Possibly nothing underlines the troubled state of the Alaska economy more than a new YouTube political advertisement produced for the campaign of incumbent governor Bill Walker.
In the ad, a young commercial fisherman thanks Walker for expanding the state’s Medicaid program so she can obtain government-funded health insurance. Commercial fishing is the state’s third largest industry.
Medicaid is a form of state-federal health insurance that pays to provide free or low-cost medical benefits for the poor, children, pregnant women, seniors, and people with disabilities.
Medicaid spending in Alaska now accounts for 11.6 percent of the state budget, according to Ballotpedia.org – a non-partisan, non-profit, public-policy website. It counts 184,081 recipients in Alaska – about a quarter of the state’s population – on which government spends $12,061 per person per year.
“Medicaid Expansion made it possible for us to fish without fear…” says the Walker Mallott for Alaska campaign.
A loss-plus industry?
Even before commercial fishermen went on Medicaid, commercial fishing was an industry costing the state more to manage than it produces in tax revenue, according to the University of Alaska’s Institute of Social and Economic Research (ISER).
The industry does provide some vital revenue for a small number of port communities, and provides seasonal income for about 8,000 fishermen and 25,000 people involved in processing fish, according to the Alaska Department of Labor.
Most of the processing income flows to non-residents, according to Labor statistics, but from a state revenue standpoint, that is a good thing. Non-residents who come to Alaska to work don’t demand the same sorts of costly services – primarily for education, and health and social services – as those who take up residence in the state.
The state has a continuing financial problem because the demand for services exceeds the revenue available to pay for them, and the state’s revenue stream is thin. Various oil-industry taxes now account for about 70 percent of state revenue.
Next in line is revenue from tobacco taxes, fuel taxes, mining licenses, and alcohol taxes. Various seafood taxes contribute about 6 percent of state revenue, according to the Department of Revenue, but a lot of that gets kicked back to fishermen for seafood marketing or to pay for commercial salmon hatcheries.
As a result, the state loses money on fishing. How much varies year to year. The costs of prosecuting commercial fisheries and enforcing the rules so fishermen don’t over-harvest are largely fixed, but the amount of revenue changes as a percentage of the salmon catch.
The ISER study was based on a three-year period from 2012 to 2014 when Alaska salmon harvests averaged 188 million fish. The 2018 harvested is expected to end up just shy of 114 million, or about 60 percent the average in the ISER study.
State revenues will drop accordingly. The state collects fish taxes on halibut, crab, shellfish and others species, but salmon are the big revenue driver due to their massive numbers.
Once good as gold
“Fisheries are closely linked to Alaska’s history. While some derided acquisition of the territory from Russia as ‘Seward’s icebox,’ others knew that icebox was packed with fish,” writes the Alaska Historical Society’s Robert W. King. “Industry pioneers built the first salmon canneries in Klawock and Sitka in 1878 and they quickly spread along the coast to Bristol Bay. As the industry grew, canned salmon provided jobs and the territory with over 80 percent of its tax revenues.”
Fisheries was the oil of territorial days. But fisheries suffered a serious decline beginning in the 1950s and continuing into the 1970s. Salmon harvests plummeted from 70 to 90 million fish per year under federal management to a low of approximately 30 million in 1973 under state management.
An Alaska Department of Fish and Game history blames cold waters in the North Pacific Ocean that led to poor marine survival and a foreign, offshore fishing fleet.
“In the late 1930s, the Japanese had begun fishing salmon in international waters near Bristol Bay. After World War II, negotiations between the U.S., Canada, and Japan resulted in the International North Pacific Fisheries Convention (INPFC) and the establishment of a tripartite commission to deal with research and management of salmon harvested on the high seas,” the history notes. “(But) the international fisheries expanded after 1960 and remained unmanaged except through treaty negotiations” with Russian and Korean offshore fleets than joining the harvest.
All of that came to an end in 1976 with passage of the Magnuson-Stevens Fisheries Conservation Management Act which pushed a newly formed U.S. “exclusive economic zone” out 200 miles from the U.S. coast.
Even before Congress dealt with the offshore harvest problem, however, Alaskans acted to deal with inshore harvest problems. State voters in 1972 approved an amendment to the Alaska Constitution that allowed the state to restrict access into the commercial fisheries.
