Transcript Document

Alaska’s Unique Economic Structure
and Fiscal Challenges
Scott Goldsmith
Professor of Economics
Institute of Social and Economic Research
University of Alaska Anchorage
Alaska Economics
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The Structure of the Economy
Recent Economic History
Population Trends
A Look to the Future
State & Local Finances
The Economic Regions of Alaska
Alaska Economics
• The Structure of the Economy
– Oil and Government Dominate
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Recent Economic History
Population Trends
A Look to the Future
State Finances
The Economic Regions of Alaska
Alaska Economics:
The 5 Sectors
Personal
Assets
20%
Traditional
Resources New
8% Resources
6%
Federal Govt
33%
Oil & Gas
33%
Alaska Economics:
The Traditional Resource Sector
$0.86
$0.40
$0.20
$17.18
Alaska Economics:
The New Resource Sector
$0.90
$0.20
$17.55
Alaska Economics:
The Federal Sector
$2.10
$4.17
$12.39
Alaska Economics:
The Oil and Gas Sector
$1.76
$2.04
$2.30
$12.54
Alaska Economics:
The Personal Assets Sector
$3.69
$14.96
Alaska Economics
• The Structure of the Economy
• Recent Economic History
– Decelerating Growth
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Population Trends
A Look to the Future
State Finances
The Economic Regions of Alaska
Employment Growth Rate is
Slowing
7%
annual rate
6%
5%
4%
3%
2%
1%
0%
60-70
70-80
Alaska
80-90
US Avg
90-00
Alaska Lost 4,000 Basic Jobs in
the 1990’s
-6,000
-4,000
-2,000
0
2,000
TOURISM
AIR CARGO
2,340
1,390
5,080
890
420
MINING
380
TIMBER
FED CIVILIAN
MILITARY
6,000
4,600
SEAFOOD
1,810 OIL AND GAS
4,000
Alaska Gained 16,000 Basic
Jobs in the 1980’s
0
1,000
2,000
3,000
4,000
4,680
TOURISM
AIR CARGO
360
3,260
SEAFOOD
MINING
690
3,950
OIL AND GAS
TIMBER
FED CIVILIAN
MILITARY
5,000
760
1,010
1,130
Per Capita Personal Income
Growth Rate is Down
6%
annual rate
5%
4%
3%
2%
1%
0%
60-70
70-80
Alaska
80-90
US Avg
90-00
REAL PERSONAL INCOME:
Growth Since 1990
LABOR
INCOME
$78
INVESTMENT
INCOME
$251
PF DIVIDEND
$154
OTHER GOVT
TRANSFERS
-$500
$659
$0
$500 $1,000 $1,500 $2,000 $2,500 $3,000
Millions of 1998 $
REAL PERSONAL INCOME:
Growth 1980 to 1990
LABOR
INCOME
INVESTMENT
INCOME
$2,620
$897
PF DIVIDEND
$602
OTHER GOVT
TRANSFERS
$748
$0
$500
$1,000 $1,500 $2,000 $2,500 $3,000
Millions of 1998 $
AVERAGE PAYCHECK: Falling
1.0%
annual rate
0.5%
0.0%
-0.5%
-1.0%
-1.5%
60-70
70-80
Alaska
80-90
US Avg
90-00
Natural Resource Job Growth
ALASKA PRIVAT E BASIC EM PLOYM ENT
T HOUSANDS
25. 0
20. 0
15. 0
10. 0
5.0
0.0
65
70
75
MINING
AIR CARGO
80
85
T IMBER
PET ROLEUM
90
T OURISM
95
SEAFOOD
A Large Share of Growth is Due
to Oil
ALASKA JOB GROWTH SINCE 1963
WHAT SHARE IS DUE TO OIL?
