Economy perks up; now budget hits raise worry

Economy perks up; now budget hits raise worry

First employment increase in three years; may decline again
How ironic. Statewide employment turned a corner in January and February, showing the first in- crease, though small (0.1 percent, or 400 jobs in February) after three years of job losses. It would appear to mark the end of the recession. However, the reports came just before Gov. Mike Dunleavy’s release March 13 of a state budget with huge cuts. If implemented the $1.6 billion in spending reduc- tions would over time cost the economy about 11,800 jobs, effectively extending the recession. The Legislature is resisting the governor’s cuts, so whether many will really happen remains to be seen. However, the immediate damage will be in a loss in business confidence. New projects, particularly in health care, are now being put on hold.

Businesses fret over Anchorage port modernization
Business groups are fretting over the cost of modernizing the Port of Alaska, which they fear will be paid largely through revenue bonds and higher tariffs. Port officials say a $2 billion estimate that has sparked concern is very preliminary and would encompass the entire project. Work will actually be broken into phases as funds are raised, but a rebuild of the port’s petroleum and cement terminal must be done initially and will start next year. A better estimate of overall costs will come when the first hard bids for that work are in hand. Until now figures quoted are engineers’ estimates.
About $200 million must be raised for the petroleum and cement terminal, and if funded with a revenue bond the effect could be to raise the tariff, or charge, for fuel unloaded from 0.38 cents/gal- lon to as much as 2.4 cents/gallon in 2023. The worry is that this could cause international air cargo operators who refuel in Anchorage to stop somewhere else, or that it would cause more cargo to move in fuel-efficient long-range aircraft. While there is always some chance of that happening the bets are that it won’t, at least soon. There is no other mid-route trans-Pacific refueling location that would seem to have more favorable economics than Anchorage. Meanwhile, no other alternative to a revenue bond seems likely because the chances of state or federal grants seem nil. There is also no chance, it seems, for a state general obligation bond for capital projects this year given the political turmoil in Juneau.

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