State budget effect on jobs and economy hasn’t appeared – yet
The good news is that the predicted loss of jobs and business confidence over state budget uncertainty this spring hasn’t appeared, at least yet, because the magnitude of budget cuts threatened earlier by Gov. Mike Dunleavy were moderated by the Legislature and agreed to, in the end, by the governor. Given that, the state’s economy is still on a slow economic rebound from three years of recession, but barely. The rate of employment growth is slow – 0.1 percent in August compared with 0.5 percent in July and June. It wouldn’t take much for the downturn to be resumed, state economists told us. The percentages compare the months with the same period a year before to reduce the effects of seasonal variations. Despite the relative stability many firms in consumer fields report slow sales particularly for big-ticket items due to continued worry about the economy.

Some industries are showing strong growth, like petroleum and construction, both high-wage fields. Some areas are still contracting, such as professional and business services, also high-wage industries, which include engineering and fields like environmental services and consulting. Retail is down too, but that’s less caused by the Alaska economy as by national trends like growing e-commerce, which eats into sales at brick-and-mortar stores. What’s important for retail as well as industries like leisure and hospitality is that there is still disposable income in Alaska. Leisure and hospitality include restaurants and bars. Their job-count, up 0.7 percent in August, reflects seasonal tourism this year as well as spending of disposable income by Alaskans.

Petroleum: Oil and gas employment has grown at rates over 5 percent and construction at rates over 3 percent all through the summer months of June, July and August. But total employment in both industries, 9,900 for oil and gas in August, and 19,300 for construction, is still below their peaks in 2014 and 2015. Both are high-wage industries. Petroleum work has picked up following new discoveries of oil on the North Slope and increased winter exploration drilling as companies moved to delineate the finds and search for more oil. Exploration-related drilling is mainly a winter activity, but activity remained strong through the summer of 2019 due to major maintenance projects on oil field processing plants and pipelines on the slope, work typically done in summer. ConocoPhillips completed its major plant maintenance in August and BP finished in mid-September, so look for a slowing of growth in petroleum in September and continuing until work related to cold-season drilling picks up in late fall. The recent strength of construction is linked closely to projects on military installations, mainly in Alaska’s interior. This will moderate as these projects are completed. The lack of a comprehensive state capital budget, or a state plan to tackle a $2 billion backlog in deferred maintenance, will become a drag on construction.

Health care: Employment growth in health care, another closely watched industry, appears to be slowing after several years of robust growth. Jobs in health care were up 0.5 percent a month in June and July but growth slipped to 0.3 percent in August. A closer examination of health care job data showed that hospital jobs and employment in clinics were stable or even slightly but that residential-type care, a category that includes nursing homes, was down. The reasons for this are unclear but it may be connected to uncertainties over the future of Alaska’s Medicaid program, which helps lower-income and disabled Alaskans. Meanwhile, federal employment was up 400 in August but that was due to the Bureau of Land Management’s fire response and a ramp-up in census hiring. State and local government both lost jobs, with reductions of 200 at the state level and 100 in local governments.

Dispute on contamination at North Pole refinery finally at trial: A state court trial is underway on a long-running dispute over liability for cleanup costs for spills of sulfolane at the site of the former Flint Hills refinery at North Pole, east of Fairbanks. Flint Hills purchased the refinery from Williams Alaska Petroleum and contends Williams should pay for cleanup because most of the contamination occurred under Williams’ ownership and operation. Williams contends sulfolane is not considered hazardous nor was it a regulated chemical at the time. Also, if a cleanup were undertaken the state has not yet set a standard appropriate to protect human health.

State gears up for long legal fight over public employee unions, U.S. Janus decision: The state has retained the Virginia-based law firm of Consovoy McCarthy in gearing up for what is expected to be a protracted legal fight with public employee unions over the state’s interpretation of a U.S. Supreme Court ruling on automatic deduction of union assessments from public employee paychecks. State regulation changes to end the procedure in Alaska ordered by Gov. Mike Dunleavy have been temporarily stopped by a state court after public employee unions filed suit. Consovoy McCarthy is working with conservative groups on legal issues and has ties to President Trump.

Alaskan Elizabeth Peratrovich will have her image on new U.S. $1 coin: Early Alaska Native leader Elizabeth Peratrovich has been honored by having her image selected to appear on a new 2020 U.S. one-dollar coin. The U.S. Mint unveiled the design at a ceremony in Anchorage. In 1945 the young Peratrovich delivered a passionate speech to the Alaska Territorial Legislature that led to the nation’s first anti-discrimination law. The law guaranteed equal access to restaurants, hotels and other public places in Alaska. This happened 20 years before the U.S. Civil Rights Act was passed by Congress in 1964. Prior to the 1944 state law, “Whites Only” signs were common in public places in Alaska.

Nome sees 5,000 cruise tourists this year; number to more than double next year: With the Arctic seas opening, Nome saw an unprecedented 5,000 cruise ship visitors this summer with six ship arrivals from the end of August until mid-September. Back-to-back vessel arrivals was good training for the increase expected next year, with 14 ships scheduled. Visitors were good for local businesses and city sales tax collections, and for local service companies providing refueling and water. Some larger ships had to lay up in Port Clarence, a natural deep water harbor west of Nome, with fuel “lightered” by small barges. One cruise ship had to anchor at Teller when bad weather prevented the vessel from getting to Nome. Local tourism officials had to hustle to get passengers 73 mile from Teller to Nome by road to catch flights.

Skagway sees jump in tourism but small firms say they didn’t benefit: Skagway’s borough saw an 11 percent increase in sales tax income in the fiscal quarter ending in June, a reflection of a boom summer in tourism. Small businesses in the small Southeast city complained that they did not see gains in sales, and blamed scheduling issues with ship arrivals and the timing of local tours. The borough could not break out the sales tax data between retail and local tour package business. The newly-formed Skagway Business Assoc., formed to work with the municipality, said the summer gains were mostly enjoyed by tour operators that are mostly owned by large companies and not the small “mom and pop” retailers.

Ketchikan hires McDowell Group to assess new tourism project: The City of Ketchikan hired McDowell Group, the Juneau-based consulting firm, to assess the economic impact of new cruise ship support facility at nearby Ward Cove. A private developer, the Ward Cove Dock Group, is building a $50 million new cruise ship dock and visitor facility at Ward Cove, site of the former Ketchikan pulp plant. The city wants to assess the pros and cons of an annexation, which would bring in sales tax revenue.

Ketchikan sales tax: Ketchikan’s city raised its sales tax “cap,” the amount above which sales are tax-exempt, from $1,000 to $2,000 for a transaction. The move is expected to bring the city $400,000 to $1 million in added income. The Ketchikan Borough, in a similar move, raised its sales tax cap.