The so-called “limited entry” program that followed was intended to solve the problem of too many fishermen competing for too few fish with the end result that none of them made much money.
“Resident professional fishermen (defined as those Alaskans who derive all or most of their income from commercial fishing) seem to be in general agreement on two counts: first, that there are too many fishermen, and second, that part-time or vacationing fishermen (especially teachers, as well as the sportsmen making occasional forays during the commercial fishing season) should be excluded,” a 1972 ISER report said.
“However, it also seems to be the case that resident professionals disagree among themselves on whether non-resident professionals should be permitted. For the resident fishermen of Bristol Bay there is little difference between vacationers from Anchorage and professional fishermen from the ‘outside;’ both cut into the catch that otherwise would be harvested by Bristol Bay residents.
“In the Gulf of Alaska area, a leader of Cordova fishermen opposed entry restrictions on professional fishermen, whether resident or non-resident, but wanted part-time fishermen excluded. About 200, or 40 per cent, of the Cordova Aquatic Marketing Association’s membership is composed of non-residents.”
The limited entry act as eventually written ignored the issue of residents and non-residents given that the U.S. Constitution prohibits states from interfering with interstate commerce.
Commercial fishermen – no matter their residency – were scored on their history in various fisheries and given permits that became their property to sell or buy. Limited entry froze the number of commercial fishermen at the same time the number of fish began to increase thanks in part to the end of the foreign, offshore fisheries; a warming climate; and improved state management.
As a result, state salmon fisheries saw a boom.
The value of salmon to Alaska fishermen peaked at $742 million in 1988 ($1.6 billion today when corrected for inflation) on a harvest of 99 million fish. Things have gone largely downhill since then.
The 225 million salmon caught last year – the third highest catch on record – were worth but $679 million.
Alaska salmon steadily decreased in value as farmed salmon took over the marketplace. Hoping to head that off, the state banned salmon aquaculture in 1990. The ban did nothing to slow the growth of the farming industry, but might have helped free Norwegian businessmen from additional North American competition.
Norway is now the world leader in salmon production, and the Alaska Permanent Fund – recognizing the value in farmed fish – has about $8 million invested in various salmon farming operations.
Meanwhile, Alaska fishermen and communities once dependent on fishing, continue to struggle, and the governor’s campaign celebrates how commercial fishermen can now qualify for Medicaid.
And that might be, sadly, a good thing given how poorly many commercial fishermen are doing.
The 451 commercial drift gillnet fishermen who worked Cook Inlet last year earned, on average, $28,192, according to the state’s Commercial Fishery Entry Commission. The 518 active commercial setnetters earned even less – $23,991 on average.
And nobody earned anything close to that in a 2018 season that was a disaster for most everyone.
A couple earning $26,627 per year or less qualifies for Medicaid, according to Benefits.gov. So the average setnetter and a spouse living on Inlet fishing income last year would have qualified.
The income level for a family of three rises to $33,516, so even the smallest, average family of gillnetters living on Inlet fishing income would qualify.
The McDowell Group, a consultancy, reports the Alaska seafood processing industry employed 24,863 people in 2016 who earned $438 million. That’s an average of $17,661 per person.
An income of $17,661 corrected for inflation in 2018 would equal $18,796. The individual income limit for Medicaid is now $19,737. The average worker in the seafood industry would appear to now qualify for Medicaid.
Alaskans should probably be happy that McDowell reports fewer than a third of the people now employed in seafood processing are Alaska residents. They might move elsewhere to claim their Medicaid and take the costs with them.
When it comes to skippers and crews, fewer qualify for Medicaid. The average income there is over $60,000, according to the McDowell report, but how many of the fishermen earning that much live in Alaska is unclear.
According to the report, only 38 percent of the nearly $1.7 billion paid to Alaska fishermen for salmon, bottomfish and shellfish in 2016 ended up in the pockets of Alaska fishermen. Over $1 billion of those earnings went south.
A lot of Alaska fish is caught out-of-sight, over-the-horizon, off the coast and back hauled to Seattle. Fishing boats 99-feet long and longer, many of which are based in the Pacific Northwest, accounted for about $1.1 billion of the Alaska fisheries revenue, according to McDowell.
