Alaskanomics

Legislative Special Session Called

The Legislature adjourned yesterday, but the Governor called a special session to address Medicaid and the unresolved FY16 budget issues. Currently, the FY16 budget is short-funded, meaning there is not enough money to pay for the full year. The Senate passed a budget that relied on the Constitutional Budget Reserve (CBR) to make-up budget shortfalls. Using the CBR requires a ¾ vote and the House was not able to come up with the votes to make this happen. House minority members want to restore school funding that was cut from the Senate’s budget.

Many hope that the special session will result in a fully funded budget. Governor Walker has also asked that Medicaid expansion be discussed but it seems unlikely that the expansion will be approved. There will also be discussion about the new bill ‘Erin’s Law’ that will require school districts to implement sexual abuse and assault prevention programs.

The special session will be called to order in Juneau, and then adjourn to regroup in Anchorage. The capitol building will not be available to the Legislature due to planning restoration. Legislators will have a period of rest before gathering in Anchorage for the special session.

Unemployment in March at 6.5 Percent

The Department of Labor and Workforce Development released the March unemployment rate early this morning. The rate for March was up slightly from February and stands at 6.5 percent. The national average remained steady at 5.5 percent.

The not -seasonally adjusted lowest and highest rates in the state remained the same with the Aleutians East Borough and Aleutians West Census Area being the lowest at 3.2 and 2.6 percent respectively; and Wade Hampton Census Area the highest at 26.6 percent.

As part of their monthly press release, the Department highlighted the job numbers of the different regions throughout Alaska for the 1^st quarter of 2015.

• Anchorage’s retail trade was the biggest source of new jobs, while professional and business services had the largest losses. The lack of snow cut into winter recreation, which created weakness in the leisure and hospitality industry.
• Southeast jobs were lower than the same period last year due to the less-than-usual growth in construction and seafood processing.
• Southwest was also lower than last year even with the seasonal growth from winter fishing.
• The Gulf Coast saw gains in seafood processing, mining, and leisure and hospitality that balanced out the loss in health care and government jobs.
• The Interior, including Fairbanks, had a small loss in jobs, but health care in the region is growing.
• The Northern Region had an increase in jobs from the same period last year. Health care increased, as did local government.

For full employment statistics, visit www.laborstats.alaska.gov

Update on the Alaska LNG Project- Anchorage Make it Monday Forum

The companies working on the Alaska LNG project are working hard to keep the project rolling through the next stage. In the summer of 2015, there will be continuing fieldwork as the project prepares for the Environmental Impact Study (EIS). The Federal Energy Regulatory Commission (FERC) will conduct one EIS for the project that will be accessible to all federal agencies. A 550-800 acre land acquisition is in the works to provide space for the liquefaction plant and marine terminal in Nikiski. The US Coast Guard is also working on the Cook Inlet Waterway Suitability Assessment that will be needed for the project to proceed. Community meetings are continuing at all levels of the project. FERC has opened a 9-month scoping period for the public to bring forward their concerns and questions about the project.

The Legislature and the Governor are locked in a battle over Alaska’s future for LNG. Governor Walker wants the Alaska Gasline Development Corporation (AGDC) to move forward on a project with a higher volume pipe, as an alternative to the AK LNG project. He states that it is good to have alternatives to make sure LNG is viable in Alaska. The Legislature wants to pursue only the AK LNG project and feels that splitting focus will create market confusion and instability in the Alaska oil and gas industry. Anchorage Chamber of Commerce Make it Monday Forum Presenter Larry Persily noted that he felt that AGDC was like a child in the middle of a highly contested divorce/custody battle. The internal battle between the Governor and the Legislature continues to cause frustration for many working on LNG in Alaska.

There are reasons that the AK LNG project could fall apart as well as reasons for optimism that it will continue and become a reality. The global demand for LNG could come up short, Alaska’s competitors could beat us on price, Russia could pull Asian markets to their product, and Alaska politics could get in the way of success for the project. However, there are still reasons to be optimistic moving forward. Alaska’s LNG has high BTU content, we have proven reserves with no exploration work needed, we are a proven supplier, and Alaska is the shortest distance to Asia from the other North American markets.

AK LNG will continue to move forward in their work and the Governor and the Legislature will continue their battle through the end of session next week and beyond. There will be many more discussions on this in the coming months and even years.

