• Alaska’s Construction Spending 2009 Forecast

      Goldsmith, Oliver Scott; Killorin, Mary (Institute of Social and Economic Research, University of Alaska Anchorage, 2009-01)
      construction spending “on the street” in Alaska in 2009 will be $7.1 billion, down 3% from 2008.1,2,3 Lower construction spending, combined with higher material and labor costs, will result in a modest reduction in the level of construction employment in 2009. Although this will be the fourth year of decline, the level remains considerably above the long-term average. Excluding the oil and gas sector—which accounts for 43% of the total—construction spending will be $4.1 billion—down 1% from 2008. Private-sector construction spending will follow the slowdown in the Alaska economy. Excluding oil and gas, we expect private spending to be $1.3 billion in 2009, a decline of 24% from 2008. But strength in the oil and gas sector will keep the overall private sector decline to only 12%. Mining, utilities, and commercial spending will be down, mostly because a number of large projects have been completed. However, commercial —as well as residential— spending will be weaker, in response to the slowdown in the U.S. economy. Public construction spending will be up 16%, to $2.7 billion, offsetting much of the decline in private spending. That growth will mainly be due to the large FY 2009 state capital budget. But strong federal spending— both military and civilian— and the federal stimulus package will also contribute to the increase. Uncertainty in this year’s forecast comes from several sources. Volatility in commodity prices has affected construction spending in two important ways. The lower petroleum and metals prices in early 2009 have made investment in some prospects less attractive. Also, companies that finance construction activities out of their current cash flow are dealing with shrinking capital budgets. The national economy continues to deteriorate as we enter 2009. Consumers are cutting back on expenditures, and businesses are reducing their capital spending. Credit has become more difficult— if not impossible—to obtain, and the unemployment rate continues to rise. Economists anticipate a long and deep recession at least through 2009 and perhaps beyond. The federal government has stepped in to try to loosen credit markets, so far with only limited success, and we anticipate that early in the year Congress will pass a large stimulus package, perhaps reaching $1 trillion. The Alaska economy has felt few ill effects from the recession ravaging the rest of the nation, but as the recession continues and deepens, Alaska is expected to begin to suffer as well. Resource industries may cut back on their development activities, and businesses may postpone new investments. Consumers may reduce spending. Credit may remain difficult to get, for both the private and public sectors.
    • Alaska’s Economy:The Challenge Ahead

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2013-09-24)
    • Alaska’s Health-Care Bill: $7.5 Billion and Climbing

      Foster, Mark A.; Goldsmith, Oliver Scott; Leask, Linda E.; Merrill, Clemencia (Institute of Social and Economic Research, University of Alaska Anchorage, 2011-08)
      Health-care spending for Alaskans reached about $7.5 billion in 2010. For comparison, that’s close to half the wellhead value of all the oil produced in Alaska that year. It’s also roughly equal to half the wages Alaskans collected in 2010. The state’s health-care spending has been rising fast, tripling since 1990 and jumping 40% just between 2005 and 2010—and at current trends it could double by 2020, reaching more than $14 billion. Here we report on who’s paying the bills, what we’re buying, what’s contributing to the growth, and other aspects of health-care spending. We conclude with a discussion of how Alaska could get better value for its health-care dollars.
    • Alaska’s Oil Production Tax: Comparing the Old and the New

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2014-05)
      Last year the Alaska Legislature made a controversial change in the oil production tax, the state’s largest source of oil revenue. The old tax, known as ACES (Alaska’s Clear and Equitable Share), was replaced with MAPA (More Alaska Production Act, or SB21). How much money the production tax brings in is a big issue: oil revenues pay for most state government services, and the industry accounts for roughly half of all Alaska jobs. Supporters say the new tax will stimulate North Slope oil investment, leading to more oil production—and so to higher oil revenues and new jobs. Critics say the oil industry doesn’t base investment decisions on tax structure, and that the revised tax is a give-away to the industry. They cite as evidence the $2.1 billion drop in the Alaska Department of Revenue’s forecast of expected 2014 oil revenues after the new law was passed. Alaskans face a choice between the old and the new tax structures this August, when a referendum on the primary election ballot will ask them whether to keep or repeal the new structure. This paper is intended to help Alaskans understand the two systems, which have the same tax base but differ in their tax rates, credits, and treatment of certain new production.
    • Alaska’s People and Economy, 1867-2009

