Legislature(2023 - 2024)SENATE FINANCE 532
03/16/2023 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska's Economy | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 16, 2023
9:02 a.m.
9:02:40 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Jesse Kiehl
Senator Kelly Merrick
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Dan Robinson, Chief of Research and Analysis, Department of
Labor and Workforce Development; Senator Cathy Giessel.
PRESENT VIA TELECONFERENCE
Brett Watson, Research Assistance Professor of Economics,
Institute of Social and Economic Research, University of
Alaska Anchorage.
SUMMARY
PRESENTATION: ALASKA'S ECONOMY
Co-Chair Stedman discussed the agenda.
^PRESENTATION: ALASKA'S ECONOMY
9:03:51 AM
DAN ROBINSON, CHIEF OF RESEARCH AND ANALYSIS, DEPARTMENT OF
LABOR AND WORKFORCE DEVELOPMENT, relayed that the
subsequent presentation should offer some context of
historical economic performance of the state and how Alaska
compared to other states. He discussed a PowerPoint
presentation entitled "The Current State of Alaska's
Economy" (copy on file).
9:04:18 AM
Mr. Robinson looked at slide 2, "Alaska's Up and Down Gross
Domestic Product," which showed a line graph of the percent
change in the Alaska and United States (U.S.) gross
domestic product (GDP) from 1978 to 2021. He offered that
GDP, which was the value of goods and services produced in
Alaska. He stressed that the revenue did not necessarily
stay in Alaska; Oil prices went up, the GDP went up, and
shareholders made money but what was produced in Alaska did
not always stay in Alaska. He explained that all his slides
would consider the "oil era economy," which was from the
1970s on.
9:06:14 AM
Mr. Robinson spoke to slide 3, "Smoothing It Out a Little
," which showed a line graph that showed a 5-year trailing
average. He pointed out that the U.S. economy had not been
as volatile as Alaska and had never dropped below zero. He
stated that in the late 1990s the state had GDP loss and
2014, and forward, reflected negative GDP growth.
9:07:08 AM
Mr. Robinson referenced slide 4, "A Reminder About the
Economic Power of Oil," which showed quotes from an article
by Neal Fried and a quote by Terrence Cole, an Alaskan
historian.
Oils contribution to Alaskas economic history has no
equal. Historians write that the discovery of oil in Cook
Inlet helped secure Alaskas quest for statehood, and the
subsequent massive discovery of oil in Prudhoe Bay
remains the largest in North America.
- Neal Fried
The balance sheet of Alaska history is simple: One
Prudhoe Bay is worth more in real dollars than everything
that has been dug out, cut down, caught, or killed in
Alaska since the beginning of time.
- Terrence Cole, Alaska Historian
9:07:47 AM
Mr. Robinson turned to slide 5, "How Our GDP Differs from
U.S.," which showed a bar graph which showed how Alaska's
GDP percentages of total compared to the rest of the U.S.
He highlighted the left side of the slide, which showed 5
things that the state had proportionally more of that the
rest of the U.S. economy: oil and gas extraction and
mining; transportation and warehousing; state and local
government; military; and federal civilian. He noted that
the transportation and warehousing was mostly due to oil
production. He noted that the data was from 2021. He noted
that the bulk of the bar shown for transportation was from
oil.
Mr. Robinson continued to the next 4 bars on the graph:
educational services; health care, and social assistance;
retail trade; construction; and arts, entertainment,
recreation, accommodation, and food. He stated that these
were not bigger in Alaskas economy than in the rest of the
U.S. He spoke to the last four bars which reflected areas
where the state fell behind the rest of the U.S.:
manufacturing; professional and business services; finance,
insurance, real estate, rental, and leasing; and all other.
He stated that much of the states manufacturing was in
seafood processing. He noted that the state did not have a
lot of white collar jobs that served populations outside
of the state. He noted that the state had little farming
wealth.