Given the numbers from the commercial fishery and the state’s hard-to-tax number two industry – tourism – it’s unclear how the state can begin to make the economy work if oil prices again slide.
But fishermen are happy.
“Fishing has provided for my family my entire life,” says the young woman in the Walker ad. “It has put three people through college…(But) basically, the day I graduated I lost my health insurance. Having to meet health care expenses on top of student loans was really daunting…Medicaid extension was super important for me.
“I thought that the Permanent Fund Dividend decision was essential…Now 44,000 Alaskans have health insurance, and young people are able to plan a future here in Alaska.”
But if this is the way it works – if the state is built on subsidized industries that can’t support themselves in the competitive marketplace of today – what kind of future do those young people have?
Salmon for halibut bait,(purchased) are usually Dogs,#2 grade.
Its not that you couldn’t eat them, but why would you,Halibut dont really care.
…. Then there was the time during the Exxon spill year when we showed up at Litnik lagoon before the Sept opening(derby days-pre IFQ) and filled the 12′ Livingston skiff (literally)full of fall nickle bright silvers for halibut bait(rod and reel).As commercial salmon fishing was closed by emergency order for the year.
4 men casting to there hearts desire, it was the stuff of legend.Good enough for the Ole “American Sportsman” show, for those old enough.
Chums are great halibut bait but I remember some years ago a buddy crewed on a halibut boat that bought 1000lbs sockeye (buck a pound then). This was before IFQs and they certainly could have gotten chums much cheaper.
You would not have been allowed to use sport caught salmon for halibut bait.
for the last 30 years I’ve been fishing a limited entry permit around a bunch of social misfits (otherwise known as fishermen), half of whom would either be incarcerated or homeless if it weren’t for commercial fishing. Instead of being a burden on society, they have found a niche industry that allows them to contribute to the local economy; they pay federal taxes, are Alaskan residents, and spend their money locally. Alaska is a big state, but that’s how I see it in the southeast part of the state. Who cares if the state government spends more than it takes in on managing a natural resource? Isn’t subsidization of industry the norm?
Back when the Ak state legislature banned fin fish farms, it was done for economic reasons (pressure form commercial salmon fishermen), and i compared it to Wisconsin’s ban on margarine; a bit like an ostrich with its head in the sand. Thirty years later, I’ve changed my mind, and am glad for the ban for environmental reasons, even though those concerns had nothing to do with the legislation at the time. Chris
Chris: The United States is full of subsidies. Elon Musk has gotten rich off them: http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html
Subsidies are used to promote all kinds of social changes: the transition from oil to solar and wind power, housing for the low income, deepwater drilling for oil off the U.S. coast, and more.
But here’s the deal, at the end of the day, industries or citizens or some combination of both need to pay the cost of government or government goes bankrupt as did the USSR. Oil has supported this state for a long time now, and it’s going to continue to be a big player in both your and my lifetimes.
Over the long run, however, it will only support so many other industries to artificially provide jobs as you describe. Not that this is a bad thing in certain situations. If I was God, welfare in rural Alaska would be replaced with something like FDR’s Work Project Administration (WPA) and villagers would be put to work building trails to connect villages and providing child-care for the children of those out building trails, because I couldn’t agree more with your observation that half or more of “social misfits…would either be incarcerated or homeless” without commercial fishing jobs.
Jobs define people’s lives. Jobs help social misfits modify their behaviors.
But one would create a government-funded, job-creation program in rural Alaska for socio-political reasons because there is no economy there. The fishing industry actually is a profitable economy that, at the minimum, shouldn’t need a state subsidy.
Meanwhile, your observations on fish farms are behind the technological curve. Some of the environmental issues have been resolved, and the others are being solved as you read this. And that’s an even bigger problem for all of us in Alaska.
When aquaponics make “buy local, eat fresh” the catch phrases for salmon sales, the state is going to have even bigger problems than it does now, although the salmon processors teamed up with hatcheries operating “cost recovery” should do OK. Give them credit for looking over the horizon to figure out where they could make major reductions in the cost of harvest: https://craigmedred.news/2018/09/04/future-fish/
Subsidization of industry is not the norm, most people do not understand subsidization and what it means and does. Taxes subsidize government, most industries subsidize government, and government subsidizes some industries and a lot of people. Without taxation there is no subsidization.
