THIS STORY WAS UPDATED ON SEPT. 28, 2016
While Alaska Gov. Bill Walker was in Asia chasing a natural gas pipeline dream last week, Lt. Gov. Byron Mallott journeyed to the small fishing community of Petersburg to make a rather odd speech to the Southeast Conference in which he suggested the era of oil is over, and encouraged Alaskans to embrace NGOs and “grow Alaska.”
At this moment, he said, his voice rising, the state “should be focused on growing Alaska again, and we will not have that conversation.”
There was polite applause.
“And we cannot afford to not have that conversation,” Mallott continued. “We have the strength of our seafood industry. We have the tourism industry. We have local government. We have the governmental sector that is hugely important to the economy of our state. We have a range of other much smaller both opportunities and in development or existing segments of our economy.”
How any of those entities could help close the state’s better than $3.5 billion budget shortfall, Mallott did not say.
Almost everything on Mallott’s list is a revenue drain on the state.
The seafood industry costs more to manage and police than it generates in state taxes, and much of the profit goes Outside to processors and non-resident fishermen. The tourism industry contributes millions of dollars in bed and sales taxes to local government, but the state gets nothing out of it. Local governments pull hundreds of millions of dollars in revenue-sharing and education dollars out of state coffers. The “governmental sector,” in the form of the federal government which still spends more than it collects in Alaska, does provide a significant number of jobs, but that doesn’t help with state revenue.
Federal employees just increase the demands for state services for which they do not pay in any significant way. For many, their biggest contribution to state coffers is a $50 annual parking pass for state parks.
Mallott did seem to recognize the difficulty in generating new state tax revenue when he opened his speech with the suggestion maybe Alaska could get some financial help from NGOs.
NGO is the acronym for “non-governmental organization.” Most of those active in Alaska in recent years have been spent their time trying to make sure the state doesn’t grow.
Trout Unlimited, an NGO, led the fight to stop the Pebble Mine. The Center for Biological Diversity, an NGO, has led the battle to stop further drilling for oil and gas in the Alaska Arctic. The Alaska Wilderness League, another NGO, promotes itself as leading opposition to development on all federal public lands in Alaska, arguing those belong to the people of all 50 states and should be preserved.
About 60 percent of the land in the 49th state is owned by the federal government, and about half of that is already protected in national parks and national wildlife refuges. But that isn’t as big an impediment to development as is the fact that aside from oil, Alaskans have in the past decade become the biggest group of NIMBYs in the nation.
Meanwhile, a small mob of NGOs has battled to curtail or eliminate commercial fishing off Alaska’s coast because, in their opinion, it is a threat to charismatic marine mammals or not sustainable despite a long history of stable harvests.
There are some social service NGOs at work in the 49th state, but none of them are among the wealthy organizations about which Mallott was talking. For those who want to listen to the entire, 40-minute speech, public radio station KFSK recorded it and posted it here: http://kfsk-org.s3.amazonaws.com/wp-content/uploads/2016/09/byronmallotkeynoteEDIT.mp3
It opens with Mallot talking about how “cool” it was to be out-of-state attending an oceans conference in Washington, D.C. where “a guy named Barack Obama spoke, ah, ah, and then Leonardo DiCaprio spoke.” The oblique reference to President Obama was apparently meant as a laugh line, but drew no laughs.
From this, Mallott segued into how “NGOS matter, environmental organizations matter, particularly as the world deals with climate change. In that room were some of the most powerful people in the world, and none of them were members of government…they represented billions of dollars that are available to deal with the reality of our world today.”
At the D.C. conference, Mallott told the Southeast conference, Alaska loomed large in the discussion of climate change. The speech then rambled into an outline of changes in Alaska water temperatures, weather patterns and the timing of fish runs.
“At that conference, as I said, were billions of dollars and they were pledging more,” Mallott observed. “That was one of the purposes of that conference, to get NGOs around the world to focus and put their dollars into dealing with this entire issue of climate change.
“We need to be thinking about working as hard as we can to access the resources that are available out there, and I think Alaska can make a very compelling case.”
