Anchorage Daily News

Amid the national financial mess, Alaska is an island of economic stability and relative prosperity.

Our natural resource industries -- oil and gas, minerals and fisheries -- are mostly doing well. We have a strong military presence. Our state government holds sizeable financial reserves thanks to high oil prices and new taxes.

The commercial real estate market is strong because of high levels of business activity. The housing market is softer than it has been but in much better shape than in the Lower 48. Tourism is at least stable.

We also have state institutions like Alaska Housing Finance Corp. and the Alaska Industrial Development and Export Authority. AHFC helps finance housing loans, while AIDEA helps provide money for business expansion and economic development projects. Both have substantial financial resources. These institutions helped us through downturns in our regional economy in the 1980s, and they can do so again.

And we have our Alaska Permanent Fund and its popular dividend program. About $1.6 billion in new disposable income hit the streets Sept. 12 when electronic deposits of the 2008 dividend and a one-time state "energy rebate," went into bank accounts around the state. Another billion dollars or so will be paid out to Alaska citizens over the next few weeks as paper checks are mailed out.

That record payout should make cash registers jingle around the state.

These strengths will help buffer us in the short and possibly medium-term, but in a long-term national recession or financial-system meltdown we'd share the pain.

It's time to make sure our own affairs are in order. Most important, our oil industry, the wellspring of Alaska's wealth, might not be in as good a shape as we think. Oil production is declining, the industry's costs have risen sharply and there are signs that the state's new production taxes, which have been tripled in the last two years, are discouraging investment in new projects in the large North Slope fields.

I suggest we set aside political rhetoric over taxes and try to really understand this problem.

We've pinned our long-term hopes on a gas pipeline, and while we have two competent groups pursing projects -- the Denali pipeline owned by BP and Conoco Phillips and TransCanada Corp.'s project -- we have no guarantees that any project will really be built. Neither group will have any sense whether the project is feasible until 2010. There are no guarantees, but there's also not much we can do at this point to help either group other than to wish both well.

Let's also quit squabbling over the Pebble mine and take a rational look at this big prospect, which poses challenges but needs a calmer discussion. Mining has great potential in Alaska but prospects for all mines get clouded when the decibel level of the Pebble debate ratchets up.

One worrisome problem that we can do something about is the continued sharp growth in the state operating budget.

We've seen double-digit growth in spending for state agencies and other state programs over several years now. Even a wobble in oil prices could put us back in deficit mode. That wouldn't be an immediate crisis because we have ample cash reserves.

Still, we should get a handle on this because if oil production continues falling, if oil prices do wobble and the gas pipeline gets pushed out more into the future, our picture won't be so rosy.

Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications. His opinion column appears every fourth Sunday.

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