Take oil companies as an example, they make our entire government funding system possible, from local to state to federal, from sea to shining sea. The government does not subsidize oil companies, oil companies subsidize the government. They are taxed on every step from lease to when they drill to how much they pull out of the ground to how they transport it to how they process to when they sell their products, their profits are taxed, their workers are taxed, their products are taxed independently of all of those taxes…road taxes, state taxes, sales taxes, city taxes. Obviously we in Alaska are more aware of how oil subsidies our government, but there are still Alaskans who think our government subsidize oil. For the record I do not work in the oil industry nor do I have any family that works in the oil industry. I do own stock in various oil companies, stock that I purchased shortly after the 2016 bottom.
It is a bit misleading to say 40% of fisherman on the CAMA board are non residents, It makes it sound like 40% of Cordova Fisherman are non resident, when in fact 80% are residents.
Paul: today you’re right. SOE3 (PWS drift) shows 532 active permits as of last year of which 414 are held by people claiming to be residents. that’s 78 percent which rounds to 80.
but i have no idea what the breakdown was in ’72, and i can’t find any data to contradict the ISER claim from that time. given that, i’m sort of forced to go with what ISER, a creditable source, said at the time.
There was just 10 or less fisherman on the Cordova Aquatic Maketing Assoc (CAMA) board, so given your 40% figure, We are talking about 4 fisherman who were non residents. I always enjoy your post, and am amazed at how anybody could be such a prolific writer
thanks, Paul. it’s funny, when i was a kid growing up in Minnesota the guy who co-owned a bar with my grandfather for a time was a Cordova gillnetter. cant remember his name, but it’s a small world.
what i do remember is the neighbors who went salmon fishing every summer, came back with fish, and held a neighborhood barbecue at which they served salmon slathered in some sort of thicky, heavy barbecue sauce.
i remember it wasn’t tasty. it wasn’t until i was an adult living in Alaska that i realized what a crime against salmon they had committed….
Craig, just because an individual is a social outlier doesn’t mean they need the government to provide them with a jobs works program. In 1988 I paid 28k for a limited entry permit and 35k for an old wood boat. with less than 10k in my pocket, and having no credit history at the time, I qualified for a Ak State commercial loan, at 8.5% interest. I think the state made money off that loan, but i was happy to get it.
Through good times and bad, I’ve managed to make a living commercial fishing in southeast Alaska since 1980, long enough to build a cabin off the grid, raise a family, and even buy a second home in urban Alaska when the boys were old enough to go to school. It sure hasn’t felt like a fake job to me. It’s felt like a lot of damn work, with a thin profit margin.
A first generation Alaskan, I consider myself lucky to have stumbled into commercial fishing. I”ve no idea where I would be today without it. I think about half the population of this fishing town would be surprised to learn their careers have been kept alive artificially by the largess of the government. Chris
Chris: Just because you work hard – and I don’t know how one can be a successful commercial fisherman and not – doesn’t mean government didn’t and doesn’t subsidize your business.
Government spent a long, long time subsidizing the timber industry in Southeast Alaska, too. Those guys also worked hard. I cut timber as a kid, and I remember well. And I wasn’t felling big and dangerous old hemlock or running risks as a choker setter.
I’m glad the system worked for you. I’m glad it worked for those loggers as long as it did. I like people who have a strong work ethic and dirt under their fingernails. I’m way more comfortable with them than prissy, journos.
But not everyone has it together enough to take the initiative like you did. There are places in this state with no real economic options, and no hopes of them, and unless we tell the people living there to move – which no one seems to want to do – it would be a lot better to put them to work doing something than supporting them with nothing to do.
Welfare of that style is corrosive. It turns people into times killers sitting in front of the tube. And it eats their souls.