9:10:41 AM
Mr. Robinson considered slide 6, "Comparing 2013-2021 to
Previous Periods":
• Average Annual GDP Growth 2013-2021: -1.5 percent
• Average Annual GDP Growth 2003-2012: 3.2 percent
• Average Annual GDP Growth 1993-2002: 0.8 percent
• Average Annual GDP Growth 1983-1992: 0.3 percent
• Average Annual GDP Growth 1978-1982: 9.5 percent
Mr. Robinson pointed out that the most recent decade had
been the lowest performing out of the last 5 decades.
9:11:06 AM
Mr. Robinson displayed slide 7, " Top/Bottom Five States by
GDP Growth, 2013-2021," which showed a bar graph depicting
the percent change in GDP from 2013 to 2021. He pointed out
to the committee that Alaska was at minus 8 percent GDP.
The graph showed the five highest performing states: Utah,
Washington, Idaho, California, and Colorado. He said that
one thing the lower performing states had in common (North
Dakota, West Verginia, Louisiana, Wyoming, and Alaska) was
oil and in come cases, coal. He relayed that it had been a
hard decade for oil.
9:12:03 AM
Senator Bishop commented that Idaho and Washington had
electrical rates of between $.05.5 and $.06 per kilowatt,
which attracted businesses.
9:12:30 AM
Mr. Robinson considered what was going right in some of the
more successful states energy costs being one of those
things.
9:12:55 AM
Mr. Robinson highlighted slide 8, which showed a line graph
depicting Alaska's employment rate from 1970 to 2022. He
pointed out that in the history of the oil era, there was
strong growth in 1970s due to oil and strong employment
growth in the 1980s. The far right of the graph showed a
peak in wage and salary jobs in 2015. He pointed out the
"covid dip" in 2020. He cited that 2015 to 2018 was a
state-level recession, which he qualified was a broad
economic downturn with oil being the main underperforming
variable.
9:14:16 AM
Mr. Robinson looked at slide 9, " Comparing 2013-2022 to
Previous Four Decades":
• Average Job Growth 2013-2022: -0.5 percent
• Average Job Growth 2003-2012: 1.3 percent
• Average Job Growth 1993-2002: 1.8 percent
• Average Job Growth 1983-1992: 2.2 percent
• Average Job Growth 1973-1982: 7.2 percent
9:14:31 AM
Mr. Robinson addressed slide 10, "Top/Bottom States by Job
Growth, 2013-2022," which showed a bar graph showing the
top five and bottom five states in employment growth. He
th
pointed out that Alaska was down 5 percent and was 50 in
the country.
9:15:04 AM
Mr. Robinson advanced to slide 11, "How We Compare to High-
Growth States," which showed a line graph looking at the
high performing states in more detail. He pointed to the
2015 2018 job loss period and the covid plunge. Nevada
suffered the most due to the shutdown of the gaming
industry. He noted that most states had bounced back, and
it seemed the healthier the economy going into Covid-19,
the healthier the economy coming out of the pandemic.
9:16:09 AM
Senator Wilson asked whether the department had done
studies on how other states had recuperated their
workforce.
Mr. Robinson thought the best data set for the subject was
job openings. He said that the more successful states had
positive migration, which Alaska did not. He cited that
Utah had a younger age structure with more young people
aging into the workforce. He noted that all the states had
unusually high job opening rates. He thought the concept of
"people don't want to work anymore" had been debunked and
had never been true. The industry that was struggling the
most was leisure and hospitality because the lower wage
jobs associated with that industry were harder to fill.
9:18:46 AM
Senator Bishop thought one issue with slow growing
workforce was low birth rates.
Mr. Robinson agreed that birthrates had been declining. He
said that death rates had had an uptick during Covid-19. He
explained that there had always been the expectation of a
problem when the baby boomers aged out of the workforce.
Baby Boomers comprised much of the working population while
the younger generations were smaller in number.
9:19:54 AM
Mr. Robinson looked at slide 12, " How We Compare to Other
Low-Growth States," which showed a line graph comparing
Alaska to 5 other states with low growth. He said that
Hawaii had the most significant covid plunge due to their
strict Covid-19 restrictions. He noticed that North Dakota,
Louisiana, and Wyoming all struggled in 2015 through 2018,
and reiterated that states with oil and coal were
struggling.
