How Alaska Natives rescued the Anchorage economy
Native organizations have been a bright spot in the otherwise gloomy Anchorage economy, according to Bill Popp, director and president of the Anchorage Economic Development Corporation. Popp gave a talk Wednesday to the Alaska Mortgage Brokers Association on the economic outlook for Anchorage and the nearby Matanuska-Susitna borough, where 54 percent of the state’s population lives.
The Anchorage area is just coming out of a recession, now in its sixth year, that raised joblessness and slowed home purchases.
Popp said one of the largest employers in the area, the Alaska Native Tribal Health Consortium, kept it from being even worse. The consortium runs the in-patient side of the Alaska Native Medical Center and provides state-wide services in health promotion and sanitation.
“I don't have specific data on the [medical center] campus in terms of the number of workers there, but it is an exceptionally large number out of the overall healthcare workforce when it comes to institutional workforce,” Popp said. “And it's a critical element in one of the areas that we see as a bright spot for Anchorage for reinvestment, which would be the university-medical district.”
Native for-profit corporations created under the Alaska Native Claims Settlement Act of 1971 also helped buffer the effects of the downturn.
“Those are employers that helped us to mitigate what would've been a much worse recession,” he said. “The Native corporation presence in Anchorage, bringing back the wealth from outside of Alaska that resulted in jobs in our community, investment in our community were significant elements in helping to soften the blow of what would have otherwise been a pretty deep recession.”
As for the overall outlook for the Anchorage area, wages are up by 4.6 percent, usually a good sign, and unemployment is down to 5.1 percent. But Popp said, “That is a function of a tight labor market, really tight, because every sector that I talked to is having problems finding qualified workforce.”
“So when you see somebody telling you that, ‘Isn’t it great that we've got record all time low unemployment?’ No, not for the reasons that we have low unemployment,” Popp said.
The reason wages are up and unemployment is down is that people are leaving Alaska.
“This has been going on for six years now. It's been this long slow bleed of talent and skill and resource and net worth out of our state to the lower 48 and that's a problem,” Popp said. “And we've got to start figuring out how to stop that.”
Popp said a positive outlook, confidence in the future, would help. When people are optimistic they buy homes, they make big purchases such as a new car, hire new workers, and invest in their businesses. That’s not happening in Anchorage.
“We ask several questions to businesses, are you going to see good gross sales? Are you going to see increased profits from 2019 to 2020?
The response about their personal financial wellbeing was slightly optimistic, with 57 percent “feeling like, ‘Yeah, we're going to have a pretty good year. It's not going to be anything to shout about, but we're going to have a good year.’
Popp said, “The big change that took this down from the previous year was [the question] ‘What is your view of the future? Are you optimistic about the future of the Anchorage economy?”
When the survey was done last year, Anchorage was still in the 30-day recovery period after a 7.2 magnitude earthquake that damaged roads, homes, and businesses. That should have put a damper on people’s enthusiasm but 57 percent still were optimistic about the Anchorage economy, compared to 45 percent this year.
With no state income tax and no state-wide sales tax, Alaska has been living off oil revenues and federal funding for 40 years. Oil has long generated at least 90 percent of state revenues. Ever since the start of the oil boom, economists have been warning that when the oil money ran out, the state economy was going to drop off a cliff.
Oil production declined from a high in the 1980s, then five years ago, oil prices dropped, and oil revenues no longer covered the cost of state operations. Popp said that set off the state’s economic recession, but the lack of leadership in generating solutions has prolonged it.
“What we see is that this five-year recession, the first two years were oil, the oil recession and the industry bottomed out by the end of the second year. The last three years of this recession have been a fiscal policy recession because there was a lack of certainty on taxes, government services, key institutions,” Popp said.
He said cuts in state funding have created an atmosphere of uncertainty for businesses. Cuts or the threat of cuts to medicare create uncertainty for hospitals, otherwise a solid area of growth. Cuts to the university will mean the loss of maybe a hundred jobs when Anchorage can’t afford to lose any more jobs. Cuts to the capital budget will hurt the already hurting construction industry. Likewise for cuts to state support for tourism and commercial fishing. When people are fearful about their financial future, they pull back, postponing spending, which adds to the downward spiral.
Alaskans aren’t thinking of the state as a whole, said Popp. “When did Alaska become a place where we have a marine highway in such disrepair? Where we don't seem to care about our coastal communities because we don't use those ferries? Well, they don't use our roads. Why should they care about us spending money on roads?
And, if you don’t have college-age children, who needs a strong university?
Popp said young people tend to stay in the communities where they went to college. And Alaska needs an educated, skilled workforce. He said 71 percent of businesses are having a problem with finding available workforce.
“We have an unending list of complaints from all employment sectors about lack of available workforce and the quality of what is available.” However, Popp said one factor in the worker shortage is the legalization of marijuana in Alaska. “One of the biggest things that is being quoted to me is self disqualification because while it is legal to smoke and it has made a nice contribution to our economy through retail jobs and manufacturing jobs… many employers have zero tolerance for marijuana. This is a hole in our legalization policy.”
Popp said Alaskans may not like it, but a state income tax would help fill the gap between state revenues and state spending. For one thing, it would help capture revenues from the 20 percent of the Alaskan workforce that lives outside Alaska. People come for commercial fishing jobs and leave at the end of the fishing season. Or they fly to the North Slope for a high-paying oil field job and fly straight back out to another state at the end of their two- or three-week shift. An income tax would help capture some of those wages.
Popp whether it’s higher taxes, a sales tax, changes to the state dividend or any of many other possible solutions, the state needs to act.
“We're all in this together and that's the challenge that we're facing right now is we are not thinking about this in terms of how do we keep Alaska from collapsing in on itself,” Popp said. “That's kind of where we're at right now.”
For more information:
Alaska Economic Development Corporation economic forecast: https://aedcweb.com/
Alaska non-resident workforce: http://live.laborstats.alaska.gov/reshire/index.cfm
Joaqlin Estus, Tlingit, is a national correspondent based in Anchorage, Alaska. Follow her on Twitter: @estus_m. Email her at: email@example.com.