Craig, I do seem to remember a lot more non residents in the early days, There were people from Slovenia,Greece, and many other Countries along with some residents and some people from Washington after the Judge Boldt decision. However the truth about the Copper River flats in those small boat days was that it was self limiting, with rickety boats, big seas and bad weather It was known as Alaskas most dangerous salmon fishery. I would say the biggest driving factor for people to get into that fishery was the enactment of limited entry, exactly the opposite of what limited entry was intended. But it is a lifestyle and quickly becomes who we are, and how we define ourselves. there are good years and bad years, Nowadays the boats are much better and safer, It is hard to pay for a expensive safe boat. Nowadays the local kids have embraced commercial fishing, they want to live this lifestyle they were raised with, and they love the lifestyle.Most of the youth that grew up here , still lives here and plan to stay. Most of the non residents left after a few bad years in the 80s.
Paul: There is no doubt Cordova is a unique situation. Unlike Bristol Bay, a lot of permits appear to have stayed there rather than left.
My daughter embraced journalism, wanted to live the lifestyle she was raised with (a lot of formative years hours were wasted hanging out at the Anchorage Daily News waiting on her parents), and loved writing and photography.
Thankfully she was smarter than her father, read the handwriting on the wall, and went and got a decent job. Unfortunately, that took her out of state. Something about our limited economy.
With the stroke of his pen Walkie Talkie created a new Budget item that currently is approaching 12% of the over all State Budget. And growing.
How does one person control so much of Alaskans destiny?
Walker loves the fact that there are more people more dependent on his largesse.
Yes his, the politics of power of government, over the power of individual responsibility is set in stone.
Spend that money Billy, secure that power, then you can make a few ads talking about the bread, cookies you provide.
good article! Some people who make critical comments simply are in denial. Commercial fishing in Alaska is waning, not waxing. The fishers, managers, and regulators better get smart. And soon!
The feds and state subsidize subsistence fishing way more than commercial fishing. Lots more poor-ass, $12K Medicaid recipient dipnetters and Bush village salmon harvestors than commercial industry workers.
Two wrongs don’t make a right, neither should be subsidized.
The forty percent non-resident figure from Cordova is a little misleading. The mail forwarding service from US Postal Service in Cordova seems to be working overtime! I think it is closer to 60%. Those dividend checks get forwarded as well. Wonder what an objective, comprehensive economic analysis of the whole industry would show us. That giant sucking sound is money leaving the State.
That statement was 40% of the 10 member cama board, which really is now called the prince william sound marketing association, actually The fisherman in Cordova are 80% Alaska Resident. If you think it is easy and they are all getting rich, You should buy in and go broke, like the rest of us.Also incedently for a fisherman on Cook Inlet to gross 28,000, his expenses are at least half that, when I was gilnetting my expenses were easily 30 grand a season.
Paul: i feel your pain. i personally don’t believe there any fishermen in Cordova getting rich.
and Cook Inlet, sadly, has become something of a hobby fishery. that’s the problem.
the state can’t survive on people’s hobbies or on faltering, transient fisheries. the Bristol Bay Borough population has fallen from a peak of 1,400 in 1990 to 867,and still going down at last report.
the only places populations in rural Alaska seem to be growing are in those parts of rural Alaska where people have become migratory, flying out to work a week’s long shit somewhere and then come home to spend a week off, or just given up and resigned themselves to lives on assistance,
If you are talking gillnet fishery Paul, then I agree. However the seine fleet has done quite well with their hatchery pinks and have had some incredible years.
Yes Bill, I was refering to the gilnet fishery. I did hear a rumor today that the seiners may get Esther next year. It hardly seems fair after a bust year on the copper, but apparently the 9 million Fish the seiners caught in Valdez does not count, and neither Chalmers or the SW district was that good. I do hope this rumor is not true, I do not know where we would have been without Esther this year. If that does happen it would likely be a one year thing as Main Bay cannot compete with the other 3 pwsac hatcheries that feed the seiners.
Boy Paul, that would be something. I can remember when the gillnet fleet used to fish with the seiners @ Ester with deep nets. Whew! A wonder someone didn’t get killed. Heheh!
When you’ve been corked by a seine, you’ve been really corked.
The first set nobody knew which way the fish were going so mistakes were made-second set corrected those mistakes.
I suppose the argument is that only PWSAC fish are allowed in the allocation of who gets to fish on them the next year.
Keep turnin’ that same rock over and over, Craig. Maybe someday that monkey you’re looking for might actually fly out!