President's Message

How does AGC work with Alaska to support a long-term fiscal plan?

As we stand and stare into the sky, our state economy is falling in a deep dive with very little time to pull up and save ourselves from a 1980-type recession. At AGC of Alaska we are well aware of the need to pull up, as the industries we represent were the first big area cut from state funding two years ago.

Construction is a leading economic indicator — as the state economy goes, so too goes construction. When construction is in a recession, so is our state. It’s time to “Put Alaska First” and make changes that reverse our decline and put us back onto the road to prosperity. It will not be easy, but it’s not easy to successfully manage a construction business either.

We all have ideas and approaches on how to get this done, but at the end of the day we need to look in the mirror and ask, “What do Alaskans really need to do?” Alaska does not have a wealth problem; we have a cash flow problem. With over $50 billion in our Permanent Fund, we can develop a long-term fiscal solution that will provide a long-term foundation for the next 50 years.

Any long-term fiscal solution for Alaska requires a mix of the following:

  • Cuts to state government
  • Use of the Permanent Fund to support state government
  • Increased revenues in the form of taxes without overtaxing our resource industries
  • Reduction in payouts of Permanent Fund Dividends

We will all need to have skin in the game to achieve a fair and balanced outcome.

One thing is for sure: We all must come to the table and make sacrifices and find solutions. In today’s world this is hard to do because most elected officials have a difficult time making these tough fiscal plan decisions that could affect their re-election.

I would like to offer a comparison to the construction industry on this topic. If our companies can’t make tough decisions and we worry about our popularity, we go broke. The worst decision we can make is to not make a decision at all.

As a lifelong Alaskan who has enjoyed a vibrant economy driven by the petroleum industry, I can understand the decisions of the past, but today we are at a tipping point for failure and we must all come to the table and support Alaska by developing a viable long-term fiscal plan. Failure to act is a recipe for disaster.

Some in the Legislature think we can solve our fiscal problems simply by collecting more taxes from our resource industries. This is extremely dangerous — a serious threat to the goose that lays the golden egg — and would have catastrophic results. What we need is tax stability to encourage investment by our resource industries in production, exploration, development and construction. No prudent investor will risk investment in our state until we solve our fiscal issues and provide fiscal and tax stability.

It is not all gloom and doom. Alaska is a great state, full of opportunity and hard-working people. There are also some large projects that can help sustain our economy until oil and gas prices and investment improve. Several large mining projects such as Donlin that are close to making a go/no-go decision, new oil opportunities at Smith Bay and mega projects that leverage our federal dollars can help bridge the gap.

The road to King Cove may be reachable in the near future. We must look at each of these construction opportunities and find a way to make these projects commercially viable. This includes tax incentives, tax stability, environmental and regulatory reform and investing our savings in a way to get the projects constructed. A more stable economic climate will lead Alaska to renewed prosperity.

We all should put our thinking caps and our work gloves on and offer thoughts and support to our leaders in Juneau. We all need to grab the yoke and start to pull because not making any of these hard decisions will be catastrophic for Alaska. If we don’t make the tough decisions, we will go broke.

Alaska can have a successful future if we develop a plan, sacrifice now and make the tough decisions. We all want a thriving, stable, sustainable Alaska. We want a great place to live and enjoy. Alaska will continue to be a great land if we work together to reset the state’s fiscal plan.