      Leask, Linda; Goldsmith, Oliver Scott; Knapp, Gunnar; Colt, Steve (Institute of Social and Economic Research, University of Alaska Anchorage, 2009-09)
      Utterly worthless. That’s how a congressman from Missouri described Alaska in 1867, when the U.S. bought it from Russia. A lot of Americans agreed. For almost 100 years, hardly anyone— except some Alaskans—wanted Alaska to become a state. But Alaska did finally become a state, in 1959. Today, after 142 years as a U.S. possession and 50 years as a state, Alaska has produced resources worth (in today’s dollars) around $670 billion. The U.S. paid $7.2 million for Alaska, equal to about $106 million now. For perspective, that’s roughly what the state government collected in royalties from oil produced on state-owned land in just the month of March 2009. To help mark 50 years of statehood, this publication first takes a broad look at what’s changed in Alaska since 1959. That’s on this page and the back page. We’ve also put together a timeline of political and economic events in Alaska from 1867 to the present. That’s on the inside pages. There’s an interactive version of the timeline—with photos, figures, and more—on ISER’s Web site: www.iser.uaa.alaska.edu.
    • Anchorage Port Intermodal Expansion Program (PIEP) Benefit Cost Analysis of Proposed TIGER Discretionary Grant Funds

      Goldsmith, Oliver Scott; Schwörer, Tobias (Institute of Social and Economic Research, University of Alaska Anchorage, 2009-09-04)
      The Port of Anchorage (POA) has exceeded its design life and has been operating beyond its capacity for a number of years. It is in need of replacement to both minimize operating costs and avoid potential damage in the event of an earthquake. It is in need of expansion to meet the needs of the growing South Central Alaska economy1. In response to these needs the POA has embarked on a multi-year expansion project—the Port Inter-modal Expansion Program (PIEP)2. In early 2009, in the midst of this expansion program, the federal government passed the American Recovery and Reinvestment Act. The Recovery Act appropriated $1.5 billion of discretionary funds to be awarded by the Department of Transportation for capital investments in surface transportation infrastructure (including ports) that would provide long-term economic benefits as well as preserve and create jobs and promote economic recovery3. In support of its request for a “Grant for Transportation Investment Generating Economic Recovery” (TIGER Grant), the POA asked the Institute of Social and Economic Research (ISER) to prepare a Benefit-Cost Analysis (BCA) demonstrating the long term economic benefits that would flow from expenditure of grant funds in support of the PIEP. This BCA follows the guidelines set forth in the Federal Register notice announcing the TIGER grant program. It measures the increase in national income that would result from the expenditure of the grant funds in support of the PIEP. Since the POA funding request would pay only a portion of the cost of the entire PIEP, this BCA is limited to measuring the benefits from the expenditure of the TIGER grant funds rather than the total benefits of the entire PIEP.
    • Economic and Demographic Projections for Alaska and Greater Anchorage 2010–2035

