The COVID-19 pandemic has dominated our lives, and it has been the focus of Alaska leaders in an effort to slow the spread. However, I also want to begin focusing on what we will face once the pandemic subsides. Alaska has challenges different and greater than other states, such as the following declines in: the financial markets tied to the Permanent Fund, demand for seafood, the visitor industry, the rural healthcare system, and the oil industry. The Alaska economy cannot be rebuilt unless we fully understand the unique impacts of these fiscal ‘earthquakes.’
1. There has been a dramatic drop in the financial markets that produce the Alaska Permanent Fund earnings, which in turn funds our public services and the dividend. Because the permanent fund earnings provide more than 70% of the state’s revenue in the yearly budget, this drop will impact our state revenue, spending, and dividend. How big the short- and long- term impacts are will be determined by how the Legislature decides to handle such pressing fiscal hardships.
2. Demand for seafood, caused by lack of foreign trade and restaurant shutdowns, has declined. Many Alaskan seafood products are experiencing significant reductions in market price. Although it is likely that fisheries prices will rebound faster than other industries whenever the global economy returns to “normal,” in the short-term, fishermen are struggling. Fishermen are self-employed and do not qualify for many traditional safety nets. Although the long-term outlook for our seafood industry is still strong, the Legislature and the administration must remain committed to adequately funding the management of this critical renewable resource and the habitat that supports it.
3. The visitor industry is fueled primarily by cruise ship companies, and unfortunately, Alaska likely won’t see any large cruise ships this year. The international ownership structure of major cruise ship companies will make a bailout by a single nation nearly impossible. Currently, there is a pervasive fear of travel around the world. This virus may be a long-term pandemic, with increases in cases every few weeks or months. It may even become a yearly inhibitor to the industry, at least until we see a vaccine. Alaska will have to slowly rebuild its visitor industry over several years, and the revived tourism industry may look different. I will continue to advocate in the Legislature to support that effort by investing budget resources in the Alaska Tourism Industry Association.
4. Health care is one of the largest employers in the state and is reeling under COVID-19. Revenues have decreased dramatically due to canceling nonessential healthcare procedures, and those losses have been particularly catastrophic to small hospitals. Dentistry, chiropractic, and other specialties also have had to be shut down or significantly reduced. Staff burnout and gaps in care, especially in rural Alaska, are also negative COVID-19 impacts.
5. The oil industry is facing a crash like we’ve never seen before because of reduced demand during the pandemic, as well as a brutal price war instigated by Saudi Arabia and Russia. Demand is down 30% and there is a lack of storage space, leading producers to shut down wells. Conoco announced a 100,000-barrel reduction in June, which is only 20% of the pipeline throughput. In Alaska, Native Corporations and oil-service contractors are a vital part of our economy and are facing big challenges resulting in hundreds of job cuts.
These topics all need to be part of the conversation as we reopen and rebuild. We also need to be aware of individual hardships; unemployment is at an all-time high. According to an ISER report in April, layoffs could directly affect 27,000 jobs with a payroll loss of almost $80 million in one month alone. When people have lost an income, they cannot support other businesses, which could indirectly result in an additional 21,000 jobs lost.
Let’s start the conversation on how we can prepare for our post-pandemic lives. Many of the ideas in this letter come from conversations and words from Former State House Representative Terry Gardiner, and I’d like to thank him for sharing them with me. If you have any questions, concerns, or suggestions for how we proceed, don’t hesitate to email me at Rep.Dan.Ortiz@akleg.gov or call my office at 907-247-4672.
Rep. Dan Ortiz, I-Ketchikan, represents House District 36 in the Alaska House of Representatives.