Sen. Robert Myers: Why is our state’s economy flat outside of oil and government?

By SEN. ROBERT MYERS

Feb. 24, 2026 – I’ve focused most of this series on problems within or related to government. There is good reason to focus on government, especially its finances, with all of the chaos that creates, but the point needs to be the private sector. That is where most of us make a living and find life’s daily necessities. It’s the portion of the world that creates things.

Even if state government lives off of the Permanent Fund (the direction we’re headed), it’s still living off of the private sector, albeit the private sector of the country rather than Alaska.

We’ve already looked at the history of state spending. Let’s start with a history of the state’s economy.

The solid lines are Alaska while the dashed lines are the rest of the country. From each set, the lower lines are government, the middle lines are the private sector (not adjusted for how much of private business is funded by government spending), and the top line is the total.

At statehood, Alaska was not doing well. The state’s two traditional industries, fishing and gold mining, were both in trouble, the first from poor resource management and the second from rising costs and stagnant prices. At the same time, the military was reorienting away from Alaska as Vietnam ramped up. That persisted until the early 70s when oil money started to flow, both to the government and through the private sector for oil field and pipeline construction. The second price jump in 1979 just added fuel to the fire even after TAPS construction had finished and oil had started flowing.

Economic activity had a sudden crash in 1986 as oil prices fell, with a bump in activity from the Exxon Valdez cleanup around 1990. We settled down close to the national average growth rate for most of the 90s as oil prices stayed low and the military drew down at the end of the Cold War.

A price drop in the late 90s was followed by a price rise and increased military spending in the 2000s. The big oil price spike of 2006 to 2014 led us to believe that the heady days of the late 70s and early 80s were back, but it didn’t last long. The price drop caused by the oil price war between OPEC and the frackers in the Lower 48 brought reality back in 2015, and we’ve muddled along ever since with some moderate improvement lately, mostly due to increased activity on the North Slope. But let’s unpack the last two decades and what was being masked by all of the Slope activity.

The chart above is Alaska’s economy by private industry except for oil and mining (which would dwarf the rest). While the immediate takeaway is that Alaska is more volatile than the country as a whole (a combination of smaller population and dependence on oil), the true story is deeper. Once we take away government and oil, the recent picture is much bleaker. Nearly all growth in the last few years has come from those two industries. Without them, the state’s economy has effectively been flat over the last two decades.

Three industries stand out as growth sectors, but the picture for the private economy there isn’t all that rosy either. The top red line is transportation. It’s shown some moderate growth, but it is heavily tied to the oil industry, both for trucking freight up to the Slope and shipping the oil through the pipeline. As TAPS ages, the maintenance required to keep it operational creeps up, raising the size of the sector but not really producing anything new for the economy. The one bright spot is the increase in international cargo over Alaska, mostly through Anchorage.

The green line is real estate. While there was some growth during the last oil boom, it quickly settled down. That’s been followed by a more recent rise, but that’s driven mostly by the rise in rents, not increased building or actual higher value.

The blue line is health care. While it’s an industry that provides a lot of good-paying jobs, the rise is driven primarily by two factors: demographics and government spending. Roughly 60% of the spending on health care in Alaska was paid for by government in 2010, and that was before both the Affordable Care Act and Medicaid expansion in 2015. At the same time, we’re getting older as a group and needing more care, much of it paid for by Medicare. More dependence on government and an aging population do not herald glad tidings for the private sector.

So why is the rest of the economy outside of oil and government largely stagnant? Let’s consider two things. First, resource-based economies grow and diversify by getting royalties or other ownership shares in the hands of individuals.

As I discussed early on, Alaska has the vast majority of royalties flowing straight to the state, not first to the private sector with a portion taxed back to the state later. That removes the capital that is needed to grow business, especially business in unrelated industries.

We already have a shortage of capital in this state, and this structure just adds to that problem. As the PFD was growing into the $2000 range in 2016, we cut it off right at the point it could have started to take on that role as capital for business. Then we wonder why business growth is slow without Outside investment.

The second problem is that the state doesn’t have to care about the private economy. Because the state gets the majority of its money from the Permanent Fund with most of the rest coming from oil, economic growth in any sector besides oil is a cost to the state, not a benefit. Economic growth means more people in the state, which means more kids in school, more road maintenance needed, and more Troopers to keep us from doing stupid things on Friday night.

But the state won’t get any more money to fund these things because there is no direct tie from the economy to state finances. We can make political decisions that hurt the economy without feeling the consequences. Instead, economic stagnation, if not outright contraction, is better for politicians because it leaves them more money to spend on services that benefit their preferred groups to help them get reelected instead of benefiting the people as a whole.

So what does caring about economic development look like in the political process? The legislature has held lots of hearings and spilled a lot of ink about not having enough people to process SNAP and Medicaid paperwork, but it’s been crickets on not having enough people to properly process permits for mines and other resource development.

Behind closed doors, oil industry people are telling me it’s easier to permit oil drilling in California compared to Alaska. The timber industry needs longer leases to properly manage forests for sustainable harvest rather than handwringing about the state losing control of land.

Increased timber harvest is critical if we want to build more affordable housing in the state. From 2012 to 2022, we added twenty occupations to the list needing a license to work in the state, making it harder to work at the same time that we were losing working-age people to the Lower 48. We should be making licensing easier with more work permitted under each license, not harder with less.

To reiterate, the one exception to this rule is jobs dependent on direct government spending. Those jobs, politicians care about a lot. They don’t help grow the state’s treasury, but they do help with reelection. Most of us live and work in the private economy that isn’t dependent on state spending, but we get forgotten.

But if we could get the economy growing again, would that help us out of the state’s long-standing fiscal quagmire? Could we pay for the better road maintenance we’d need to grow? I’ll address that next week.

Senator Robert Myers was born in Fairbanks and spent much of his young childhood at the Salchaket Roadhouse, owned by his parents. He attended the University of Alaska Fairbanks, where he studied philosophy, political science, and history. While in college, he drove for a tour company, sharing  Alaska with countless visitors. He currently drives truck and travels the Dalton Highway (Haul Road) frequently. He ran for office because he wants an Alaska his children will choose to make their home down the road. When not working for his Senate District B, North Pole, he enjoys reading, history, board games, and spending time with his wife Dawna and his five kids.

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