9:21:22 AM
Mr. Robinson showed slide 13, "Top/Bottom Five States by
Population Growth," which showed a bar graph with high and
low population growth 2013 through 2022. He identified that
the state's working population had declined by 6 percent.
9:22:25 AM
Senator Wilson asked what Idaho was doing differently than
Alaska that it would have such strong in-migration.
Mr. Robinson qualified that he was not an expert on other
state's economies, but broadly answered that Idaho and Utah
had good technology sectors and lifestyle attractiveness.
He mentioned that the states had far cheaper housing than
California. He said many sought the warmer weather.
9:24:19 AM
Senator Kiehl asked about the difference in population
change from the successful and less successful states.
Mr. Robinson thought the answer was complicated. He thought
that one reason was age structure. He pondered to what
degree non-resident workers. He noted that 20 percent of
Alaskas workforce were non-residents, which meant that
they would show up in the employment data set but not the
employment data set. He thought age structure was the
biggest variable.
9:25:49 AM
Senator Merrick asked whether tax structure had anything to
do with in and out migration.
Mr. Robinson thought the data would show that taxes were a
very minor factor, especially with baby boomers. He
commented that Texas, Navada, Florida, and Utah had tax
structures advantageous to people on a fixed income.
9:26:47 AM
Co-Chair Olson asked whether those states were more
attractive because of the absence of income and real estate
taxes.
Mr. Robinson thought that a lack of income tax was most
attractive.
9:27:16 AM
Mr. Robinson referenced slide 14, "April's Issue of Alaska
Economic Trends," which showed a magazine cover of the
March 2023 issue of Alaska Economic Trends. The slide
showed a line graph titles, More out-movers than in-movers
since 2013. He said that the decrease in in-migration had
been more significant than any increase in out-migration.
9:28:08 AM
Mr. Robinson turned to slide 15, "Another Way to Look at
Net Migration Numbers," which showed a bar graph that
reflected that between 2013 and 2023, approximately 53,000
more people had left Alaska than had moved to the state.
9:28:27 AM
Mr. Robinson considered slide 16, "How Migration Patterns
Have Shifted by Age," which showed a bar graph with long
term trends by age group. He summarized that Alaska had
historically had opportunities that attracted young people
in their 20s and 30s, who would have children, adding to
the population. He stated that the state had always been a
net exporter of college aged kids. He said that due to the
cold, older aged people moved out of state. He pointed out
that the graph showed the average number per year.
9:30:33 AM
Mr. Robinson displayed slide 17, " Oil and Gas's Difficult
Decade is Part of Our Challenge," which showed the April
2017 magazine cover for Alaska Economic Trends. He cited
that the state had lost 6,000 oil and gas jobs when oil
prices fell, secondary shock was the budget crisis:
The importance of confidence and stability to an
economy
But this recession is unusual in that the initial
shock created the near certainty of a secondary shock.
Alaskans will have to absorb another economic
deduction in the form of new taxes or more state
government job and spending cuts, and until we know
how that will play out, individuals and business may
be more likely to put the financial decisions on hold.
9:31:58 AM
Mr. Robinson highlighted slide 18, "Not Resolving These Big
Issues Has Economic Costs," which showed the February 2019
magazine cover for Alaska Economic Trends. Mr. Robinson
summarized the slide:
How we described the budget situation four years ago:
Harder choices lie ahead
Even with the influx of nearly $3 billion from
investment earnings, the state expects revenue to fall
short by about $1.6 billion of the preliminary budget
for fiscal year 2020. That means major choices remain,
and none of the options are painless or universally
popular.
All of our possible choices have pros and cons, and
from an economic perspective, none will be cost free.
But until we make those decisions, our economy will
struggle.
Mr. Robinson stressed the need for structural change and
spoke of the various ways that the states economy should
be forecasted to maximize useful data.
