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.
Southeast Conference is responsible for developing a Comprehensive Economic Development Strategy (CEDS) for Southeast Alaska designed to identify regional priorities for economic and community development. The CEDS 2020 Southeast Alaska Economic Plan is a strategy-driven plan developed by a diverse workgroup of local representatives from private, public, and nonprofit sectors. Over the course of 12 months, 27 workshops and strategic planning meetings Southeast Conference members developed an overall vision statement, a list of six goals, 47 objectives, 8 priority objectives, and regional and industry specific SWOTs analyses. More than 400 people representing small businesses, tribes, native organizations, municipalities, and nonprofits were involved in various elements of the planning process.
This publication tells two stories about the regional economy: a positive tale of five-year trends, and a more sobering one-year analysis and future forecast. Over the last five years we added 2,600 people and 1,500 jobs to our economy. Total workforce earnings increased by $275 million, with most of that coming from the private sector ($209 million). With the exception of government, nearly every sector flourished. New jobs and investments occurred in the areas of seafood, tourism, mining, construction, healthcare, maritime, and energy. However, data from the last year especially indicates a contraction. Between 2013 and 2014 there were few areas of growth, and many indicators trended slightly downwards. Our population declined by 30 people. Jobs fell by 300, mostly in the areas of government, construction, and health care. There were 34,000 fewer cruise and ferry visitors to the region. The value of seafood harvested in the region fell by $92 million. The price of gold fell by 10%. Early 2015 job reports show more losses on the way. The most concerning signal is the long-term strength of our government, which accounts for more than a third of all workforce earnings in the region.
The Southeast Alaska Business Climate Survey takes the “pulse” of our local business community and the economy. It is completed every five years to help us better understand the obstacles and advantages of owning and operating a business in Southeast Alaska. The survey tracks change in economic outlook over time by industry and community, along with tracking which institutions are most valuable to local businesses. Finally, it tracks private investment in the region. The survey focused on Southeast Alaska business owners and top managers, though non-business leaders could take a much shorter version of the survey as well. The 2015 online survey was designed and administered by Rain Coast Data. The survey was conducted in Summer 2015. The survey was taken by 416 Southeast Alaska business owners and top managers. Business owners and operators from 29 communities in Southeast Alaska responded to the survey. This includes 165 company presidents, owners, or CEOs, and 84 senior executives, senior officials, directors, vice presidents, or managers. An additional 167 who took the survey identified themselves as self-employed.