Federal Spending in Alaska: Running Out of Steam?

Abstract

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.