A Monday presentation to the House Finance Committee about the diversification of the economy included a hypothetical factory in the Fairbanks North Star Borough.
According to documents posted online before the meeting, the hypothetical factory’s local property taxes would more than pay for the increased demand for services (like schools, law enforcement and roads). The state, however, would be on the hook for a significant increase in K-12 funding without any source of new revenue.
It was intended to be a presentation about the need to diversify state revenue as the state economy is diversifying, but it was all too much for one Interior legislator.
Before Department of Commerce, Community and Economic Development Commissioner Mike Navarre could even put himself on the record and begin the presentation, Rep. Tammie Wilson, R-North Pole, said she wouldn’t be sticking around.
“If you took factory and put military in there instead, we would basically be saying on page 29 doing the math that we couldn’t afford the military because of a $30 million loss and I’m not willing to send that message to the military,” she said. “So I will not be staying for this presentation.”
This is the page she took issue with. It concludes with “Can the state afford it? No.”
To her credit, the numbers are very roughly similar to the upcoming beddown of a squadron of F-35s at Eielson Air Force Base. The F-35s are expected to bring a total of about 5,000 new people (both employees and family members) to the Interior through either direct employment with the Air Force or drawn by additional economic opportunities.
There’s a fair amount of discussion already underway on the increased demand for housing, schools and other services in the area, but most of the attention has been focused on winning the support of the U.S. Air Force.
Navarre walked back the example a bit during the presentation, insisting that it was purely hypothetical and not meant to make the case if something is worth it or not, but to draw attention to the fact that the state government is overly reliant on oil when the economy is shifting. As it stands, he said, economic development doesn’t help balance the state’s budget.
He argued the disconnect between state revenue and the economy has the potential to cut the legs out from economic development if it means the state’s continued to be mired in financial uncertainty.
His presentation also included the hypothetical impacts the factory would have in other communities.
At its core, it’s an argument, essentially, for something like an income tax to link economic growth to the state services they’ll rely on.
But for Fairbanks Republicans, the presentation’s similarity to the military struck a nerve.
Wilson wasn’t alone in voicing her disapproval. Rep. Steve Thompson, a Fairbanks Republican whose district includes U.S. Army Base Fort Wainwright, criticized the report and noted that much of the work done by local studies put the impact lower than Navarre’s presentation.
He said it seemed skewed, sending a bad message about economic development in the state.
“This comes out like we don’t want the military up there because it’s going to cost the state money. Maybe we shouldn’t open up the fertilizer plant in Kenai (Navarre was the mayor of the Kenai Peninsula Borough) because we’re going to add kids into the schools and we can’t afford it. JBER has more military than Eielson and Wainwright combined, maybe we need to reduce that because a lot of the students down there are what’s driving up the cost in Anchorage,” he said. “I don’t go along with your report here. I think you kind of tried to skew it one direction or another, and I really don’t appreciate it.”
Navarre shot back. He recognized the numbers generated by the local studies are lower than what was in his presentation, but said the reality is still the same. A big new influx of economic activity like the F-35s or any other project aren’t currently going to pay for the state services they’ll rely on.
“Really what I wanted to do is stimulate discussion,” he said, noting that the local reports cite the state as a major source of additional funding for schools.
“Now that’s not to say we don’t support the military. I know you do, I do, certainly the governor does. Everybody in Alaska supports the military,” he said. “The fact of the matter is what we do in this state and have done for some time, I guess, is expect oil and gas in a declining production scenario, which is what we’ve seen for the last 20 years, will pay for the cost associated with the diversification of the rest of the economy. That is a premise that is not sustainable and will be a disincentive to investment. That’s really what I was trying to show with the disconnect.”
“Our economy has been diversifying,” he said. “Our revenue is not.”