Anchorage Housing Gridlock and Density Discussion

For many in Anchorage, the reality of homeownership is out of reach. According to a recent presentation from the Housing Subgroup of the Live.Work.Play initiative, Anchorage is the 19^th most expensive city in the US and 21^st most expensive when it comes to housing. The lack of affordable housing is not just a concern for individuals, but also for businesses trying to hire new employees from out of state. The Anchorage Economic Development Corporation (AEDC) conducted a survey of Anchorage employers to determine the biggest concerns of employers and employees in the Municipality. The number one concern of employers was being able to attract and retain good employees and a large part of that was being able to have housing for their employees. Companies have had individuals turn down jobs in Anchorage because of the lack of affordable housing. There is a lack of selection and of quality, especially in rental properties. Many potential employees cite that it is too difficult to move to a new, high cost area with the uncertainty of a new job and without affordable housing.

Many issues have created the housing gridlock being seen in Anchorage. Available land for new developments, the cost of construction/renovation, and the difficulty of navigating the permitting process have all lead to the housing crunch. A solution to this issue is to reconsider housing density.  There are many ways to create more dense housing in Anchorage without building skyscrapers that house hundreds of residents. Density is an important concept that helps maximize the value and utility of land.

At a discussion hosted by Housing Anchorage, attendees wrestled with the best way to consider approaching the subject of density in Anchorage. Many noted that perceptions and misconceptions about density would need to be changed before moving forward to find a solution. Everyone agreed that it would be helpful to have a successful example of more dense housing in Anchorage to use as an example in moving forward. Creating higher density housing would break up some of the gridlock being seen and allow for more flexibility in the housing market. A representative from the Municipality’s Planning Department noted that the department was going to target certain areas of the Municipality for higher density projects. A shift to higher density would only be made in areas where it was appropriate and it would be strategic.

Discussions regarding housing in Anchorage are continuing and include a variety of subjects and potential solutions. For more information, visit www.aedcweb.com.

Alaska and the Puget Sound

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Earlier this year, the Seattle Metro Chamber released a study that shows continued growth to the Puget Sound region due to Alaska’s economic impact. The report shows that Alaska’s impact can be seen in a number of sectors including freight/cargo, seafood, passenger transportation and tourism, maritime support, refining, health care, and education. In 2013, Alaska accounted for 113,000 direct, indirect, and induced jobs that generated $6.3 billion in wages for the Puget Sound region.

Last week, Seattle hosted a panel of Alaska experts to discuss the impact of low oil prices and how it relates to business throughout the Northwest. The Puget Sound is not expected to feel a real impact in 2015 but could start to feel a pinch in 2016. Puget Sound businesses provide $5.3 billion in goods and services to Alaska, which travel through Puget Sound ports. 2015 contracts are already set, so traffic is not expected to change, but could drop in 2016 if Alaska changes its spending plan for the coming year.

As is the case with the Alaska economic environment, 2015 will not be a crisis for the Puget Sound region, but businesses are more cautious moving forward and planning for 2016. Bill Pedlar, Executive Committee Member with the Alaska Travel Industry Association noted that in 2015 the number of people taking Seattle-based cruises into Alaska is expected to rise 5 percent to record levels, but it could change next year. Marketing budgets will be tight, which will make it harder to win passengers. More than 1 million people pass through Seattle-Tacoma International Airport on their way to an Alaska cruise.

The Puget Sound and Alaska will always be strongly linked and the Pacific Northwest is watching the Alaska economy closely as they plan for the future.

For the “Ties that Bind” report, visit http://www.seattlechamber.com/home/business-tools/community-news/detail/2015/02/06/ties-that-bind-puget-sound-to-alaska-stronger-than-ever

*Photo from the Seattle Metro Chamber

Anchorage Municipal Elections- April 7

Anchorage voters do not forget that April 7 is Election Day. All voters will have an opportunity to cast their vote for Mayor and three School Board seats. There are Service Area and Limited Road Service Area Board of Supervisor seats up for election in certain areas of the Municipality.

Beyond the offices to be filled on Tuesday, there are also 7 propositions on the ballot for voters to consider.

• Proposition 1- Capital improvements for the Anchorage School District bonds
• Proposition 2- Area wide safety and public transportation capital improvement bonds
• Proposition 3- Area wide facilities capital improvement project bonds
• Proposition 4- Anchorage Parks and Recreation service area capital improvement bonds
• Proposition 5- Anchorage roads and drainage service area road and storm drainage bonds
• Proposition 6- Anchorage fire service area fire protection bonds
• Proposition 7- To add to the power of the Girdwood Valley Service Area the power to operate and maintain a municipal cemetery at its sole expense

For more information about tomorrow’s Municipal election, please visit http://www.muni.org/Departments/Assembly/Clerk/Elections/Pages/Default.aspx

Discipline Over Desire: Finding Opportunities in a Challenged Economy

This week, Northrim Bank hosted three economic update luncheons. The annual luncheon was held in Fairbanks, Anchorage and Juneau. Speakers included Northrim Bank CEO Joe Beedle, Northrim Bank Economist Mark Edwards, and guest speaker Dr. Bill Conerly, business strategy consultant, online contributor to Forbes and author of Businomics.

