How Vulnerable Is Alaska's Economy to Reduced Federal Spending?

Abstract

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.