In Alaska: Boom Times Yield to a Bitter Bust
By Paul A. Witteman
In the Red Dog saloon in Juneau, the sawdust on the floor gets changed biweekly come fog, downpour or the occasional shard of sunlight. Behind the bar, there's a bumper sticker that was temporarily stapled up last spring for laughs. It reads, GOD, PLEASE GIVE US ANOTHER BOOM. WE PROMISE NOT TO P THIS ONE AWAY.
A stiff hike up the hill from the Red Dog, nobody in the state capitol building sees anything to chuckle about. When Steve Cowper, the new Governor of the largest state in the union, looks out his third-floor window, his horizon does not stretch far enough to see another boom, or even a boomlet. What he sees is a budget deficit of $882 million and diminished prospects for the state's heretofore pampered citizens. A man who favors cowboy boots and long silences, Cowper says sardonically, "It's a four-year term unless they burn me out of the mansion." Cowper idly contemplates that unhappy prospect because after he decided to run for office, first oil prices, then Alaska, went bust.
Overnight, it seems. Back in the early '80s, the state had so much oil money that State Representative Hoyt ("Pappy") Moss proposed to bail out Chrysler, Cleveland and a couple of other basket cases in the Lower 48. A few years before that, the legislators, in a gesture of unprecedented largesse, did away with the state income tax. In its place, they substituted a state- sponsored giveaway. Each and every resident was paid an annual "dividend" of some $500 merely for living in the state. The big spenders in Juneau also voted to give residents 65 and older an additional $250 each month as a longevity bonus. Says Cowper: "Government was in the business of dividing up the loot."
When OPEC and oil prices went south, there were minicelebrations at gas pumps across the Lower 48. In Alaska, as in Kuwait and Dubai, there were rude awakenings. Alaska derives a higher percentage (86%) of its general fund from oil taxes than any other oil-producing state. As the price of a barrel of crude oil tumbled from the high 20s down through the teens to about $9, the state began to run on empty.
Out in Bethel, a town scattered across the Kuskokwim River delta, there is apprehension about what budget cuts will mean. A region in western Alaska the size of Oregon, with about as many residents as Rutland, Vt. (pop. 18,436), the delta is representative of problems throughout the state. For example, the just completed $4 million Yukon-Kuskokwim youth correctional facility will probably never open its doors. There is no state money to operate it. "So much of our economy has been artificial," says City Councilwoman Diane Carpenter, speaking of a generation of pork-barrel construction projects expensively built on pilings above the shifting permafrost. "Now that there are no jobs for young people, there will be social dislocation, anger and bitterness."
Some of that dislocation will occur in the 56 villages for which Bethel serves as a hub. Tony Vaska, 38, a Yupik Indian who was born upriver in Kalskag, earned a doctorate at Stanford and now is the interim Bethel city manager, sees it coming. "The villages are going to feel it the most as teachers' aides get cut. And 99% of them are native." That will ripple back to Bethel. "Everything is one big question mark," says Dave Foster, 46, general manager of Swanson's, the largest retail store in town. "I don't think we've seen the worst of it."
In living rooms and kitchens around Bethel, people are plotting ways to extricate themselves from their collective predicament. Former Teacher Harold Sparck sees the Bering Sea and its fisheries as a rich alternative source of income. Steve Constantino, 35, an attorney and president of the local Chamber of Commerce, is touting tourism and the lure of about 100 species of birds that spend their summers in the region. (He makes no mention of the score or so species of mosquitoes that share the turf.) Rosie Porter, the feisty editor and publisher of the weekly Tundra Drums and proprietor of the Porter House Bed and Breakfast, thinks the tourists ought to include the Soviets, just a couple of hours away across the Bering Sea. "They'd be real good customers," she says, clearly thinking more of her occupancy rate than of the Drums' circulation. A sobering counterpoint to these schemes, however, is the rise in suicides and thefts of heating oil.
The news is no less bleak 750 miles to the northeast in Deadhorse, a town of prefabricated modules that hunkers next to the oil fields at Prudhoe Bay, north of the Arctic Circle. The Prudhoe Bay Trading Post recently held a sale. DON'T SNOOZE, YOU'LL LOSE, the sign trumpeted. Clerk Lisa Greenwood had trouble staying awake. "At 8:30, there wasn't a soul in here," she says. "Business has gone down 50% in the past year." The house she and her husband Perry bought outside Anchorage two years ago for $120,000 is now appraised at $90,000. The mortgage payments have not shrunk along with the Greenwoods' income. "It's all we can do to hang on," she says.
Not everyone sings the blues. Former Governor Walter Hickel, who has seen the occupancy rate in his 600-room Captain Cook Hotel drop 7 points, to 62%, in the past twelve months, says resolutely, "We have to be enthusiastic." Indeed, the state's savings account, the Permanent Fund, continues to grow and now tops $8.1 billion. That is a healthy reserve, even if the principal cannot be tapped to help solve the current crisis. Harold Heinze, the president of Arco Alaska, looks at the modest rebound in the world price of oil and says, "It feels good to have a mild wind at your back after walking into a gale."
What Steve Cowper feels, however, is the need to reinstitute the state income tax, slash entitlements and reduce the state's expectations. The legislature has not reacted to those proposals with unbridled enthusiasm. Tony Vaska has a simple definition of the attitude that keeps the politicians from acting: "Alaska has been spoiled." Maybe so, thinks the Governor, but matters have reached a new level of urgency. "We can change overnight. We don't have any choice in the matter."