates in this fall's
elections and let them know you need specific answers.
Ask them what steps we can take to:
*Encourage new responsible investment in resource development that
produces lasting benefits.
*Build a fiscal plan that conserves assets and provides long-term
*Ensure all Alaskans share a commitment to the path that leads Alaska to
a stable economic future.
Encourage everyone you know to write the candidates and elected state
officials to ask these questions about Alaska's economic future. Because
it's not just about us anymore; future generations will be greatly
affected about the decisions we make over the next few years. We can
wait no longer. That's why I say, when it comes to our economy, the
future is indeed now.
Posted: August 24, 2010
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