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2009-12)
      This report describes three economic, demographic, and fiscal projections for the state of Alaska and the Greater Anchorage region consisting of the Municipality of Anchorage and the Matanuska- Susitna Borough. These projections have been prepared by the Institute for Social and Economic Research (ISER) of the University of Alaska Anchorage as part of the development of the Seward Highway to Glenn Highway Connection (H2H) Environmental Impact Statement (EIS) for the Department of Transportation and Facilities. These projections will be used to estimate future travel demand within the study area. The assumptions driving the three projections were developed by ISER in consultation with the study team and planners and economic development staff from Anchorage and Mat-Su. The BASE CASE projection is driven by a set of assumptions that together represent a likely future scenario for employment and population growth. The HIGH and LOW CASES are each driven by a set of assumptions that together represent the range of possible outcomes around the likely BASE CASE. The assumptions are based upon the best information available at the time that they were developed—the fall of 2009. The economic and demographic projections, contingent upon the assumptions for the different cases, were prepared using the MAP economic and demographic model developed by ISER. The main body of this report is a description of each of the three projection cases. This is followed by short sections comparing the three projections to one another and to an earlier projection prepared by ISER for KABATA (Knik Arm Bridge and Toll Authority) in 2005. There is also a brief description of the structure of the MAP model. A number of appendices contain detailed tables of model output as well as a detailed description of the assumptions for each of the three cases.
    • The Economic Importance of the Bristol Bay Salmon Industry

      Knapp, Gunnar; Guettabi, Mouhcine; Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2013-04)
      By any measure, the Bristol Bay sockeye salmon fishery is very large and valuable. It is the world’s most valuable wild salmon fishery, and typically supplies almost half of the world’s wild sockeye salmon. In 2010, harvesting, processing, and retailing Bristol Bay salmon and the multiplier effects of these activities created $1.5 billion in output or sales value across the United States. In 2010, Bristol Bay salmon fishermen harvested 29 million sockeye salmon worth $165 million in direct harvest value alone. That represented 31% of the total Alaska salmon harvest value, and was greater than the total value of fish harvests in 41 states. Salmon processing in Bristol Bay increased the value by $225 million, for a total first wholesale value after processing of $390 million. The total value of Bristol Bay salmon product exports in 2010 was about $250 million, or about 6% of the total value of all U.S. seafood exports. In 2010, the Bristol Bay sockeye salmon fishery supported 12,000 fishing and processing jobs during the summer salmon fishing season. Measuring these as year-round jobs, and adding jobs created in other industries, the Bristol Bay salmon fishery created the equivalent of almost 10,000 year-round American jobs across the country, and brought Americans $500 million in income. For every dollar of direct output value created in Bristol Bay fishing and processing, more than two additional dollars of output value are created in other industries, as payments from the Bristol Bay fishery ripple through the economy. These payments create almost three jobs for every direct job in Bristol Bay fishing and processing. United States domestic consumption of Bristol Bay frozen sockeye salmon products has been growing over time as a result of sustained and effective marketing by the industry, new product development and other factors. This growth is likely to continue over time, which will result in even greater output value figures for the industry’s economic impacts across the U.S. The economic importance of the Bristol Bay salmon industry extends far beyond Alaska, particularly to the West Coast states of Washington, Oregon and California.
    • Federal Spending in Alaska: Running Out of Steam?

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2012-05)
      After nearly a decade of explosive growth, federal spending in Alaska has turned flat, except for the temporary boost from the stimulus package—the American Recovery and Reinvestment Act—that pumped more than $2.2 billion into the state economy in 2009 and 2010. (Shown in black in the figure below.) Total federal spending in Alaska was $11.2 billion in 2009 and $10.9 billion in 2010, compared with about $9.4 billion in 2008. But without the stimulus funds, federal spending in 2009 and 2010 would have been no higher than in the previous four years. Alaska was first among the states in per capita stimulus funds, with more than $3,000 per capita, or nearly four times the national average. Spending is no longer growing for either defense or grants—the largest categories of federal dollars coming into the state. Still, the special characteristics that have historically kept Alaska near the top of the state rankings for federal funds per capita will continue to guarantee a strong role for federal dollars in the economy. Here we discuss the composition of federal spending in Alaska, comparing it with spending in other states, and also review stimulus spending and provide examples of the importance of federal funds to particular sectors of the state economy. In an appendix, we correct a serious reporting error in data from the U.S. Department of Commerce on federal spending in Alaska. Because of the difficulties in sorting out temporary stimulus spending in 2009 and 2010—and because of errors in federal data for those years—2008 spending provides the best picture of recent federal spending in Alaska.
    • The Foraker Group Report on the Alaska Nonprofit Economy: 2010 Update

