Alaskanomics

Alaska Legislature Passes FY18 Budget

It took 157 days and two special sessions called by the governor, but the Alaska House and Senate have passed an operating budget for fiscal year 2018. The budget is a compromise of the two bodies that will allow the state to avoid a government shutdown on July 1. While we are disappointed that there was no systemic change in this year’s fiscal planning model, we are looking for the silver-lining in the situation.

The limit to the Permanent Fund Dividends formalizes the amount for the check ($1,100 or about half of historical practice) and reduces spending for that line item. The budget does not provide inflation proofing for the Permanent Fund, which reduces such appropriation and allows more flexibility in the earning reserve or spendable portion of the Fund. The budget was balanced by taking approximately $2.4 billion from the Constitutional Budget Reserve, which does not have much left in it, but the good thing is that it allows for more earning power in the Permanent Fund by not taking money from the earnings reserve. This is an interim positive step until a POMV type systematic changes are made that builds a more sustainable budget with new revenue sources.

The new budget is not good and not the way that government or business should be run. That being said, it is not debilitating for the State of Alaska and the fact that there is intent to work towards systemic changes is heartening. We will continue to work to educate legislators and the public about the importance of a structurally balanced budget that not only reduces spending but also utilizes the earnings reserve of the Permanent Fund and raises new revenues. This fight is not over, but we have an operating budget for the fiscal year that starts in one week.

TAPS 40th Anniversary

Today marks the official anniversary of the completion of the Trans-Alaska Pipeline System (TAPS). 40 years ago today the first oil flowed to Valdez through TAPS. This was the culmination of a three year, $8 billion project that employed approximately 70,000 people during construction.

In the past 40 years, more than 17 billion barrels of oil have been produced on Alaska’s North Slope. Through 2016, the oil industry has invested more than $55 billion in Alaska. In many years, oil has funded 90 percent of the state’s unrestricted General Fund and generated more than $180 billion in total state revenue. Today, oil revenues account for approximately 67 percent of unrestricted General Fund revenue.  

There is no doubt about the impact that the oil and gas industry has had on Alaska’s economy. Prudhoe Bay has exceeded initial projections and is the third-largest oil field in the US by proved reserves. Despite low oil prices, 2016 was the first year in a decade that had increased production through TAPS. This year is expected to have another increase. If the prediction holds true, it would be the first time with 2 years of increased production since 1988.

As we celebrate the Summer Solstice, we think about all that TAPS has brought to Alaska’s economy. The longest day of the year brings life and growth, just as TAPS has brought life and growth to Alaskans throughout the state. Many have their own stories of working on the pipeline or coming to Alaska for a fresh start. The same fresh start that we feel on Solstice as we look forward to the coming summer season. Happy Anniversary to the Trans-Alaska Pipeline System and all who have helped to make it a lifeline for Alaska.

Alaska's Unemployment Rate at 6.7 Percent in May

Alaska’s Department of Labor and Workforce Development released the Unemployment rate for May this morning. The seasonally adjusted rate remained virtually unchanged and sits at 6.7 percent in May. The National rate is 4.3 percent in the past month.

The preliminary employment numbers show a 1.8 percent drop in jobs from May 2016. The drop equates to approximately 6,000 jobs. Most losses were seen in oil and gas, followed by construction, professional and business services.

There are a couple of sectors that added jobs and they include health care and leisure and hospitality. Local and federal government jobs are also up in 2017. Much of the growth in local government comes from tribal government jobs, which are classified as local government.

As per usual, May’s not-seasonally adjusted unemployment rate dropped two-tenths of a percent from April and stands at 6.8 percent. This is due to the increase in tourism and construction jobs. The lowest rates in the state were all in Southeast Alaska with Juneau and Sitka at 4.1 percent and Skagway at 4.2 percent. Kusilvak Census Area has the highest rate in the state at 21.1 percent.

Full employment stats can be found at http://live.laborstats.alaska.gov/ces/