Guests were given an update on Alaska’s economy and a special presentation on the economic issues affecting Alaska and the nation. Joe Beedle provided information specific to each region in his remarks. Each presentation is attached below. We invite you to peruse the PowerPoint presentations at your leisure.

Guests were also given a copy of the Alaska Economic Update for Spring 2015 as well as a copy of Understanding the Current Oil Environment. The update was written by Bank Economist, Mark Edwards, and has been highlighted over the past two weeks in Alaskanomics. Both pieces are in the ‘Resources’ section of the blog.  

To wrap up each luncheon, Northrim Bank presented donations to University of Alaska programs. Over the years, Northrim has given over $4 million to Alaskan higher education. Northrim invests in the community and is proud to support organizations that are helping build a stronger community for the future. Northrim is a strong advocate for higher education throughout Alaska and supports each of the major hubs of the University.

• University of Alaska Fairbanks School of Management-$50,000
• University of Alaska Anchorage Institute of Social and Economic Research $100,000
• University of Alaska Anchorage Small Business Development Center $50,000
• University of Alaska Southeast School of Management -$40,000
• University of Alaska Ketchikan Campus- $5,000
• University of Alaska Sitka Campus $5,000

Northrim Bank Economic Luncheon 2015 - Anchorage

Northrim Bank Economic Luncheon 2015 - Fairbanks

Northrim Bank Economic Luncheon 2015 - Juneau

Governing Alaska in a Time of Low Oil Prices

Commonwealth North hosted Governor Walker at lunch on Wednesday to hear his vision for Alaska and the status of important issues concerning the state budget, natural gas pipeline, and Medicaid expansion. The Governor kept his introduction light and tried to warm-up the crowd. He seemed to want to maintain a sense of optimism throughout his presentation. He outlined the cabinet retreat that was held after his election to set priorities for the administration. The cabinet walked away from the retreat with a mission statement, core values, and a vision for the Governor’s term in office. At the heart of the three sections was how to improve the lives of all Alaskans.

Getting into the meat of his presentation, Governor Walker discussed his actions regarding LNG and the state. He reassured everyone that his priority is getting Alaska LNG to market. The work done by the Parnell administration and the companies working on AKLNG is the priority, but the Governor is not comfortable moving forward with only one option in the LNG field. He noted that if there is only one project being worked on, negotiations will be very difficult and he would like to leave his options open for getting Alaska’s gas to market. Many times throughout the presentation, Governor Walker reiterated his desire to have a viable solution to the natural gas issue. The work being done by the Alaska Stand Alone Pipeline (ASAP) is not to be seen as competition to AKLNG, rather as a backup. It is not a new project, rather one that was started in 2010 and the Governor feels it is a viable option for the future.  

Governor Walker then switched gears to Medicaid expansion and reform. He hopes that the Medicaid bill will get through the Legislature before the end of the session, as he believes the expansion is vital for the health of uninsured Alaskans. There would be significant savings on the cost of health care and lead to a reduction in uncovered health care costs and other social problems.

Even with the fiscal and policy issues being faced by the state, Governor Walker felt that there was a silver lining, and that was the fact that we can make the necessary changes to the way government functions in Alaska, in relation to the state budget. The spring forecast will be released and while it will not be good news, it should not be a surprise to anyone. The Governor stated that when it comes to the budget, it is a back and forth process. It is not pleasant, but it is absolutely necessary. He continued by saying that a reduction in spending is necessary before going to citizens for revenue sources. When it comes to budget cuts, everything will be on the table and will be carefully reviewed for the best possible outcome.

It was clear that Governor Walker wanted to remain optimistic about future of the state. He noted that Alaska is full of opportunity and was told last week that Alaska doesn’t have a wealth problem, it has a cash flow problem. Alaska is rich with natural resources and we must determine the best way to get the resources to market. The Governor has a tough road ahead and seems to be up to the task, but only time will tell what the future holds for Alaska. The deficit must be dealt with soon because the longer it goes unchecked, the harder it will be to solve. Governor Walker is willing to put in the work and seems confident that the Legislature is also ready to do what is best to improve the lives of all Alaskans.