9:34:08 AM
Mr. Robinson showed slide 19, " Questions/Comments":
Dan Robinson, Chief of Labor Research and Analysis
Dan.Robinson@Alaska.gov
Phone: 907-465-6040
9:34:20 AM
BRETT WATSON, RESEARCH ASSISTANCE PROFESSOR OF ECONOMICS,
INSTITUTE OF SOCIAL AND ECONOMIC RESEARCH, UNIVERSITY OF
ALASKA ANCHORAGE (via teleconference), discussed a
PowerPoint presentation entitled " Status of the Alaska
Economy" (copy on file).
Mr. Watson looked at slide 2, Institute of Social And
Economic Research":
• For over 60 years ISER has helped Alaskans
understand their state and its economy.
• Most ISER research is supported by Federal, State,
and Private funding.
• Our research reflects the views and expertise of
those that produce it, not the opinions of a funder.
• This presentation benefited from the contributions
of Mike Jones and Mary Kopriva, but all
errors/omissions are my own.
9:35:40 AM
Mr. Watson spoke to slide 3, "Questions about the State of
the Alaska Economy":
• Is Alaska in a recession?
• No, but we are growing more slowly than most
states
• Has the economic recovery been even among
households?
• No evidence that inequality is rising.
• What are the state's economic headwinds?
• Issues before pandemic
• Issues since pandemic
• What are the tailwinds?
• Three legged stool
• Oil industry
• Federal spending
• Other industries
9:36:39 AM
Mr. Watson referenced slide 4, "Judging a Recession":
• National recessions are determined by the Business
Cycle Dating Committee of the National Bureau of
Economic Research
• "a significant decline in economic activity
that is spread across the economy and that lasts
more than a few months"
• Judgement Made Based on Indicators:
• real personal income less transfers (PILT)
• nonfarm payroll employment
• real personal consumption expenditures
• wholesale-retail sales adjusted for price
changes
• employment as measured by the household survey
• industrial production
• There is no equivalent recession dating body for US
states
• Alaska economists tend to use a range of similar
indicators
9:37:40 AM
Mr. Watson turned to slide 5, "Alaska Employment Short Pre-
pandemic Levels," which showed a line graph with data from
the Bureau of Labor Statistics. He highlighted that in
2019, Alaska averaged 330,000 jobs. The state shed about
50,000 jobs in early 2020, with a trough in April 2020. As
of December of 2022, the state was approximately 6,000 jobs
short of pre-pandemic levels.
9:39:07 AM
Mr. Watson considered slide 6, "Why is Alaska Lagging the
National Recovery?" The slide showed a line graph of non-
farm employment. He highlighted that Alaskas job growth
rates slowed in 2021 and still fell behind the rest of the
country.
9:39:54 AM
Mr. Watson displayed slide 7, "Why is Alaska Lagging the
National Recovery? Depth of Covid Recession?" The slide
showed the relationship between the speed at which states
recovered from the Covid-19 recession compared to the depth
of their recession. He pointed to the far-right side of the
figure, which showed that states like Hawaii and Nevada had
been relatively slow to recover. He related that state
above the dotted line had larger economies currently than
before the pandemic.
9:41:00 AM
Mr. Watson highlighted slide 8, " Why is Alaska Lagging the
National Recovery? Pre-covid economy," which showed a
scatter plot. He thought the graph showed the strong
relationship between how well a state was doing before the
pandemic and how much it had recovered since the pandemic.
He concluded that states that were performing poorly before
the pandemic were slow to recover.
9:41:29 AM
Mr. Watson looked at slide 9, "Alaska Gross Domestic
(State) Product," which showed a line graph which included
measurements of GDP in both constant and nominal dollar
terms. He observed that since 2012, GDP had been in
decline in Alaska, and was lower today than pre-pandemic.
He said that all the decline was due to inflation.
9:42:33 AM
Mr. Watson addressed slide 10, " Alaska Gross Domestic
(State) Product," which showed a scatter plot that compared
state GDP growth and how quickly GDP had grown since the
pandemic. He noted that Alaska was in the company with
other oil-dependent states, such as Oklahoma, West
Virginia, Nevada, and Wyoming.
