If you listen to the rhetoric in Juneau, the focus appears to be on the State government budget and legislators working to maximize the dollars that flow to Juneau. That amount has been growing significantly over the past several years and has led to large spending increases that seemingly put government budgets on an unsustainable path. Oil production continues to decline and the high production tax rates at the current high prices are leading companies to invest more elsewhere.
It’s important to not confuse the State government budget with the Alaska economy. The State and Federal budget only account for under 10% each of our total gross state product, and the private sector accounts for about 81%. We need to broaden our focus so that we are not looking through the prism of Juneau, rather what’s best for the overall economy. This includes high-paying jobs in the private sector, opportunities for construction and service-based industries, and infrastructure development projects.
Capital investments from the large natural resource companies are what drive our economy, and our largest industry is oil and gas. Uncompetitive tax structures may bring in large State revenues in the short term, but dampen private sector investments in the long run and hurt the largest part of Alaska’s economy. Government revenues are a result of a successful economy; not its purpose. If the private sector is thriving, there will be plenty of options for the government to obtain the revenues it needs for operations.
We recently spoke at Northrim Bank’s annual economic luncheons in Fairbanks and Anchorage with an update on our economy and the opportunities before us. We were joined by Bob Heinrich of ConocoPhillips who presented their challenges and opportunities in Alaska. Click Here to view the presentation on Alaska’s economy.