80%
70%
SHARE
60%
50%
40%
30%
20%
10%
0%
1964 1968 1972 1976 1980 1984 1988 1992
1966 1970 1974 1978 1982 1986 1990 1994
Population Growth Cycles
Follow Job Growth
ALASKA POPULATION
SOUR CES OF C HAN GE
40
THOUSAND
30
20
10
0
-10
1960
1965
1970
1975
NAT URAL INCREASE
1980
1985
1990
1995
NET CHANGE IN POPULAT ION
NET MIGRA TI ON IS T HE DIFFERENCE B ET WE EN
A NNUA L CHA NGE A ND NA T URAL INCRE AS E
Growth Drives Down the Cost
of Living
ANCHORAGE COST OF LIVING
Ratio to US Average
1.60
1.60
1.50
1.50
1.40
1.40
1.30
1.30
1.20
1.20
1.10
1.10
1.00
1.00
2000
1960
1965
1970
1975
1980
1985
1990
1995
Economic Driver #1.
FEDERAL AID PER CAPITA: HIGHEST
STATES IN 99
$3,500
$3,000
98 $
$2,500
$2,000
$1,500
$1,000
$500
$0
ska ming York akota ntana erage
a
l
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A
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Mo S Av
Wy New orth
U
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1990
GROWTH 1990 TO 1995
GROWTH 1995 TO 1999
Federal Grants: 1999 (Million $)
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TOTAL
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Highways
$362
Medical Assistance
$282
Indian Health Service $259
Health/Human Service $142
Bureau of Indian Affairs $109
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Impact Aid
$101
Environmental Protection $ 84
Federal Aviation Admin $ 79
K-12 Education
$ 76
Food/Nutrition Programs $ 61
$1,932
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Jobs and Training Admin $ 56
NOAA
$ 37
Justice Programs
$ 32
Rural Water/Sewer
$ 32
NSF
$ 18
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Alcohol/Drug Abuse
$ 15
Disease Control
$ 13
Economic Development $ 12
Energy
$ 11
Housing
$ 11
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All Other
$140
Federal Payments to Persons: 1999 (Million $)
• TOTAL
• RETIREMENT AND DISABILITY
– Social Security
– Federal Retirement
– Veterans Benefits
$ 71
– Other
• OTHER
– Medicare
– Unemployment Compensation
– Food Stamps
– Public and Indian Housing
– Other
$1,232
$453
$123
$140
$161
$120
$ 49
$ 33
$ 83
Economic Driver #2.
The Importance of the Permanent
Fund Dividend
Purchasing Power of the PF Dividend
Expressed in 1999 Dollars
$2, 000
$1, 600
$1, 200
$800
$400
$0
78
80
82
84
86
88
90
92
94
96
98
0
Real Personal Income Growth:
1990 to 1999
• Total PI Increase (million)
– Fed & State Govt $$$
• PFD
• Fed Trans
• ½ Fed Grants
– Govt $$$ Multiplier
– All Other
$1,784
$ 1,251
$ 425
$ 420
$ 405
$ 375
$ 158
Alaska Economics
• The Structure of the Economy
• Recent Economic History
• Population Trends
– Older, More Diverse & Urban
• A Look to the Future
• State Finances
• The Economic Regions of Alaska
Population Growth Rate is
Down to US Average
3.5%
annual rate
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
60-70
70-80
Alaska
80-90
US Avg
90-00
POPULATION UNDER 40:
No Growth
3.0%
annual rate
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
60-70
70-80
Alaska
80-90
US Avg
90-00
POPULATION CHANGE: 1990
to 1999
60,000
50,000
40,000
30,000
20,000
10,000
0
-10,000
Urban
Maritime-Non- Maritime-Mixed Maritime-Native
Native
Non-Native
Native
Interior-Large
Export Base
Interior-Small
Export Base
Alaska Economics
• The Structure of the Economy
• Recent Economic History
