Northern Economics Blog

One of the challenges of working as a consultant in Alaska is that Alaska’s unique natural environment and geographic location often mean that proposed projects that are economically feasible where construction, labor, and/or energy costs are lower are economically infeasible here. As the professionals who often conduct the feasibility analysis, our all-too-frequent role as the bearers of disappointing news brings a new meaning to the term “the dismal science.” While our motto may be “Helping Society Make Better Decisions,” it’s still not easy to tell a client that their dream project is unlikely to result in a positive economic outcome. Sometimes, though, we are blessed with the joy of watching an obviously beneficial and feasible project move from proposal to analysis to action. A recent example moved one step closer to reality when Governor Sarah Palin approved the new FY 2009 Capital Budget, which included $150,000 to help the Alaska Department of Fish and Game (ADF&G) with its planned overhaul of the current system for collecting labor data on Alaska’s seafood harvesters.

The Problem

Accurate data on participation is important for both the communities crew members call home and for the crew members themselves. Without accurate data fishing communities find it difficult to prove to policy makers, granting agencies, or lawmakers that their communities are integrally tied to fisheries. This is especially true for inland communities where a connection between the community and the sea may not be obvious to a policy maker located outside Alaska. Crew license holders suffer because their licenses do not provide adequate proof that they participated in a specific fishery. This makes it more difficult for crew and communities to find a seat at the table during fisheries restructuring discussions or when they try to access federal programs such as those run under the Trade Adjustment Act. Hence, an improved system has the potential to make a large difference in the lives of crew members and in their communities. (We also note that improved data collection systems always make the lives of your friendly neighborhood economic consultants easier.)

The Process

The recent state appropriation is part of a process that began with the Southwest Alaska Municipal Conference’s (SWAMC) Seafood Harvesting Labor Data (SHLD) project-when SWAMC expanded an existing effort to improve the quality of seafood harvesting labor data. SWAMC member communities are located from Kodiak to Bristol Bay and out along the Aleutian Chain. Commercial fishing is a cornerstone of the local economy in many of these communities. While several sources track permit holder effort and processing labor by community, crewmember data has received a decidedly lower level of attention than other key components of the seafood labor force. For example, permit holder effort and processing labor are each tracked-by community-by one or more of the following agencies: the U.S. Census, the U.S. Bureau of Labor Statistics, the Alaska Department of Labor and Workforce Development, and the Commercial Fisheries Entry Commission. Normally, worker counts are available through unemployment insurance premiums paid to the State of Alaska, but crew members are contract workers who are not required to pay unemployment insurance premiums so the Alaska Department of Workforce and Labor Development does not collect wage reports. The only consistent data over time comes from the Alaska Department of Fish and Game’s licensing program. The current licensing program is both vendor and license-holder friendly in that applying for a crew license is the same as applying for a recreational fishing license: simply tell a vendor you would like to purchase a crew license, fill out a carbon-paper backed form, hand over your money, and walk away with your new license. A paper copy of the license is then sent back to ADF&G by the vendor, where it is hand-entered in a database. That point represents the end of consistent official tracking of crew effort across the entire population of crew members. While the data collected by ADF&G allow us to know how many people purchased licenses and where they purchased them, we do not know how many crew license holders participate in a given fishery in aggregate or by community of residence. The current system tracks licenses purchases as opposed to actual participation.

Our Role

Northern Economics’ role in the SHLD project was to document the challenges communities and crew license holders faced with the current system, to outline past and current efforts to address the problem, to convene a 2-day workshop of stakeholders, and to outline roadmaps to a variety of solutions for SWAMC. The high point of the project came in November 2006 when more than two dozen stakeholders representing crew, communities, state and federal agencies, and researchers came together to exchange ideas and explore solutions to the issues at hand. The meeting ended with a commitment by ADF&G to review the current situation. After the completion of the project in early 2007, the SWAMC Board voted to continue pushing for a revamped data collection system. SWAMC’s staff has continued working with ADF&G on to make sure that a new data collection system meets the needs of crew members, communities and policymakers while also meeting ADF&G’s goals of ensuring the system stays accessible to vendors and purchasers alike. As quoted by the Anchorage Daily News on May 4th, 2008, John Hilsinger of ADF&G noted “We need a system that works in the Bering Sea Crab Fisheries as well as the skiff fisheries on remote rivers.”