      Goldsmith, Oliver Scott; Schwörer, Tobias (Institute of Social and Economic Research, University of Alaska Anchorage, 2010-11)
      A report on the economic importance of Alaska’s nonprofit sector conducted by the Institute of Social and Economic Research University of Alaska Anchorage
    • Four Scenarios for Alaska's Future

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2011-05)
      The Alaska economy is growing as high commodity prices (for oil and gold in particular) drive the private sector and oil revenue surpluses fuel the state budget. But as oil production continues to decline; the prospect for commercialization of North Slope gas in the near term fades; access to petroleum resources on federal lands remains stalled; and non-petroleum resource development moves forward only slowly, many Alaskans are concerned with what path the Alaska economy will take in the next decades. We could go in four possible directions. Here we offer a short description of each scenario— general enough to let each person fill in the blanks. Our objective is not to predict but rather to stimulate thought and discussion about what Alaskans can and should do to move the economy along the preferred path. Here’s a summary of the four potential paths. A more detailed description follows.
    • High Oil Prices Give Alaskans a Second Chance: How Will We Use this Opportunity?

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2011-09)
      Think about this: 10 years ago, it looked as if Alaska was on the brink of a tough transition to a post-Prudhoe Bay economy. Oil production was half of what it had once been, the state’s oil revenues were about $2 billion, financial reserves were falling, and employment in the oil industry was down. The price of Alaska oil, adjusted to today’s buying power, was $27 a barrel—and that was high by historical standards. Things have changed dramatically since then: a combination of much higher oil prices—about $115 a barrel as this paper is being written—and revisions in the way the state calculates production taxes have caused state oil revenues to skyrocket, even though oil production is down 40% since 2002. We now find ourselves in a second huge oil-revenue boom, comparable to the one in the early 1980s (Figure 1 ).
    • How Much Should Alaska Save?

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2011-02)
      Alaska today is in the lucky position of having an estimated $126 billion in petroleum wealth— $45 billion in savings accounts derived from oil revenues, and $81 billion in future state revenues from oil and gas still in the ground--if current official state projections prove accurate. Almost all state revenues come from oil, as they have for 30 years. But oil production is now only a third of what it once was, and analysts think that even with new discoveries and enhanced recovery, production from state lands will keep dropping. So Alaskans face a dilemma: how can we preserve this petroleum wealth for future generations, while still benefitting from it ourselves? The answer is to limit how much we spend today from our petroleum wealth, and invest the savings in income generating assets. The income from those assets would grow over time and gradually replace declining petroleum revenues. We’ve already taken a major step, by depositing 24% of past oil revenues into savings accounts. Is that enough?
    • How Petroleum Has Transformed the Alaska Economy

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2010-05-13)
    • How Vulnerable Is Alaska’s Economy to Reduced Federal Spending?

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2008-07)
      About a third of all jobs in Alaska can be traced to federal spending here—and over the past decade the rapid increase in federal spending drove much of the economic growth. Federal spending in Alaska more than doubled between 1995 and 2005, and in 2006 it was $9.25 billion. But now federal spending here has stopped growing, and many Alaskans are worried that the economy is vulnerable to spending cuts as the federal budget tightens. This analysis estimates that Alaska could be vulnerable to federal spending cuts in the range of $450 million to $1.25 billion—which could cost the economy anywhere from about 7,000 to 20,000 jobs in the future. We estimate potential vulnerability as a range, because it’s impossible to predict with any precision how federal spending will actually change. The best we can do is estimate the likely magnitude of reductions, given federal budget problems. Any cuts will likely be made gradually, over time, and recent strength in the petroleum and mining sectors will help cushion the effects.
    • Implementing a State Fiscal Plan: Step 1.Tracking Maximum Sustainable Yield