9:43:54 AM
Mr. Watson advanced to slide 11, "Rural Energy States,"
which showed a line graph illustrating the dynamic in real
GDP for the selection of small energy dependent states. He
noted that all the states had shown a relatively slow
growth, except for Montana.
9:44:30 AM
Mr. Watson looked at slide 12, "Oil Drive's State's
Economic Fluctuations," which showed a line graph that
broke down the major components of the state GDP into
separate lines. He observed that from 2005 to 2020, most
industries in the state's economy had experienced steady
nominal growth, with a covid shock, and a return to pre-
Covid-19 levels. He countered that the oil component of GDP
had fluctuated wildly for the time-period. He said that the
movement of GDP across the other industries had been
swamped by the fluctuation in the oil GDP.
9:45:54 AM
Senator Wilson considered the healthcare sector line. He
asked why the slide showed a lag in the healthcare sector.
Mr. Watson explained that there had been growth in the
healthcare sector over the time-period, particularly in
employment, as well as continued growth in the sector. He
did not have specifics as to why the GDP measurement did
not reflect growth.
9:47:00 AM
Mr. Watson showed slide 13, "Other Alaska Economic
Indicators":
• Seasonally adjusted jobless claims (USDOL) are at
record lows [weekly]
• Official unemployment (BLS) at lowest level on
record [monthly]
• Consumer spending (Affinity Solutions) Dec 2022-Feb
2022 up over same time last year
• Punchline: most conventional measures of economic
activity point to Alaska's economy continuing to
recovery from the pandemic recession
• Is this recovery being felt evenly?
9:48:21 AM
Mr. Watson referenced slide 14, "Poverty Flat/Down Since
2017," which showed a line graph of data from the U.S.
Census Bureau. The differently colored lines indicated
income distribution as percent of the poverty line
(families) lower income levels by percent of families, by
year.
Co-Chair Stedman asked what the chart indicated.
Mr. Watson summarized that between 2019 and 2020, poverty
in the state remained relatively static. He noted that the
press had reported substantial disproportionate burdens of
the pandemic on certain portions of the population. He said
that there was in evidence in the data on his slide to
support that claim. He thought maybe the extreme poverty
levels might have risen a little bit, but that the sample
sized in Alaska tended to be small and he did not want to
overinterpret the data. He concluded that the data showed
that Alaskans fared well financially during the pandemic.
9:50:16 AM
Senator Kiehl queried the percentage of Alaskans
represented on the slide.
Mr. Watson explained that the slide showed 20 percent of
Alaskans. He said that approximately 18 percent of Alaskans
were at or below the poverty line. He cited that the 2021
poverty line for a 4-person household was $27,740 per year.
9:51:03 AM
Mr. Watson turned to slide 15, "Real Income Distribution is
Largely Stable Post-pandemic," which expanded the number of
families and offered a broader slice of the states
economy. He noted that the graph looked at families that
were up to 500 percent of the poverty level.
Co-Chair Stedman asked whether 40 percent of families in
the state made over $138,000 per year, 5 times the poverty
rate.
Mr. Watson replied in the affirmative.
Co-Chair Stedman expressed surprise at the figure.
Mr. Watson agreed that the figure was surprising. He
offered to provide clarifying information on the slide.
9:52:33 AM
Senator Wilson wondered why the 100 and 200 percent lines
differed between slides 14 and 15.
Mr. Watson cited that between slide 14 and slide 15 there
was an inflation adjustment. Slide 15 was inflation
adjusted and slide 14 was in nominal dollars.
9:53:08 AM
Mr. Watson considered slide 16, "In Nominal Terms, Income
Growing and Distribution Roughly Stable," which showed a
chart showing household income distribution in the state by
year and percentage of population. He interpreted that in
between 2019 and 2021, there was not a marked fluctuation
in income inequality.
