Southeast's economy rallies.

• Author: Miller, Dirk
• Position: Southeast Alaska - Economic Review & Forecast

Like an old-fashioned revival, economic activity in Southeast Alaska started to rise in intensity this year, a rebirth based partly on faith that everything will turn out for the best.

As in most of Alaska, the region weathered an economic slump in the mid-1980s, the result of declining oil prices. Spending by the state government, which relies on oil revenues for 85 percent of its intake, was curtailed. Businesses failed. Homes were lost to foreclosure. Thousands fled the state in search of work.

In 1989, the slump slackened. Southeast's employment increased 4.4 percent, state economists say. Government spending rose and Alaskans, who had been mired in a gloomy mood, began to speak of the future as holding promise again.

The outlook for Southeast now depends on answers to three questions: Will mining in the Juneau area make a comeback? Will state government employment grow with windfall revenues coming from the Persian Gulf crisis? And will reforms related to management of the Tongass National Forest derail the region's logging industry?

This year, from Sitka to Saxman, Southeast's economy has been on the move. Tourism, logging, fishing and mining exploration are the mainstays behind the acceleration. The number of luxury cruise ships visiting Southeast rose. One hard-rock mine has been in operation for a year, and others in Alaska and across the Canadian border are being explored.

Fishermen hauled in a better-than-average catch and expect possibly to have a larger harvest next year. In Juneau, Craig and Ketchikan, facilities for fish processing were being built or pondered.

LOGGING. Industry watchers say logging this year continued at a cut slightly below that of last year, due to declining prices. Logging is the region's largest employer. Only the seafood industry, 3,990 jobs, and state and federal government, 4,400 jobs, come close.

According to a study for the Alaska Loggers Association (expected to be renamed the Alaska Forest Association) by the McDowell Group/Data Decision Group of Juneau, the Tongass provides a total of about 3,500 jobs, including federal Forest Service slots, in Southeast. Another 1,000 jobs are created by logging on private lands, mostly Native corporation timber. State economist Brian Rae predicts employment in the timber industry will stay nearly the same the next two years.

Last year both the House and Senate passed Tongass reform bills and a conference committee developed a compromise from the two conflicting plans. The legislation, signed into law in November sets aside 1,018,000 acres, of which roughly 300,000 is designated wilderness and the rest is designated as roadless/no-timber-harvest management areas. The removal of allowable timber sale acreage, through the additional set aside and new buffer strip requirements, is estimated at 40 million board feet. Most important, long-term timber contracts with the state's two pulp mills were preserved.

Thyes Shaub, legislative liaison for the Alaska Loggers Association, notes that the industry is relieved to see the debate come to an end. It created an artificial market meltdown, she says. Because banks were reluctant to lend with the prospect of the long-term contracts being canceled, logging operations, particularly small businesses, were unable to get financing.

I don't think any compromises...