Private Construction Promises Strong Season; Questions Remain for Public Spending
Photo Credit: Patricia Morales | Alaska Business
In the teeter-totter of construction industry activity, private sector spending is expected to outweigh public sector spending by nearly a billion dollars in 2026, even considering the decline expected as Santos’ Pikka project moves from construction to production.
McKinley Research Group, on behalf of the Associated General Contractors (AGC) of Alaska and the Alaska Construction Industry Progress Fund, released its annual construction industry spending forecast in late January, with presentations in Anchorage and Fairbanks. This year, McKinley Research estimates the private sector will likely spend about $3.8 billion in Alaska—about 56 percent of total construction—while the public sector estimate is about $2.9 billion, or 44 percent.
Public Spending Considerations
While the tally of all expected spending, $6.71 billion, is level with the 2025 forecast, the balance of public versus private spending is tipping further toward private spending.
Over the past five years, the balance between private and public construction spending has maintained a fairly even split, with one sector holding 51 or 52 percent of spending and the other, 48 or 49 percent. This is the first year within the last five that private spending has started to pull ahead by more than a few percentage points.
While public sector spending is down nearly across the board—with less money spent on school maintenance, expansion, and renovation projects; less on national defense, as several large projects wrapped up last year; and less on state, local, and federal government-funded projects—two other categories bear a closer look.
The airports, ports and harbors, and railroad category is nearly double last year’s forecasted amount, from $470 million in 2025 to $900 million in 2026. Projects pushing that increase are the Port of Nome expansion, which is expected to get going this year, and the Don Young Port of Alaska Terminal 1 replacement, a project the Anchorage port has been working toward for more than a decade. Also in-process is a project to extend shore power to Seward’s port, allowing ships to plug in while idling their own engines, starting next year.
The second category to scrutinize pertains to highways and roads. While McKinley Research estimates $690 million in spending this year, the forecast contains a caveat: “Funding of these projects is highly contingent upon state match funding to access federal transportation grants, and spending in this category may fall short of this forecast if the full state match funding is not appropriated in 2026.”
The state match at issue is 2025 funding that the Alaska Legislature, cash-strapped and trying to patch a budget deficit, reallocated from older, incomplete, or stalled projects to cobble together the required state match for several 2025 Department of Alaska Transportation and Public Facilities (DOT&PF) projects. Although the measure passed the Alaska House and Senate, Governor Mike Dunleavy vetoed it last summer, noting that the funds had already been spent or were tied to projects. Now legislators are considering a $70 million supplemental appropriation to allow construction to proceed apace in 2026.
Current Issue
March 2026
AGC Executive Director Alicia Kresl testified before the House Finance Committee on January 27, requesting the body to approve the supplemental appropriation. She also delivered a letter endorsed by AGC and twenty other organizations—from the Anchorage, Fairbanks, Juneau, and statewide chambers of commerce to the Alaska Bankers Association and the Pacific Seafood Processors Association—all underscoring the request that the legislature approve $70 million early in the session to unlock $700 million in federal transportation dollars this year.
Most state transportation projects are funded federally, with the US government providing 90 percent of the funding while the state kicks in 10 percent. Signatories to the letter have asked the legislature to “Meet the Match.”
“Alaska is already halfway through the federal fiscal year, and failure to approve the match promptly could prevent state agencies from obligating and deploying funds within required federal timelines,” the letter states. “Any further delay risks DOT&PF’s ability to advertise projects, award contracts, and move shovel-ready work forward for Alaska’s short 2026 summer construction season.”
At the January 27 committee hearing, House Finance Co-Chair Andy Josephson asked Kresl if the state match had ever been delayed this long. Kresl, who has led AGC since 2018, said she had not witnessed such a delay and believed the last time Alaska missed its standard funding cycle may have been in 1985.
The House Finance Committee did not take action on the supplemental appropriation bill, labeled House Bill 283, on January 27. When it came back before the committee February 13, the committee opted to combine several supplemental budget requests into one bill, House Bill 289. That bill is scheduled to receive further review from the House Finance Committee this week.
Private Spending Progress
McKinley Research Group estimates about $6.7 billion will go toward construction in Alaska across several categories in 2026.
Image Credit: McKinley Research Group
The construction spending forecast reflects progress on several projects across Alaska, with all categories seeing more spending but one: oil and gas. Despite the dip, construction spending in that category retains its historic spot at the top of the list at $1.4 billion—a slight decrease from the 2025 projection of $1.49 billion. The slight dip is linked to the wrap-up of the construction phase of Santos’ Pikka project, which is nearing production.
Utility spending is expected to be up this year, as broadband internet and water/sanitation infrastructure projects continue. The forecast notes that some utility projects are on hold following cancelled federal grants, but several power providers plan to press forward on upgrades, such as substation upgrades for Golden Valley Electric Association and two hydroelectric projects in Southeast.
Residential construction is expected to be up thanks to recent interest rate cuts and planned projects by regional housing authorities. Construction related to hospitals and healthcare is planned across the state.
Mining spending is projected to be up in part due to favorable commodity prices and federal policy support. Other basic industry spending is projected to be up this year, as cruise dock developments in Juneau and Seward get underway, while in Fairbanks the Fountainhead Antique Auto Museum relocation process will generate income for construction companies, and a seaweed processing facility is on the near horizon in Kodiak. Rounding out the list, about $500 million is expected to be spent in “other industrial/commercial” spending, which includes improvements to Anchorage’s downtown, continued work on cargo and logistics projects at Ted Stevens Anchorage International Airport, and more.
Find the full 2026 Construction Spending Forecast here.
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