Southeast Alaska has been experiencing rough economic times, but there are bright points in the region. While the state sector has struggled, we have seen sustained growth in the tourism industry, and there are indications the economy is beginning to stabilize.Dramatic cuts reduced state sector employment in the region by 15% since 2012, a loss of 850 jobs, and an estimated $50 million in lost annual wages. By comparison, the rest of the state experienced a 7.5% decline in state jobs during the same period. State spending cuts have curtailed growth in other industries, especially construction.The regional population declined for the third year in a row, by a combined 1,600 people. About half the population loss consisted of children and 20-somethings leaving Juneau, the community most impacted by cuts in state employment. The seafood industry has been struggling. A poor 2016 harvest led to the loss of 500 jobs; and while the 2017 harvest was on par with 10-year averages, neither the jobs nor the Chinook returned. Chinook harvest levels are the lowest on record. Additionally, the fishing industry is facing the potential impacts of the president’s seafood tariffs. The ferry system continues to face significant cuts, reducing ridership by 20% in the last three years, and bringing 35% fewer visitors to the region. Layoffs were announced at the Ketchikan shipyard, and Ocean Beauty is permanently closing its Petersburg cannery. Just under half of regional business leaders called the Southeast business climate “poor" or “very poor” in 2018, up from 29% in 2015. But not all indicators are bad. There were 380 more jobs in 2017 than in 2016, and we are less than 400 jobs below peak employment levels of 2013. This is almost entirely thanks to massive growth in tourism – specifically cruise ship tourism. Between 2010 and 2019, cruise passenger numbers are projected to increase by 50%, with 1.31 million cruise visitors expected to sightsee here in 2019. Jobs in the visitor industry increased by nearly 2,000 year-round equivalent workers since 2010, and visitors to Southeast spent $65 million here last year. Jobs are poised to expand in health-related fields. Mining and tribal government employment grew last year. Oil prices are improving, and there is hope that this, combined with a permanent fund restructure, will stabilize the government sector. Looking forward, Southeast Alaskans remain optimistic about the future, with two-thirds of Southeast Alaska business leaders expecting their prospects to be positive or to improve in 2019.
In the Spring of 2018, 232 Southeast Alaska business owners and top managers from 27 regional communities responded to Southeast Conference’s Business Climate and Private Investment Survey, answering questions about the economic climate and regional investment. Confidence in the regional business climate has been decreasing. However, looking forward business leaders are optimistic. Businesses in Skagway and Haines reported the brightest outlook in the region. The mining sector reported the most positive industry outlook, followed by the health care, tourism, and real estate industries. This year we added a new question to to our business climate survey: How has the economy impacted your business? We received 140 thoughtful responses from business owners and operators, and we printed these in full by industry. It is the stories "behind the numbers."
Summary of 2017 work by Southeast Conference and progress on the 7 economic priority objectives of the region.
Last year was a tough year for the Southeast Alaska economy. Jobs and workforce earnings were down for the first time since 2007. Population dropped for the second year in a row, the first losses in a decade as well. The reason for our economic distress is clear. Dropping oil prices combined with falling oil production have drastically reduced the state’s share of oil earnings, which previously provided up to 90 percent of the state’s unrestricted revenues. Last year was also the worst year for our seafood sector in over a decade. However, there is also good news. Tourism is booming, and 2017 will be a record year for cruise and air passengers, along with jobs and spending.
In the Spring of 2017, 209 Southeast Alaska business owners and top managers from 22 communities responded to Southeast Conference’s Business Climate Survey and Private Investment Survey, answering 10 questions about the economic climate and regional investment. Nearly two-thirds (64%) of regional business leaders were positive about the economy, calling the business climate “good” or “very good.” Leaders were slightly less positive about the state of the economy in 2017 than they were in 2015. Looking to the future, one-third of Southeast Alaska business leaders expect the their sectors to improve, 16% expect decline, and more than half (51%) expect the outlook to remain status quo.
