Alaska's economy is in trouble. Our steady economic growth of the last two decades has slowed to a standstill. Our political leaders have placed Alaska's eggs of economic hope into the single basket of AGIA (the Alaska Gas Inducement Act). And they have created a tax environment oil companies are finding inhospitable. If Alaskans settle for political spin about slow incremental progress on a gas pipeline to the Lower 48, or of claims the oil industry is actually increasing their investment in oil exploration on state land, we will be headed for an economic cliff.
Scott Goldsmith of ISER points out that Alaska's economy balances on a three-legged stool; oil and gas is one-third of our economy, federal spending is another third, and everything else -- tourism, fishing, air cargo, etc. -- is included in the third leg. This economic stool is teetering.
No industry contributes more to our economy than oil. Oil provides one third of the jobs in Alaska and pays for 90 per cent of state services and 57 per cent of local government. The oil industry enables Alaskans to enjoy the low tax structure we do.
Goldsmith points out that without oil, Alaska's economy would look much like the state of Maine. In 2006 job growth was 66 percent of the national average in Maine, we were 144 percent. The median pay check in Maine was 77 percent as high as Alaska. Factoring in differences in taxes, wages, and the PFD, an average family of four in Maine would have an annual income of $78,560, in Alaska, $128,614. This is the economic difference between having oil investment and not having it.
Alaska's economic stool is teetering because oil companies find our tax environment inhospitable and are investing elsewhere. Alaska must receive fair payment for the oil and other resources extracted here, but we need to be very careful not to kill off the thing that actually supports one third of our jobs and almost all of state government. This will become increasingly important to us if, through lack of investment, our oil production continues to decline. We need to work with industry.
Alaska can become less dependent on oil and federal spending. Air cargo is a great example. Twenty years ago, I led the state's team to attract the FedEx and UPS air cargo hubs to the Anchorage International Airport. Today, the airport accounts for 12.5 percent of the jobs in Anchorage. Companies like Pegasus Aircraft Maintenance, recently purchased by NANA Development Corporation, are proving there is still a lot of untapped opportunity to build new business around the flow of international air cargo. Alaska's Native Corporations, and smaller companies like Alaskan Brewing in Juneau, have found they can headquarter a business here and successfully serve larger markets outside of Alaska.
But to make any real progress toward diversifying our economy, Alaska needs to start investing in itself. Fortunately, oil has made Alaska wealthy. We need to refocus our attention on international trade. There are now over 300 million Chinese approaching middle class who would love our seafood and enjoy visiting Alaska. Significant marketing dollars should be invested behind Alaska-based tourism -- the kind that has a good economic multiplier effect for our economy. The Alaska International Airport System should be the international air cargo service center of the world, building on our unparalleled geographic location and our excellent aviation program at UAA. And if Tahiti can market its water so successfully, why can't we?
Our focus should be on developing and diversifying the economic "third leg" while not killing off oil investment. We need to start now to develop and diversify our economy, creating the kinds of jobs that will allow our kids to stay or return to build their futures in Alaska.
Bob Poe, a Democrat, was previously director of the Office of International Trade, director of the Alaska Industrial Development and Export Authority, and president of the Anchorage Economic Development Corporation. He is a candidate for governor.
Alaska Dispatch Publishing