9:54:07 AM
Mr. Watson displayed slide 17, "US Poverty Levels
Declining, While AK is Stable," which showed a graph
comparing the states poverty metrics to the rest of the
country. He pointed out prior to 2019, poverty in the U.S.
was falling. He said that Alaska was in recession from 2015
and 2019, which could have contributed to the increase of
poverty during that time. He reiterated his claim that the
pandemic had not had a more significant effect on those
below the poverty line.
9:55:08 AM
Senator Wilson asked about changes in the average wage
during that time, and wondered whether the poverty line was
keeping up with inflation.
Mr. Watson stated that there was not a good sense of the
distribution of wages across the economy. He said that the
data before the committee used survey data and tended to
lag a bit. He referred the question to Mr. Robinson.
Co-Chair Stedman encouraged members at the table to ask
questions after each slide.
9:56:40 AM
Mr. Watson highlighted slide 18, " Alaskan poverty rates
trend similarly to other Rural Energy states," which showed
a line graph showing the percentage of families below the
poverty line in Alaska, which was like that of other energy
states.
9:57:10 AM
Mr. Watson looked at slide 19, "Non-white poverty levels
are higher, but falling," which showed a line graph with
the percent of the population below the poverty line by
race in Alaska and the U.S. He noted that there was
movement in declining poverty for both white and non-white
populations in the U.S., but the line had remained
relatively flat in Alaska.
9:57:50 AM
Mr. Watson addressed slide 20, "Headwinds":
• Inflation
Workforce shortages
Mr. Watson stated that inflation and workforce shortages
were important headwinds facing Alaskas economy. He
mentioned that a reason to keep an eye on inflation was
that the federal reserve was taking actions to fight
inflation. He thought that the federal government could
decide that controlling inflation was worth pushing the
national economy into a recession. He noted that Alaska was
a small state, relative to the national economy, and that
the needs of the state did not factor largely into the
federal reserves calculations. He thought that keeping an
eye on the states inflation rate and the national
inflation rate was important.
Co-Chair Stedman asked whether the federal reserve combines
Alaska with the Westcoast federal reserve district.
Mr. Watson relayed that Alaska had its own inflation
measure for the BLS and cited the Anchorage Consumer Price
Index (CPI). He said that Alaska was such a small fraction
of the U.S. economy that it was unlikely the state would
factor into federal calculations for setting interest
rates.
Co-Chair Stedman asked whether BLS measured states
individually or measured them using the different federal
reserve districts when making federal reserve related
policy decisions.
Mr. Watson explained that BLS thought about regional
economies at the federal reserve district level.
Co-Chair Stedman thought that Alaska would be linked with
California.
Mr. Watson replied in the affirmative.
10:00:45 AM
Mr. Watson advanced to slide 21, "Alaska Tracks National
Inflation," which showed a line graph showing the headline
inflation in Alaska and the U.S. He highlighted that the
value of 100 for February 2020 indicated that prices were
the same for Alaska and the nation in February 2020, while
the value of 110 meant that prices were 10 percent higher
than in February 2020. He cited that generally, prices had
risen across the economy by approximately 15 percent since
the start of the pandemic. He said that Alaskas inflation
had been tracking with the rest of the country over the
reflected time.
10:01:41 AM
Mr. Watson looked at slide 22, "True for Headline and Core
Inflation," which showed two, line graphs showing headline
inflation and core inflation. He explained that headline
inflation showed the changes in prices of goods and
services for the overall economy, whereas core inflation
removed the more volatile portions of prices including
food and energy prices. He noted that Alaska and the nation
tracked well with one another in both graphs.
10:02:17 AM
Mr. Watson spoke to slide 23, " AK v US: Energy Lower, Food
Higher," with three, line graphs showing core inflation,
energy inflation, and food inflation in Alaska and the U.S.
He noted that energy prices in Alask and been lower than
the rest of the U.S. and food prices had been higher.
10:02:54 AM
Mr. Watson referenced slide 24, "Goods Cool, While Food
Continues to Rise," which showed a line graph depicting
U.S. inflation by major components including core goods,
core services, energy, and food. He said that the most
important component of core services was housing, while the
most important component of core goods was durable and non-
durable goods. He pointed to core goods between 2017 and
2021, which were elevated above core services between 2021
and early 2023. He believed that the pandemic was a major
factor in the increase of the core goods sector.
