Understanding construction economics: government's role in industry stabilization.

• Author: West, Gail
• Position: CONSTRUCTION

One of the most important industries in Alaska, construction, is interwoven with nearly every other industry in the state, according to Scott Goldsmith, a professor of economics at the University of Alaska Anchorage Institute for Social and Economic Research. Goldsmith said when the economy is good, businesses need the industry for expansion. When the economy sinks, the industry tends to sink with it.

"It can be a good bellwether to indicate how other industries are doing because all other industries feed into the construction industry," Goldsmith said.

ALASKA IN GOOD SHAPE

The good news for Alaska is that today's construction industry is relatively stable, compared to the booms and busts of the past. In fact, the industry may be in better shape here than it is in many other states. As Goldsmith reported to the Associated General Contractors in January of this year, the nation had lost 1.6 million construction jobs. Factoring in the number of federal dollars flowing into Alaska along with oil and gas spending and that from other resource-development industries, the state has a relatively healthy construction industry.

"We're not small potatoes," said John MacKinnon, executive director of the Associated General Contractors of Alaska. "Alaska construction means more than $7 billion a year to the state. That's 20 percent of our state economy."

Of that annual investment into Alaska, public monies--federal, State and local--will account for just more than $2.5 billion this year, according to ISER's construction spending forecast produced annually for AGC. That projection, however, was published before additional construction funding for Alaska was finalized.

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"After the ISER report was published, the 2010 Legislature passed a new State capital budget with nearly $3 billion in construction funding," said John Boucher, senior economist for the State of Alaska.

"It won't all hit the street this year, though," Boucher added. "Generally, our budget dollars fund projects that may take a few years to complete. After a budget is passed, that money is made available through appropriations to State agencies for programs and projects. The vast majority of these projects are done by private contractors.

"For example," Boucher said, "DOT (the State's Department of Transportation and Public Facilities) anticipated putting more than $750 million in projects on the street this year."

FUNDING STABILIZED BY STATE

Alaska Office of Management...