• Population Trends
• A Look to the Future
– Uncertain Growth Prospects
• State Finances
• The Economic Regions of Alaska
Basic Sectors with Growth
Potential
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Petroleum
Tourism
Mining
International Air Cargo
Footloose Services
Military
The Post-Prudhoe Blues
Market Value of Oil (and other resources)
$20,000
Million 1998 $
$15,000
$10,000
$5,000
$0
70
75
80
85
90
95
0
Natural Gas Projects:
Construction Jobs
(Total Man Years)
Over the Highway
Top
Instate
Alyeska
with LNG (actual)
AK Cost
(Billion $)
$2.25
$3.5
$6
$17
AK Pipe
(Miles)
300
600
800
800
Conditioning
Plant
3,000
3,000
3,000
Pipeline
3,750
7,500
10,500
Terminal
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-
4,500
-
6,750
10,500
18,000
54,000
Total in AK
Annual Average Growth Rate
MAP MODEL PROJECTION:
JOBS
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
1990 TO TODAY TODAY TO 2010
BASIC
SUPPORT
2010 TO 2025
INFRASTRUCTURE
STATE/LOCAL GOVT
Alaska Economics
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The Structure of the Economy
Recent Economic History
Population Trends
A Look to the Future
• State Finances
– Chronic Overspending
• The Economic Regions of Alaska
Alaska State Finances:
PC State and Local Govt Spending
Highest in the Nation
ALASKA / US AVERAGE
ALASKA PUBLIC OUTLAYS PER CAPITA
COMPARED TO THE NATIONAL AVERAGE--COLA ADJUSTED
3.5
3.5
3.0
3
2.5
2.5
2.0
2
1.5
1.5
1.0
1
1965
1970
1975
1980
OU T LAY S
1985
1990
1995
E X C L U D I N G P F D IV ID E N D
S OURCE: US DE PT OF COMMERCE OUT LAY S
P UB LIC OUT LA YS INCLUDE S S TA T E A ND LOCA L GOVE RNMENT
Alaska State Finances:
The State Budget Pie
THE 4 PIECE STATE BUDGET PIE
BILLIONS OF $$
$2.316 GENERAL FUND
$1.463 FEDS
$1.543 OTHER
$1.274 PF EARNINGS
LEGISLATIVE FINANCE, FISCAL YEAR 1999
Alaska State Finances:
GF Oil Revenues Have Fallen with
Production Decline
GF OIL REVENUES
Thousands
BI LLION 1998 $
$6
$6
$5
$5
$4
$4
$3
$3
$2
$2
$1
$1
$0
$0
70
74
72
78
76
82
80
86
84
90
88
94
92
98
96
0
Alaska State Finances:
Other GF Revenues Insensitive to
Growth
GF NON-OIL REVENUES
MILLION 1998 $
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
80
82
84
86
88
GENERAL FUND EARNINGS
90
92
94
96
98
0
NON-PET ROLEUM REVENUES
Alaska State Finances:
Expenses > Revenues
= Fiscal Gap
THE FISCA L GAP
BILLION 1999 $
$4.0
$3.0
$2.0
$1.0
$0.0
1992
1994
1996
1998
2000
2002
2004
2006
2008
ADO R FALL 1998 MIDCASE
EXISTING REVENUES
FISCAL GAP
ACT UAL / MAINTENANCE SPENDING
2010
Alaska State Finances:
Draws from the CBR Balance the
Budget--Temporarily
Constitutional Budget Reserve
Billion 1999 Dollars
$4
$4
$3
$3
$2
$2
$1
$1
$0
$0
91
93
95
97
99
1
Balance at the Start of the Fiscal Year
3
5
Alaska State Finances:
Permanent Fund Growth has Offset
Declining Oil
ALASKA STATE ASSETS:
OIL IN THE GROUND & PERMANENT FUND
$60
$50
BILLON $
$40
$30
$20
$10
$0
77
79
81
83
86
87
89
91
OIL IN THE GROUND BASED ON RESERVES AND PROJECTED PER BARREL REVENUE
PERMANENT FUND IS END OF FISCAL YEAR PRINCIPAL + UNREALIZED GAINS
93
95
97
99
Alaska State Finances:
Permanent Fund Earnings is the
Biggest State Revenue Source
Disposition of Realized Fund Earnings
Million 1999 Dollars
$3, 000
Other
Inflation-Proofing
PF Dividend
$2, 500
$2, 000
$1, 500
$1, 000
$500
$0
78
80
82
