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Capital move would devastate Southeast economy, new report says

Research group studies rate of job transfers

Posted: Sunday, April 19, 2009

A new report puts fresh numbers on a chronic Juneau fear: losing the capital.

Michael Penn / Juneau Empire
Michael Penn / Juneau Empire

"We'd lose somewhere between a quarter and a third of our economy," said Jim Calvin, lead researcher for the Juneau-based McDowell Group. "It has implications for virtually everyone in the community."

The report was paid for by the Alaska Committee, a group dedicated to keeping Alaska's capital in Juneau. McDowell Group researchers used state data on the workforce and location of state government jobs.

The relative importance of state government to Juneau's economy has dropped somewhat since a similar study in 1992, Calvin said. That's because tourism has grown so much since then. Cruise visitors, for example, doubled to about 1 million a season in the past decade.

Calvin said the study isn't intended to scare people, but to remind everyone that despite the growth in tourism, "we're still very, very much a government town."

There's no current bill to move the capital from Juneau, but the effort dates back to territorial days.

"We wanted to have this information available so we can be prepared, not as a conversation starter," said Lorene Palmer, president and CEO of the Juneau Convention and Visitors Bureau, during Calvin's presentation at Thursday's Chamber of Commerce luncheon.

'Creep' is real

Researchers also documented capital creep, or the slow siphoning of state jobs as they move one by one from Juneau to Anchorage. From May 2006 to August 2008, Juneau had a net loss of 87 state jobs, with 76 of them moving to Anchorage. Position transfers accelerated after December 2006, and the transfers tended to be higher-ranking positions, the report said. Six state commissioners are among the positions that moved.

The accelerated transfer "has created a significant net loss to the Juneau economy and an apparent unofficial erosion in the role of the capital city," the report said.

The report said the acceleration of transfers during 2007 "appears to be associated" with the 2006 change to the Palin administration.

It's referred to as "net losses" because jobs move to Juneau, too. For example, the Department of Fish and Game moved 10 positions from Juneau to Anchorage, and moved nine from Anchorage to Juneau, for a net loss to Juneau of one job.

The Department of Health and Social Services had the highest net loss, with 21 positions moved to Anchorage. Most positions were vacant when they were moved.

What if the capital moved?

Researchers figured some state jobs wouldn't move with the capital, namely regional offices serving Southeast or Juneau. Positions with the Department of Transportation and Public Facilities, Lemon Creek Correctional Center and Juneau Job Center would stay. But Juneau would lose the 2,890 jobs with statewide functions, plus some related federal jobs.

That's about two-thirds of the state jobs in Juneau, or 16 percent of all jobs in the city. And that's just the estimated direct impacts. Total employment losses could be between 4,358 and 5,810 jobs. The report estimated Juneau would lose about 29 percent of its 30,000-plus residents.

Whatever affects Juneau affects the rest of Southeast, the report said. The capital city has 43 percent of the region's population and 47 percent of its spending power.

Here's more on the post-capital scenario for Juneau and Southeast:

• Residential property values drop dramatically as an exodus of state workers abandon the housing market. Homeowners - about two-thirds of Juneau families - lose more than $1 billion in property value.

"Really, there wouldn't be a market for many, many of the homes that might come up for sale," Calvin said.

• Credit markets "would essentially disappear (think the current national credit crisis times 10 on the local level)," the report said.

• Health care costs rise. Some services are no longer offered. State workers typically have good benefits, so everyone else's costs would go up. Fewer Juneau residents would mean fewer medical specialists.

• Utility costs rise, as those who are left have to pay the utility's fixed costs of infrastructure and operating.

• Fewer flights and higher airfares. The same would apply to the Alaska Marine Highway's ferry service.

• In retail, there's less competition, higher prices, fewer economies of scale and limited inventory. At least two chain retailers close.

• Social services needs go up as contributions go down.

• Politics: With the population shift, Southeast loses representation, Anchorage and the Mat-Su gain some, probably becoming the majority while the rest of Alaska ends up in the political minority. The most remote areas "will certainly suffer the most in budget allocation shortfalls," the report said.

Constant threat

Gordon Harrison, author of "A Citizen's Guide to Alaska's Constitution," wrote that during the state's constitutional convention, the capital location was "perhaps the most divisive of all the issues facing the delegates." They postponed the issue by declaring Juneau the capital in a transitional part of the constitution, instead of a permanent article - that meant it would be easier for lawmakers to change later on.

Since then, Southeast legislators - usually allied with Fairbanks - have fought many battles to keep state government here. The most nearly successful was a proposed move to Willow in 1982, derailed by a voter initiative requiring full disclosure of costs and a popular vote on bond measures.

"It is so politically divisive, so explosive, so controversial that it hasn't gotten very far," Harrison said. "But it is constant, and it is possible; you don't have to amend the constitution to do it."



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