Distressing news came out Monday via the UAA’s Institute of Social and Economic Research (ISER), which reported construction spending in Alaska is expected to be down about 18 percent from last year.
The group’s report said total spending on all construction projects is likely to be around $7.3 billion, a drop of about $1.6 billion from 2015.
That’s a huge decrease, and one that should give many people pause here in the Mat-Su, where the local economy has been heavily reliant on construction as the population has rapidly increased over the past two decades.
Much of the decline is attributed to less spending by oil and gas companies, which are hunkering down now that petroleum prices have tanked. But spending will be down across the board, with less money being shelled out by utilities and local, state, and federal governments.
While construction spending isn’t the only economic indicator, it is a valuable one. And the fact that it’s going in the wrong direction so fast shows Alaska could very well be in for a difficult road ahead.
Much time and talk has been spent on solving the state’s current budget deficit, which at the latest count was running close to $4 billion in the red. Clearly something must be done in the Legislature to close this gap, and that something will likely come in the form of some combination of new taxes and draws on the state’s savings accounts.
But there has been precious little discussion about how Alaska can get itself off the oil price rollercoaster and find more sustainable ways to fund government.
We would like to see our legislators begin to tackle this issue. The world is changing rapidly, with developments in digital technology creating economies that didn’t exist only a decade ago. From self-driving cars to delivery drones to new sources of alternative energy, it’s clear that the world of the future will look very different than the place in which Alaska has come of age.
If we continue to rely on oil and gas as the primary drivers of our economy, Alaska is destined to rise and fall on the whims of commodity prices.
Along with the tough discussions about the budget, we’re hopeful this legislative session becomes one in which our legislators start looking toward the future rather than the past. With its vast cash reserves, there’s still time for Alaska to begin investing in new industries that could become the economic drivers of tomorrow.
Already, municipalities and foreign countries that have embraced technology have seen economic booms in the form of outside investment and an influx of new workers. There’s no reason why Alaska can’t attempt to make similar gains. Although the state is currently at a disadvantage when it comes to high-speed internet access, that doesn’t have to be the case forever. State investment as well as tax breaks for tech companies could quickly change that.
In addition, the state stands poised to be a world leader when it comes to transportation and new industries in the Arctic. Shipping is just beginning to open up at the top of the world, and the state should explore ways to capitalize on this trend.
We don’t profess to have all the answers, nor do we expect our legislators to create a futuristic utopia in the next three months. However, it’s clear that oil won’t be king forever, and the sooner we start looking at ways to diversity our economy, the sooner Alaska can emerge from its current fiscal crisis into a future of new growth and prosperity.
— Mat-Su Valley Frontiersman
Feb. 2