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2013-04-05)
    • Lessons Learned from Solving An Alaska Economic Puzzle

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska, 2010)
      This presentation provides information about Alaska's historical economic development with particular attention paid to the role of petroleum development, federal funding and private enterprise. Presented at the Meet Alaska Conference in 2010.
    • Looking Ahead at the Alaska Economy: Business As Usual

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2009-05-19)
    • Managing Alaska’s Petroleum Nest Egg for Maximum Sustainable Yield

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2012-03)
      Web Note #7 (How Much Should Alaska Save? February 2011) suggested we should think of Alaska’s petroleum wealth as an asset from which we should spend only the earnings—thus preserving that wealth for future generations, while at the same time providing a sustainable annual flow of income for current Alaskans. Based on the value of state financial assets and a projection of future petroleum revenues, in early 2011 we estimated total petroleum wealth—the Petroleum Nest Egg—to be $126 billion. That total could generate an annual sustainable flow of income, or Maximum Sustainable Yield, of $5 billion. That year actual state spending from petroleum revenues, along with the Permanent Fund dividend, was $5.5 billion, or $.5 billion more than the sustainable amount. This put a Fiscal Burden on future generations of Alaskans because it reduced the size of the nest egg. The state could have avoided that burden either by increasing non-petroleum revenues $.5 billion, or by reducing spending that much. Doing one or the other would have added $.5 billion of saving to the nest egg and so maintained its value. This Web Note revisits the calculation of the Petroleum Nest Egg, the Maximum Sustainable Yield, and the Fiscal Burden, taking into account both changes in expectations of future revenues and the size of the state budget. The estimated size of the nest egg has increased since last year, to $155 billion, because of higher oil prices and more optimistic production assumptions, so the estimated sustainable yield is up to $6.2 billion a year. But that growth has been more than offset because spending of petroleum revenues has also increased. The FY 2012 state budget exceeds the Maximum Sustainable Yield by $.8 billion, passing a Fiscal Burden of that amount on to the next generation of Alaskans. Looking beyond FY 2012, continued spending growth would have dramatic effects on the Nest Egg and Sustainable Yield. For example, if spending growth of 6% a year were to go on year after year and the growth was funded by petroleum revenues, the currently estimated Nest Egg would shrink at an accelerating rate and the Fiscal Burden would grow at an increasing rate. The Maximum Sustainable Yield for the next generation of Alaskans would drop by half in 20 years. Looked at another way, sustaining spending growth of 6% a year would require a Nest Egg of $350 billion—more than twice the current estimate. To put that amount in perspective, $350 billion is more than half the current size of the Norwegian government’s pension fund.
    • Managing Extractive Resource Wealth for Sustainability: Alaska in the Time of Falling Oil Production

      Goldsmith, Oliver Scott (Institute of Social and Economic Research, University of Alaska Anchorage, 2011-06)
      Cash economies in many parts of the Arctic North have long been dominated by resource extraction industries such as petroleum and metal mining. These developments are often short lived, generating cycles of economic booms followed by busts. And the wealth created by these activities tends to flow South, as profits to large firms and wages to temporary residents. But in Alaska the Permanent Fund (and a number of smaller financial accounts), has captured a significant share of the wealth generated by the production of petroleum over the last 30 years. Alaska residents now have the opportunity to use this wealth (currently estimated at $45 billion in financial assets and $81 billion in the state share of oil still in the ground) to build a strong economy, not only for the current generation but for future generations of Alaskans as well. This will be a unique challenge, balancing the needs of current and future generations, the preferences of urban and rural residents, permanent and temporary citizens, and others. This paper will examine the challenges facing Alaska as it begins the task of wealth management in an era of declining petroleum production. This should provide lessons for other regions impacted by cycles of resource extractive industries.