Given that the answer to climate change on the part of most NGOs has been to block any sort of development in Alaska and the Arctic, how exactly linking up with these organizations would help a state with a faltering economy and significant job losses was left hanging.
Mallott did appear to recognize the jobs problem. He got to it at the end of the speech.
The end of oil
“I want to close by talking a little bit about Alaska’s fiscal circumstance,” he said. He first apologized for Walker’s budget cuts, which consisted mainly of taking from the Permanent Fund Dividend and killing promised oil credits. Mallott then expressed the opinion the Alaska Legislature would this year fix the budget, and warned that the days of oil revenues supporting the state are over.
“No one in the market place and leadership nationally, internationally, forecasts at all that oil prices will recover any time soon in any meaningful way….The revenues that have sustained Alaska for the 50-plus years now of its existence are gone,” he said.
“We will always have petroleum revenue in Alaska’s budget. It will continue to be significant. A billion dollars or more is nothing to sneeze at. But it will not be the sustaining driver of both governmental funding and our economy, not even close to what it has been in these first 50 years of Alaska’s existence.
“We know that our economy must diversify. We know that the underpinnings of our economy have essentially, fundamentally altered…How do we grow Alaska again? We postponed that conversation for two full years. Years we will never get back.
“The 2017 Legislature will continue (to ignore the question) because it will take, I assume, the entire legislative session to achieve a fiscal plan. An entire session of the Alaska Legislature that should be focused on growing Alaska again,” he said, his voice rising, “and we will not have that conversation.”
Mallott then suggested the possible opportunities in seafood (which already appears to be at or beyond peak production with the number of best jobs capped by limited entry), tourism, various form of government and “a range of other much smaller both opportunities and in development or existing segments of our economy.
“But the hole is too big in both our budget and our economy for us to let another session go by without resolving this issue.”
Wholly unmentioned was the key problem economists note when the prospect of growing Alaska comes up. The way Alaska taxes are now structured with the majority of state revenues coming from oil, and businesses and individuals paying almost nothing, growth simply puts government farther behind.
All Alaskans demand government services, even if those services are as limited as marginal roads and some form of police protection. But most Alaskans don’t pay for services. It makes any increase in the number of Alaskans a big budgetary problem for state government.
Maybe the good news is the number of Alaskans now appears to be shrinking. The state in 2014 saw its first population decline since oil prices crashed in the 1980s. The U.S. Census reported a net loss of 527 people. The Alaska Department of Labor pegged the loss at 61.
The exodus is believed to have continued through 2015, but Labor is still working on the numbers for 2015. Permanent Fund Dividend applications, which are a pretty good barometer for Alaska population decline, have yet to show a significant decline.
Sara Rice, the director of the Permanent Fund Division in the state Department of Revenue, reported 643,678 people spent enough of 2015 in Alaska to qualify for the 2016 PFD. That’s an increase of 6,664 from the 637,014 Alaskans who qualified for dividends the year before.
The number of applicants had generally fluctuated around an average of 621,000 – give or take 25,000 – for the past eight years. That followed years of generally steady increases in qualified applicants since the first PFDs were issued to 469,738 Alaskans in 1982.
The only significant deviation in the upward trend came in the 1980s when global oil prices slumped as they are slumping now. The number of qualified PFD applicants hit 532,305 in 1986 before beginning a decline that finally bottomed out at 497,626 qualified applicants in 1990.
The number of applicants then started climbing steadily until 2005 when the appeared the first sign of a plateau. The number held just show of 600,000 for the next three years before jumping to 610,096 in 2008. It has fluctuated up and down near that number since.
The number of approved applicants, however, tells only part of the story. Since 1990, the actual number of applications has increased every year except 2006 and 2013. The number of applications actually peaked at 673,978 in 2013, but the state rejected more than 63,000 of those claims as invalid.
UPDATE/CORRECTION – This story was updated and corrected on Sept. 28, 2016 to reflect a new and more accurate count on approved PFD applications for 2015, and correct some errors in the data on past PFD applications.