My Turn: Economic impacts of budget cuts

Posted: Monday, June 30, 2003

Recently, there has been speculation about how state budget reductions might impact the number of jobs in the state. Such speculation may mislead Alaskans and disguise some basic economic facts:

• Alaska's economy appears to have bottomed-out. Key plans are in place for a resurgence of our fishing and timber industries and increased exploration in the oil and gas industry.

• Economic indicators that point to job growth in other sectors.

• Robust construction industry:

In 2003 the state's construction industry is expected to benefit from military construction spending of approximately $263 million with an additional $463 million in 2004, due to the sale of general obligation bonds for schools and other construction.

Missile defense construction spending is expected to contribute an additional $250 million and create 400 jobs this year alone.

Coupled with state construction projects of approximately $1.2 billion in 2003 (state and federal dollars), and similar figures in 2004, public construction project spending will have a positive impact by increasing jobs.

Public construction projects also stimulate growth in other economic areas such as professional and business services that are, according to the industry forecast published in the May 2003 edition of Alaska Economic Trends, expected to create 1,400 new jobs over the next two years.

• Robust health care industry.

• Mining jobs should show an increase in 2004, with construction of the Pogo mine.

• In 2002, over 1,500 new health care jobs and 700 social assistance (i.e., day care, etc.) jobs were created in Alaska. As the state's population ages and the demand for health care continues to grow, expanded job opportunities in this sector are likely to result.

• Moderate, but steady growth in other industries.

• Other segments of our economy such as retail and light manufacturing have enjoyed steady, moderate growth in past years and are expected to continue that trend in future years.

The biggest threat to the continued health of the state's economy is uncertainty and instability. For the last decade, our spending has exceeded our revenues. As a result, we have had to dip into savings accounts that are now nearly depleted.

Since taking office, Gov. Frank Murkowski has taken steps to create new revenue sources and savings by improving industry's ability to do business in the state. By streamlining and reorganizing state government, stimulating resource exploration and development, and actively partnering with businesses and industry, government costs are being reduced and new revenue sources are being created. Gov. Murkowski has repeatedly made the point that these measures are just part of what is needed to ensure economic stability for Alaska.

The uncertainty surrounding the state's yearly budget gap equates to economic uncertainty for those who would do business in Alaska and impacts the decisions business and industry make about investing and spending in our state. Having long-term fiscal planning in place will establish the framework for stabilizing and expanding the state's economy and provide the foundation for businesses to make sound investment choices.

By reducing state spending and focusing on the core responsibilities of state government, Gov. Murkowski is taking the first, long over-due step to address Alaska's deficit spending and bring stability to Alaska's economy. Through streamlining state government and encouraging development of the state's abundant resources, the governor's strategy is creating new revenue sources. He has laid the foundation for continued fiscal planning that will allow for a balanced state budget and stable business environment.

Gov. Murkowski is committed to working with the Legislature, business and industry leaders, local elected officials and the people of Alaska to ensure a strong economic future for our state.

O'Claray is commissioner of the state Department of Labor & Workforce Development.



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