The Morning Headlamp — Nervous contractors and PFD changes

“Not particularly optimistic.” Construction firms in Alaska have mixed expectations about how the year ahead will treat their industry. However, their outlook is somewhat grim when it comes to how much work they expect to be available in 2016. The trade group Associated General Contractors of America and software company Sage conducted a survey across the United States. The Alaska study surveyed 25 contractors – primarily in the commercial sector – who listed Alaska as the state where their firms perform the largest amount of their work. Forty-four percent of the contractors predict they will be competing for less project money in 2016 than last year. The other 56 percent think the amount of project money will be stagnant. An economic trends report released Thursday from the Alaska Department of Labor & Workforce Development forecast that in 2016, the state’s construction industry will lose 900 jobs. That’s due to low oil prices and a tapering off of both privately and publicly funded construction projects amid economic uncertainty and a tightening of the state’s capital budget. “That’s not a particularly optimistic outlook,” said Brian Turmail, senior executive director of public affairs for AGC of America. “Contractors in Alaska seem a lot more pessimistic about 2016 than anywhere else in the country.” Headlamp would like to highlight the interconnection between Alaska’s oil and gas industry and the rest of Alaska’s economy. Astutely noted in this ADN piece, when Alaska’s primary industry succeeds, Alaska’s construction firms succeed. When the former flounders, all other industries follow suit. Headlamp calls on policy makers at the state and local level to heed this forecast for 2016, and work to implement pro-industry, pro-job growth, and pro-economic freedom policies that Alaska’s economy desperately needs.

Alaska lawmakers “all over the map” on PFD changes. According to an analysis be the Alaska Dispatch News, the governor’s proposed reduction to the Alaska Permanent Fund dividend check – a move designed to help the state balance its budgetwill exceed more than $15,000 for a household of four in the next three years. Compounding the loss to Alaskans is the fact that the next two dividend checks had been projected to grow to record amounts, if you don’t count inflation. Walker said in a statement he’s looking out for the long-term interest of Alaskans, not just a “few high years” of dividend payments. Stay on the current path, and dividends are gone by 2020, he said. If the plan is approved by lawmakers, future dividend checks would come from oil royalties, instead of investment earnings from the $50 billion Permanent Fund. Instead, the fund’s earnings under the plan would help pay for government. House Speaker Mike Chenault, R-Nikiski, said he wants to see cuts before the earnings are used. His colleagues are all over the map. “Some are adamantly opposed, some would use it, and some are kind of in between,” he said. “But you may get support for using Permanent Fund earnings if we feel the size of the budget has been reduced enough.” Sen. President Kevin Meyer said he likes the governor’s proposal to overhaul the Permanent Fund. The idea may have support in the Senate, but cuts need to come first. “We’ve gone from $100 oil to $35 oil, and so we need to make that change before we start taking money from Alaskans,” he said. Headlamp again urges legislators and the governor to first find reductions and efficiencies within state government before turning to Alaskans checkbooks. State government over the past decade has grown unabatedly. In this era of low oil prices government at all levels must learn to deal with less, because the private sector is doing the same.

In his regular column in the Alaska dispatch News, Charles Wolfforth writes that Alaska has “created something precious” in the PFD, and it is a “basic part of our economy” that promotes equality. Large reductions to the Permanent Fund dividend checks alone will not fix Alaska’s fiscal crisis. In fact, depriving Alaskan households of over $15,000 over the next few years will only exacerbate job losses  in the oil and gas industry that provide family supporting incomes. To survive this downturn state government must be right sized, Alaska’s tremendous financial resources must be used wisely and sustainably, and policies that keep the state competitive and open for business should be championed.  

$15? Sen. Johnny Ellis is proposing that the state increase its minimum wage to $15 an hour. Under a 2014 ballot initiative voters approved raising the minimum wage to $8.75 an hour last year, and to $9.75 an hour as of January 1, 2016. The increase proposed in Sen. Ellis’s bill, if approved, would take effect Jan. 1, 2017. That would make Alaska’s minimum wage among the highest in the United States. On its surface a minimum wage increase sounds wonderful; who doesn’t want to get paid more?! However, research shows that substantially raising the minimum wage, as Sen. Ellis has proposed, negatively impacts low skilled workers, first time job seekers, minorities, and less educated people. Minimum wage jobs are traditionally the first step up on America’s economic ladder. These jobs teach people valuable skills like the importance of showing up to work on time, following directions, good behavior, respect, honesty, and gives them the dignity of honest work. However, when the minimum wage is raised considerably that first rung disappears, as do the job opportunities for those already struggling to get by. A government edict that artificially inflates wages will never bring about the high standard of living that greater levels of economic freedom can.

Alliance member continues to move Alaskan economy forward. A unique semitrailer designed to get cheaper, cleaner energy to Fairbanks has shown it can haul more liquefied natural gas than anything else on the road. In demonstrations last month, the rig hauled 12,300 gallons of super-cooled LNG between the Titan gas-liquefaction facility at Point Mackenzie and Fairbanks, a 30 percent increase from the current average load of 9,500 gallons, officials said. The review is part of the Interior Energy Project, an effort by the state to lower energy prices and improve air quality in Fairbanks, a city of 32,000 mostly dependent on oil and wood for heating. As part of the project, the Alaska Industrial Development and Export Authority, which has acquired the liquefaction plant at Point MacKenzie and Fairbanks Natural Gas, has been reviewing offers from private companies interested in hauling LNG to the region. The semitrailer’s manufacturers — Heil Trailer in Tennessee and Western Cascade Truck, Tank and Equipment in Washington — have offered to sell the trailer to the state, said Pat Malara, president of Western Cascade.

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First Reads

As Alaska leaders eye Permanent Fund earnings, cost will be felt in dividend checks
Alaska Dispatch News, Alex DeMarban, January 11, 2016

New LNG semitrailer proves it can carry bigger loads
Alaska Dispatch News, Alex DeMarban, January 11, 2016

Alaska construction firms more pessimistic than those elsewhere
Alaska Dispatch News, Annie Zak, January 11, 2016

Alaska’s dividends help make us equal and protect our common wealth
Alaska Dispatch News, Charles Wohlforth, January 11, 2016

Anchorage Democratic senator proposes $15 minimum wage
Associated Press, January 11, 2016

Alaska Energy News

TransCanada to file 2 legal challenges to Keystone rejection
Alaska Journal of Commerce, Juan A. Lozano, January 7, 2016