10:04:36 AM
Mr. Watson turned to slide 25, "AK LFPR Back, US Still
Below," which showed a line graph considering the states
labor force participation rate. He explained that the
figure showed that the state's labor force participation
rate was currently near or above what it had been pre-
pandemic. The national rate was lower due to certain
demographic trends, possibly due to a surge in early
retirement on the national level.
10:06:20 AM
Mr. Watson considered slide 26, "AK Leads Energy States in
LFPR Post-Covid," which showed another representation of
the information on the previous slide. He observed that
generally the graph was a positive comparison for the state
versus the national economy with respect to workforce
issues.
10:07:04 AM
Mr. Watson displayed slide 27, "Women LFPR Generally Lower
than Men," which showed a line graph with LFPR in the U.S.
by gender. He noted that the labor force participation rate
was considerably lower than the rates for men, particularly
during the pandemic when lack of childcare forced many
women to leave their jobs to care for children at home.
10:07:36 AM
Mr. Watson highlighted slide 28, "Despite Larger Shock,
LFPR Gender Gap Shrinks," which showed the LFPR for women
dropped significantly lower than that of men in early 2020,
which was consistent with the idea that more women had to
leave the workforce during that time to care for family
members. He felt that the gap began to close in January
2023, and had remained relatively narrow.
Co-Chair Stedman asked whether there was a way ISER could
help with tracking the work force gender gap for the state.
He shared that childcare for families was an issue
important to the legislature and hoped that some state
specific data could be mined.
Mr. Watson mentioned the challenge of identifying people
that were actively looking for jobs which could require
survey data, which was costly.
10:09:35 AM
Senator Kiehl queried the reasons for the closing gender
gap reflected on slide 28.
Mr. Watson thought that understanding the mechanisms
through which some of the trends were operating was
important. He lamented he could not offer any insights into
the reason behind the closing gap. He suggested that the
reopening of schools and childcare centers could be
factors.
Co-Chair Stedman requested that ISER provide data on
childcare issues and the labor force. He said that the
legislature would be working on the issue in the future.
10:11:26 AM
Mr. Watson looked at slide 29, "Tailwinds":
• Alaska three-legged stool
• Petroleum
• Federal Spending
• Other "Export" Industries (tourism, mining,
fishing, air cargo)
10:12:06 AM
Mr. Watson addressed slide 30, "Petroleum":
• Short term
• Production down slightly
• Prices (?)
• Medium term (Development)
• Willow 180k bbl/d
• Pikka 80k bbl/d
• Long term (Leasing, Exploration)
• Limited enthusiasm for Cook Inlet, ANWR
• Energy transition
• "Capital Discipline"
Mr. Watson stated that the production timeframe for the
industry was the short-term, medium term, and long term. He
said that in the short-term the Department of Revenue was
forecasting that oil prices would hold at $75 to $80/bbl at
500,000/bbl per day. He said that there was uncertainty
surrounding oil prices but less uncertainty around the
production numbers. He said that in the medium term, the
Willow and Pikka projects would add significantly to oil
production. He considered the long-term activity and
charactered the results of current lease sales as
lackluster but recognized other areas of exploration on
the North Slope. He noted that the transition away from
fossil fuels should be monitored. He spoke to capital
discipline in the industry and thought that it would be an
important factor in the coming years. He said that looking
at the last few years, firms had been reluctant to k=make
large scale investment and drilling activities and gas
sector employment were down. He discussed the idea that
investors wanted a return on their investment.
10:16:46 AM
Co-Chair Stedman anticipated that the committee would be
requesting updates on oil prices as trends changed.