While Northern Economics no longer has an active role in SHLD project, we are heartened every time we hear that the project continues to move forward and that SWAMC and the myriad of state and federal agencies involved in the project continue to build on the understandings forged during the SHLD workshops. If SWAMC’s and ADF&G’s efforts result in an improved crew labor data collection system, we’ll be excited to be able to use the new data and to know that we played a small role in making positive change for Alaska.

Governor Palin’s proposed $500 per person energy rebate morphed into a $1,200 per person resource rebate in July, with the hope of allowing Alaskans to decide how to spend their share of excess revenues from development of the state’s resources.

A recent ISER publication compares the proposed rebate with the increase in household energy costs for residents throughout the state. As with the earlier study mentioned in this blog, the energy costs include electricity and heating, but not vehicle fuel costs and other energy needs. What it finds is that virtually all of the households in Anchorage (97 to 99 percent) would collect more from the rebate than their energy costs had increased from 2006 to 2008. The numbers are similar for the increase in energy costs from 2000 to 2008: 87 to 94 percent of households would be overcompensated.

Residents in other road communities and more developed areas of the state would fare similarly. Households in the Mat-Su and Kenai Peninsula Boroughs would be overcompensated by 77 to 91 percent (or 62 to 81 percent for 2000 to 2008 increases). Households in Fairbanks, Juneau, and elsewhere would be overcompensated by 70 to 73 percent (2006-2008) and 47 to 59 percent (2000-2008).

In rural Alaska, however, the rebate would cover energy cost increases from 2006 to 2008 in about half of households, and would only cover the energy cost increases from 2000 to 2008 in about one-third of households.

Based on ISER’s findings, for the majority of households in the state, the rebate by far exceeds the increases in energy costs. Only communities in rural parts of the state have experienced increases in energy costs compared with the amount of the rebate.

Alaskans would be wise to spend their rebates carefully, however, as the less-mentioned effect of increasing fuel costs is the impact it has on the price of transporting food to and within our great state. The U.S. Postal Service increased shipping costs in May due to increased fuel prices. Along with the penny per stamp increase faced by consumers around the nation, bypass mail rates went up 9.5 percent, a cost passed on to rural customers of the AC Store, according to the Seward Phoenix LOG. As noted in the article, this increase follows increases in bypass mail rates of 12 percent and 7 percent in the prior two years.

The impact of higher transportation costs on food prices was covered in the July 2008 issue of Alaska Economic Trends. While Anchorage’s inflation rate was only 2.2 percent in 2007, during the first three months of 2008 data collected on food costs suggests that food prices increased 10 percent. Areas with air and seasonal barge access face the most expensive food.

It remains to be seen how quickly, or if, the resource rebate checks will start to arrive in mailboxes, but one thing is clear: whether it be food or fuel, Alaskans are paying more for many of the items they purchase on a regular basis.

The Institute of Social and Economic Research (ISER) at the University of Alaska Anchorage published a WebNote titled “Estimated Household Costs for Home Energy Use, May 2008” earlier this month.

ISER estimates that households in the state spend an average of 3.9 percent of their income on home energy. In Anchorage, the percentage ranges from 2 percent to 3.9 percent, depending on income. In other large communities and communities on the road system, 3.1 percent to 12.9 percent is spent on home energy. For remote rural communities, the impact is the greatest, ranging from 5.3 percent to 41 percent. With soaring diesel prices, it is understandable that more remote communities pay more for home energy, since the majority of communities outside Anchorage rely on diesel fuel for electricity generation and heating.

The authors are careful to point out that the numbers are only estimates, since there is a lag between when information used in the study is available. The study likely overstates the actual expenditures. However, the basic premise of the study holds: Alaskans, especially those in remote areas of the state, spend a lot of money on home energy needs.

The study’s focus is on home energy use, which includes heating, electricity, and other uses. It does not include the cost of fuel used for transportation, however, meaning that the burden placed on Alaskan households due to high energy prices is even greater when one considers the operation of a vehicle and the purchase of goods produced outside the state or region. (I’ve heard reference to the fact that food travels an average of something like 1,500 miles to arrive on one’s dinner plate at home. Anchorage is 1,450 air miles from SeaTac alone, so food traveling to Alaska has to go much farther than food sent to other parts of the country.)

You can find the ISER WebNote at http://www.iser.uaa.alaska.edu/Publications/webnote/Fuelcostupdatefinal.pdf.

The Natural Resources Defense Council (NRDC) recently launched a new website to help businesses understand how to “go green” in a very no-nonsense manner. They explain that “going green” is the colloquial term for working towards reducing the negative impacts on the planet’s ecological systems from your company’s supply chain and operations. The site is designed to be useful to all manner of enterprise because it collects all of the parts of the greening process into one site: how to make the business case, how to design a greening program, and the various opportunities for greening.

