New capital budget is much lower than previous budgets

Knik Arm Bridge rendering
A conceptual rendering of the Knik Arm Bridge. Construction industry advocates support the project, but Gov. Bill Walker hasn’t pursued it. (Image courtesy Knik Arm Bridge and Toll Authority)

State lawmakers who voted to pass the capital budget Thursday said it will help the economy. But it will provide less help than it did just a few years ago.

It was more than twice as large then — $3.6 billion in 2013, in contrast with $1.4 billion in the new budget.

When oil prices fell in 2014, so did the amount of money available for Alaska to repair and expand roads and other infrastructure.

The state spent more than $2 billion on the capital budget in 2013. The new budget includes less than a tenth of that.

Fairbanks-based Exclusive Paving contract administrator Sarah Lefebvre noted the state has stopped funding its own construction projects.

Now, most of the capital budget comes from federal spending.

“Once upon a time, the state was able to do state-funded transportation and infrastructure projects,” she said. “That would include not just highways, but airports and that type of things. … Those state-funded projects are done.”

This decline has contributed to an overall decline in construction jobs across Alaska.

According to the state Department of Labor and Workforce Development, there’s been a one-sixth drop in construction jobs over the past three years.

Some trades have been hit particularly hard.

Juneau district representative Corey Baxter expressed anguish on the effect on the members of his union, International Union of Operating Engineers Local 302.

“It’s huge for our members,” he said. “I’d say over 90 percent of our work has to deal with the capital budget. And with the huge cut we’ve had over the last couple of years, it’s hurt us big time. A lot of our members are thinking of moving out of state.”

The capital spending decline has hit regions in different ways. Southeast Alaska already was affected by the overall decline in state spending.

Rain Coast Data director Meilani Schijvens said the region lost roughly 50 construction jobs last year and could lose a projected 100 this year.

“You’re having an enormous impact, a negative downward impact on jobs, on population, on spending, and so it’s been really frustrating and disappointing to watch,” Schijvens said.

Without a sudden surge in oil prices, the state won’t be able to fund projects like it used to.

There are steps that the Legislature can take to increase capital spending, according to some construction industry advocates.

Associated General Contractors of Alaska executive director John MacKinnon said state support for three often-maligned mega-projects would help. They are the Juneau Access road, the Knik Arm bridge and the Susitna-Watana dam.

Gov. Bill Walker has decided against pursuing the projects.

MacKinnon said $150 million in state spending for those projects would draw much more federal spending that would put contractors to work.

“If you look at some of the greatest projects that have been done in this country – the Hoover Dam, the Golden Gate Bridge, the coastal highway that went down through the Florida Keys – the projects were done in and around the depth of the Depression,” he said.

MacKinnon’s wife Anna MacKinnon is a Republican senator who oversees the capital budget as co-chair of the Senate Finance Committee.

John MacKinnon said the capital budget decline has affected private spending.

“Part of that has to do with the optimism out there of investors, private investors and private money,” he said. “You don’t see a lot of private money being spent out there.”

But the oil price decline has also had a large effect on private construction.

The Institute of Social and Economic Research at University of Alaska Anchorage projects overall construction spending will be down $700 million dollars this year.

Most of the decline is from the private sector.

Andrew Kitchenman

State Government Reporter, Alaska Public Media & KTOO

State government plays an outsized role in the life of Alaskans. As the state continues to go through the painful process of deciding what its priorities are, I bring Alaskans to the scene of a government in transition.

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