1. Fostering Alaska Business Development
A Commonwealth North Report
Financial Support Provided by
First National Bank Alaska
March 26, 2002
Edward Lee Gorsuch
Chancellor
University of Alaska Anchorage

2. 3 Principles A Rising Tide Lifts All Boats
Growth Doesn’t Equal Development
Growth Is a Double Edged Sword

3. Principle #1: Rising Tide Growth Increases Output (Gross Product)

4. Principle #1: Rising Tide Growth Puts Alaskans to Work

5. Principle #1: Rising Tide Growth Increases the Market (Personal Income)

6. Principle #1: Rising Tide Growth Drives Down the Cost of Living

7. Principle #2: Growth Not Development Permanent Fund Dividend Payout (mill 99$)
What accounts for the economic growth that did occur in the 1990s? There were two important, but largely invisible forces pumping money into the economy at unprecedented rates.
Largely due to stock market gains, the amount paid out to Alaskans through the PF Dividend doubled (99$) between 1995 and 2000, increasing by nearly $600 million. In 2001 it fell slightly. This increase is like adding an entire new industry to the state over 5 years with a payroll of $550 million—like the construction industry—or oil and gas.

8. Principle #2: Growth Not Development Federal Aid Per Capita: #1 in Nation
Federal grants to state and local governments (and others) per capita have always been higher than the US average.
In 1990 they were highest in the nation and , at $2000, about double the national average. Growth from 1990 to 1995 was modest, but since 1995 the increase for Alaska has been quite dramatic, particularly compared to other high recipient states. Today per capita grants are over 3 times the national average ($3,468 in 2000). This is pumping over $2 billion into the economy each year.
Total federal spending in the state has also been on the rise and in 2000 was nearly at $6 billion--$9500 for every man, woman, and child in the state.

9. Principle #2: Growth Not Development Job Growth Slowing

10. Principle #2: Growth Not Development Real Income Growth Since 1990

11. Principle #2: Growth Not Development Per Capita Income is Falling Behind

12. Principle #2: Growth Not Development Out-Migration During Growth

13. Principle #2: Growth Not Development Population Aging Since 1990 (000)
Older In the last 10 years infusions of new young Alaskans from migration slowed to a halt, the baby boomers aged, and seniors chose to stay in Alaska. Although population increased 14 percent—76 thousand, the under 40 population fell by several thousand, the number of middle ages Alaskans grew by 70 thousand, and the over 65 population increased 60 percent compared to 11 percent for the US as a whole. This was the fastest growth rate in the US except for Nevada.
More Diverse Racial and Ethnic Minority populations increased faster than whites and now comprise about 1 in 4 statewide. Anchorage in particular is fast becoming a diverse community with inmigration of Alaska Natives and minorities from outside the state.
More Stable Alaskans are more likely to have been here 5 years ago than at any time in recent history based on trends from the US Census. Figures for 2000 are not yet available but should confirm a continuation of that trend.
More Urban Population is concentrating in the Railbelt from the Kenai Peninsula up to Fairbanks and in Juneau in the Southeast. In the last 10 years over 90 percent of all the statewide population growth was in the Railbelt and Juneau.

14. Principle #3:Economic Growth is a Double Edged Sword
Competition from Outside firms
Economies of Scale
Market Dominance
Expatriating Jobs and Profits
Consumer Benefits
Lower Cost of Living
Recycled Savings

15. Principle #3:Economic Growth is a Double Edged Sword
Growth Brings Outsiders
Walmart
Safeway
Wells Fargo
National Trends Toward Consolidation
BP/Amoco
Phillips/ARCO/Marathon
National Trends Toward Devolution
DELL
Auto Manufacturing

16. 4 Strategies Increase Exports Add Value to Exports
Substitute Local Production for Imports
Manage Fiscal Policy

17. Strategy #1: Exports
Definition - Expand Goods and Services Sold Outside Alaska
Payoff
Potential—Big

18. Strategy #1: Exports

19. Strategy #1: Exports Examples Oil and Gas Mining Tourism Education
Seafood
Challenges
World Markets for Traditional Resources
Supply Constraints

20. Strategy #2: Value Added
Definition - Process What We Produce
Payoff
Potential—Modest

21. Strategy #2: Value Added

22. Strategy #2: Value Added
Examples
Seafood Processing
Refining
Timber
B&B’s
GTL’s
Veneer
Challenges
Distance to Market
Cost
Scale

23. Strategy #3: Import Substitution
Definition: Do for ourselves what we currently pay others to do
Payoff
Potential--Modest

24. Strategy #3: Import Substitution: Progress in Recent Years

25. Strategy #3: Import Substitution: Wholesale Trade Deficit

26. Strategy #3: Import Substitution: Services Deficit

27. Strategy #3: Import Substitution
Examples
Jet Fuel
Oil Field Modules
Health
Education
Engineering and Related Services
Challenges

28. Strategy #4: Managing Fiscal Policy
Fair
Sustainable
Realistic
Gradual
Complete
Strategic
Flexible
Efficient
Stable
Transparent

29. Strategy #4: Managing Fiscal Policy The Alaska Disconnect: Best Case Scenario Assumptions
New Basic Sector Jobs in Anchorage
New Workers have Families
Families Use Local Services and State Transport Services
Families Pay Their Share of State & Local Taxes
New Development Pays it Pro Rata Share of State and Local Taxes

30. Strategy #4: Managing Fiscal Policy The Alaska Disconnect: Best Case Scenario Fiscal Results [ Excludes PFD]
Each New Basic Job creates a $1,100 Annual Burden on Public Finances
Revenues = $5,200
Expenditures = $6,300
Local Government Net Benefit = $300
State Government Net Burden = $1,400

31. 4 Promising Opportunities
Traditional Resources
New Resources
Import Substitution / Services
Quality of Life

32. Promising Opportunity #1: Traditional Resources
Oil
North Slope Exploration Support
Gas
North Slope Gasline Support
Cook Inlet Gas Exploration
GTL Technology, Finance, and Design
Mining
Tidewater Smelter

33. Promising Opportunity #2: New Resources
Tourism
New High End Attractions
Music, Theatre, Eco-Tourism
New Destinations
Air Cargo
Warehousing
Assembly
Manufacturing
Technology
Engineering
Finance
Telecommunications

34. Promising Opportunity #3: Import Substitution / Services
Health Care
Professional Services
Prisons
Higher Education
Federal Research and Development

35. Promising Opportunity #4: Quality of Life
Telecommuting
Footloose Industry
Retirees

36. 6 Roles for Public Policy
Target Opportunities and Compete
Create Investment Attractive Environment
Secure Federal Regulatory Relief
Invest in Human Capital and Infrastructure
Expand Mechanism for “Buy Alaska”
Support a Policy Research Agenda

37. Fostering Alaska Business Development
A Commonwealth North Report
Financial Support Provided by
First National Bank Alaska
March 26, 2002
Edward Lee Gorsuch
Chancellor
University of Alaska Anchorage