Mr. Watson advanced to slide 31, "Federal Spending":
• CARES/ARP Funding winding down
• Infrastructure/IRA winding up
• 2023 Construction Forecast
• Private sector: $2.83 billion ($520 over 2022)
• Public sector: $2.4 billion ($297 over 2022)
• Military spending (Arctic's strategic location)
Mr. Watson relayed that he had pulled some numbers from the
2023 McKinley Capital Construction Forecast, which could
provide a tailwind for the economy. He thought the was in
Ukraine could lead to increased military spending.
10:18:44 AM
Mr. Watson showed slide 32, "Other Industries":
• Tourism (Record cruise ship visitors)
• Mining - ISER projects industry to hold steady in
"status quo" scenario
• Fishing - Record runs in Bristol Bay, but closures
in crab fisheries
Mr. Watson said that independent travelers spend more money
in the local economy. He stated that the hard rock mining
industry over the next 10-20 years was projected to remain
flat. He relayed that closures of federal fisheries would
continue to fuel fisheries debates.
10:20:58 AM
Mr. Watson addressed slide 33, "Summary":
• Alaska continues to recovery from the pandemic, but
more slowly than most of US
• Headwinds
• Inflation (and the Fed's response to it)
represents key short-term headwind
• Tight labor markets are raising wages, but
creating hiring challenges for firms
• Alaska's demographic/outmigration issues
• Tailwinds
• Federal spending
• New oil development
• Tourism
10:22:28 AM
Mr. Watson considered slide 34, "Recently Released and
Ongoing Work":
• Economic and Environmental Impacts of Mining
• Brett Watson, Bob Loeffler
• Transportation costs in rural Alaska
• Mike Jones
• Economics of preventative health care
• Mary Kopriva
• Workforce Development (STEM, education,
construction, fisheries)
• Dayna DeFeo
• Natural disasters
• Jen Schmidt
• Climate Change
• Matt Berman
• Rural infrastructure
• Marie Lowe
Mr. Watson relayed that the slide highlighted work being
done by his colleagues at the institute.
10:23:23 AM
Co-Chair Hoffman relayed that the committee had been
dealing with the issue of rewriting the Permanent Dividend
formula for several years. He noted that Mr. Watson had not
touched on the issue. He wondered why it had not been
included in the presentation.
Mr. Watson noted that there were a few issues related to
the economics of the Permanent Fund Dividend and the impact
of the dividend on the states economy. He noted that Mr.
Robinson had mentioned that economic uncertainty, with
respect to the states fiscal situation, created
uncertainty for businesses that were considering investing
in the state. He mentioned an ISER report that was authored
by Mouchine Guettabi that spoke to the effects of the
uncertainty on investors. He mentioned a 2016 ISER study
that discussed various impacts of fiscal options available
to the state that discussed decreased in the dividend
amount. He said there was no ongoing research currently
being done but that a follow-up to the 2016 report was
being considered.
10:26:46 AM
Co-Chair Olson mentioned carbon sequestration and capture
as proposed by the governor. He asked for Mr. Watson's view
on the matter.
Mr. Watson thought that there was a potential positive
environmental impact and pondered the potential impacts to
the states budget. He had not seen any rigorous analysis
about how much additional carbon savings might be achieved
through a more robust state plan with respect to
sequestration. He thought even if the potential
environmental benefits were small, the potential positive
benefits to the state could be large.
Co-Chair Stedman noted that there was some work being done
on natural disasters and asked that the work include
potential repercussions from the federal government putting
restraints on the funding for the rebuilding of coastal
communities in the state. He mentioned FEMA and federal
flood insurance and requested that the information be
considered in the natural disaster analysis.
Mr. Watson agreed to pass along the request.
Co-Chair Stedman thanked Mr. Watson for the work his
organization had done to help the legislature with policy
discussions. He extended appreciation to the presenter and
the committee for completing the days agenda in a timely
manner.
Co-Chair Stedman discussed housekeeping.
ADJOURNMENT
10:31:26 AM
The meeting was adjourned at 10:31 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 031623 State-of-the-Economy-.pdf |
SFIN 3/16/2023 9:00:00 AM |
|
| 031623 _Alaska Economic Overview_Senate Finance.pdf |
SFIN 3/16/2023 9:00:00 AM |