From an economics perspective, the site is very interesting because it is written by an environmental organization for a business audience. People tend to think of environmental activists as taking a confrontational approach to changing the way a business, viewed as environmentally negative, operates by trying to stop the business’s operation. The NRDC has attempted to take a different approach to changing the way businesses operate by appealing to businesses by framing their interests (reducing ecological impacts) into the terms of business.  The result is discussing environmental protection in terms of reduced costs and increased revenue – music to any business owner’s ears.

This approach is not new and has grown in interest in the environmental community for several years. The basic idea is that most resources that a business consumes cost the business money.  If they reduce the consumption, they reduce their internal cost in addition to reducing the external costs that include the ecological impacts of the resource consumption. There is also the added bonus that discerning environmental minded shoppers may feel better about purchasing products made with less impact on the planet. It also has the potential to boost employee morale because people tend to want to make the world a better place and the opportunity to make that difference through your job is inspiring.

Again, there is nothing profoundly new on the website. It is notable for its guilt-free appeal to businesses to add some environmental thinking to their operations and the comprehensive but not overwhelming coverage of issues. So take a look and see if there are any money saving tips that could help your business or organization. The link is below:

NRDC’s Greening Advisor

My name is Cristina Gaina. I am exploring the Alaskan Economy(and everything related) this summer as an intern for NEI.I am an international student at UAA,majoring in Economics  and working on a minor/major in Math. As for my graduate studies, an MBA is probably my best choice for now.

So far,I love my experience with NEI. I have been able to put at work my organizational skills and learn a lot about Alaska’s geo-economic and socio-cultural specific characteristics, especially demographics-past,present and future.

It is a wonderful experience that combines applying knowledge gained in class, learning the real world economics and enriching cultural knowledge in a friendly,supportive as well as challenging  environment.

My name is Cameron Ramey and I’ll be an intern over the summer. I grew up in Vermont and went to high school in Williamsburg Virginia, and then the Vermont Commons School. Once graduating I moved out west to attend Willamette University in Salem Oregon, where I keep myself busy outside of classes with hiking, running and a club rugby team.

I am an upcoming senior at Willamette University majoring in Economics with a minor in Spanish, interests that I intend on pursuing at the graduate level. I feel very fortunate to be able to work at NEI this summer, and the projects, such as mooring rate studies, that I have already been able to contribute to. I look forward to exploring this field further, and the opportunity to enjoy Alaska for the first time.   

Mike Fisher’s abstract has been accepted for the ProMAC 2008 conference to be held in Anchorage in September. The paper, titled “Organizational project risk management maturity assessment and improvement,” will look at the current methods available to assess an organization’s maturity with respect to project risk management (PRM) and will provide general guidance for organizations to improve their maturity. The paper will be based on work done recently with the University of Alaska Anchorage in looking at the future of PRM, as well as on recently published articles on project management and PRM maturity.

My name is Brandon Foy and I am the newest intern from UAA.  I grew up here in Anchorage and graduated from Dimond High School in 2002.  I enjoy a wide variety of hobbies including hiking, baseball, volleyball, tennis, basketball, running, reading, and cooking.

I will be graduating this summer with a BBA in finance and a minor in economics.  I plan to continue my education by pursuing a Master of Public Administration degree next spring in Colorado. I am excited at the opportunity to work here at NEI and put to use what I have learned in school so far.

We’re proud to announce that Dr. Katharine Wellman has been selected to serve on the Puget Sound Partnership’s new Science Panel. The panel includes nine members from varied backgrounds, and affiliated with a wide range of entities, mostly governmental agencies and universities. Dr. Wellman is the only member of the team from a private sector firm, and the only social scientist selected.

A press release from the Puget Sound Partnership dated November 20, 2007, explains:

Working toward its goal of restoring the environmental health of Puget Sound by the year 2020, the Puget Sound Partnership today announced a group of preeminent scientists who will help direct its work.

The Science Panel will provide independent, scientific advice to the Leadership Council, the governing body of the Puget Sound Partnership, as it develops a comprehensive plan to restore Puget Sound.

 “Some of the state’s top scientists are on now board to help ensure this effort is a success,” said David Dicks, executive director of the Puget Sound Partnership. “Their expertise and input is critical to developing a restoration plan that is grounded in good science.”