Overall, $112.7 million to $174.4 million of private investment in the Southeast Alaska region was documented by the survey in the 12-month period between July 2016 and June 2017. The energy, seafood, mining and visitor industries attracted the highest level of regional private investment last year. Investment is considered any expenditure beyond typical business and payroll expenses. The average investment was $1.1 million, while the median investment (including no investment) was $7,500.
Progress on the Eight Strategic Priorities of the Southeast Alaska 2020 Economic Plan:
- Marine Highway Reform Project
- Energy Legislation
- Diesel Displacement
- Secure Adequate Timber Supply
- Market Southeast Alaska to Visitors
- Full Seafood Resource Utilization
- Alaska Mariculture Initiative
- Maritime Workforce Development
Southeast Conference's powerpoint for the Senate Commerce Committee (January 26, 2017)
Phase One of the AMHS Strategic Operational and Business Plan was developed by Elliott Bay Design Group (EBDG) and McDowell Group. The study identified alternative governance structures that could help the Alaska Marine Highway System (AMHS) achieve financial sustainability. This statewide effort was managed by Southeast Conference and guided by a 12- member steering committee of stakeholders from across Alaska.
Project tasks included a high-level examination of six basic ferry governance models to assess their suitability for Alaska’s unique geography, markets, and transportation needs. More detailed case studies were conducted with three ferry systems to identify ideas and lessons applicable to AMHS: British Columbia Ferry System, Steamship Authority (Massachusetts), and CalMac Ferries (Scotland). The study also included review of relevant AMHS reports and interviews with key AMHS contacts including senior management and union representatives.
The project incorporated extensive public involvement including convening a Statewide Marine Transportation Summit, solicitation of feedback through the project website, outreach to municipal governments and trade organizations throughout Alaska, and a presentation and discussion at Southeast Conference Annual Meeting.
If it weren’t for state government’s impending fiscal meltdown, the region would be well positioned for a prosperous future.
The last five years have been good to Southeast Alaska. People came here in droves, to visit and to live. Our overall population increased by 4% as 2,730 new people joined our ranks. We broke records in terms of visitors arriving by airplane, and 2016 could be our top year ever for total passenger arrivals by all modes. Since 2010, we added nearly 2,000 jobs and $308 million in total workforce earnings, and 2015 was a record year for regional employment and earnings.
By many indications, our economy should continue to grow. Tourism is growing at 4% per year for the foreseeable future. After three years of declines, mineral prices are on the rise again, which is great news for our local mines. The maritime economy has taken off, and for the first time ever we are building Alaska ferries by Alaskans for Alaskans right here in Southeast Alaska. The seafood industry hit an all-time harvest record in 2013, and although the last couple years have been weak there are indications that next year will be better. The military has gone from being an economic footnote to becoming a key economic driver, as our Coast Guard personnel have grown to more than 800 members in 2016. As our population ages and health care needs grow, the medical industry is poised to expand to meet increasing demand.
Yet, despite so many positive indicators, we are not going to continue to grow. As the capital region for the state we are dependent on state government, both for employment and expenditures, and the economic health of the state government is declining rapidly.
At Southeast Conference’s March 2016 Mid-Session Summit, audience members participated in a resiliency mapping exercise. The purpose of this process to determine and detail the key strategies that private business owners, elected officials, tribal leaders, municipalities, and community organizations are implementing or planning to implement in order to respond to our current state fiscal situation.
Economic resilience is the ability to withstand and recover quickly from a disruption to the economic base. More than 200 Southeast Alaskans from 23 communities and 24 sectors across the region rated their level of concern regarding the pending economic crisis, and wrote down the actions they plan to take to ensure the economic resilience of their businesses, industries, communities, and region. Nearly 400 individual written comments that became part of this analysis. The results were definitive and clear. Private sector businesses are getting ready to stop investing and layoff employees, as are our local and state government leaders. In addition to long term economic planning, Southeast Conference members want an income tax and a restructured permanent fund, while maintaining a strong marine transportation network.