84
86
88
90
92
94
96
98
0
Alaska Economics
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The Structure of the Economy
Recent Economic History
Population Trends
A Look to the Future
State Finances
• The Economic Regions of Alaska
– Urban, Maritime, Interior
Alaska Regional Economics:
Most Jobs are in Urban Alaska
Interior
9%
Maritime
14%
Urban
77%
Kenai Economic Base
SHARE OF TOTAL INCOME (MIL $)
KENAI PENINSULA: 1997
SEAFOOD
$170
15.5%
PET ROL EUM
$175
15.9%
OIL REVENUES
$142
13.0%
T OURISM
$94
8.6%
FEDERAL SPENDING
$271
24.8%
OT HER
$25
2.3%
MISC INCOME
$46
4.2%
NS OIL
$84
7.7%
PERMANENT FUND
$87
8.0%
KENAI Real Personal Income:
Growth Since 1990
LABOR
INCOME
$31
INVESTMENT
INCOME
$80
PF DIVIDEND
$36
OTHER GOVT
TRANSFERS
-$40
$57
-$20
$0
$20
$40
Millions of 1999 $
$60
$80
Special Characteristics of
Rural/Native Alaska
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13 Regional Native Corporations
Village Corporations, Tribal Councils, Local Govt
Small, widely scattered communities – off roads
Mixed economies—cash and subsistence
Narrow economic base
Limited employment in market economy
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Hooper Bay
Sand Point Electric Company
Tok (includes Dot Lake)
Hoonah
Skagway
King Cove, City of
Yakutat Power
St. Paul Municipal Electrqic Utility
Unalakleet Vallkey Electric Cooperativ e
Emmonak
Klawock
Mountain Village
Togiak
Point Hope
Kake
Kwethluk, Inc .
Chevak
Gwitchyaa Zhee Utilities (Fort Yukon)
Thorne Bay Public Utility
Selawik
Gambell
Savoonga
Alakanuk
Angoon
Noorvik
Aniak Light & Power Company, Inc.
Quinhagak
Kotlik Electri c Services
Wainwright
Shismaref
Galena, City of
Pilot Stati on
Tooksook Bay
Akiachak Native Community Electric Co.
McGrath Light & Power
St. Mary's
Stebbins
Kipnuk Light Plant
Nunapitchuk
Kasigluk
Akutan Electric Utility
Scammon Bay
New Stuyahok
Kiana
I-N-N Electric Cooperative
Buckland, Ci ty of
Manokotak Power Company
Nuiqsut
Hydaburg
Napaskiak Electric Utility
Tuluksak Traditional Power Utility
Naterkaq Light Plant (Chefornak)
Nulato
Tanana Power Company
Kivalina
St. Michael
Noatak
Napakiak Ircinraq Power Company
Akiak Power Utilities
Tununak
Old Harbor
Ambler
Lower Kal skag
Tuntutuliak Community Service Assn.
Marshall
Russian Mission
Puvurnaq Power Company (Kongiganak
Eek
Anaktuvuk Pass
Holy Cros s
Elim
Koyuk
Kwig Power Company (Kwigillingok)
Teller Power Company
Atmautluak Joint Utilities
Brevig Mission
Unqusraq Power Company (Newtok)
Ouzinkie, City of
Kaltag
The Larger Rural Alaska
Villages
PCE COMMUNITIES
1997 POPULATION (PART 1.)
1,000
800
600
400
200
PCE COMMUNITY-LARGEST TO SMALLEST
Excludes 9 Larg est Communities With Population Exceeding 1000.
Composition of Personal
Income in Wade Hampton in
1997
GOVT TRANSFERS
STATE/LOCAL GOVT
RESOURCES
FEDERAL
OTHER JOBS
INVESTMENTS
RETAIL
AIR TRANS
SERVICES
1999 FEDERAL AND DIVIDEND $$
COMPARED TO PERSONAL INCOME
(INCLUDES HALF OF GRANT $)
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Urban
Maritime-Non- Maritime-Mixed Maritime-Native
Native
1990
Interior-Large
Export Base
GROWTH 1990 TO 1999
Interior-Small
Export Base
Alaska’s Unique Economic Structure
and Fiscal Challenges
Scott Goldsmith
Professor of Economics
Institute of Social and Economic Research
University of Alaska Anchorage