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In my November post, I wrote the following about my expectations for early 2021:

There are hard days ahead economically and socially. There are also many better days ahead economically and socially. The next 60-90 days will be very challenging, but as the light returns to Alaska, we’re also going to have the path illuminated to an easier 2021.

At the time, I also said that by the time the sun started to rise again in Utqiagvik, we would have a much better sense of how 2021 was going to play out in Alaska. However, I did not realize that early 2021 would turn into an Alaskan variant of the poker game known as Texas Hold’em. In Texas Hold’em, each player is dealt two personal cards. The dealer then lays out five community cards in three stages known as the “flop” (3 cards), the “turn” (1 card), and the “river” (1 card). Players try to make the best hands they can out of these seven cards. I’m contending that Alaska has the two cards in its hand, and that the last 90 days, but in particular the last 30 days, have given us the flop (three more cards). With the flop on the table, we now have five of the seven cards we get to play with this year.

Cards in Our Hand

The cards in Alaska’s hand right now are mixed with one strong card and one weak card:

  • Through a combination of local and statewide actions, geographic isolation, and dumb luck, Alaska has done relatively well handling COVID-19. Measured by per capita rates, we’ve done the second best in testing, 14th best in total cases, and third best in deaths. At the same time, out of the 50 states, we have the highest portion of the population with at least one vaccination in their arm, second highest portion of second shot arms, and we have a robust number of doses either already here in-state waiting to get into arms or coming. With all of these points, I feel like we’re holding a queen here.
  • As I outlined last month, our state fiscal situation is decidedly a mixed bag. In percentage terms, our tax revenues dropped more than any other state last year, due in no small part to the fact that the state has only one leg in its tax stool. While we have the riches of the Permanent Fund, we’re basically broke when it comes to easily spendable cash. A bit like a retiree who spent too much cash early in retirement and who didn’t want to generate extra income, we are facing some hard choices about how we want to manage our remaining resources. In cards, we’re holding a four or five here, but with the option to turn the card into something stronger if we have the courage.

The Flop

The flop is just as mixed as the cards in our hand, but these cards give us great visibility as to how 2021 is most likely to play out:

  • Last week, Canada announced that it would not allow cruise ships sailing between U.S. ports to pass through Canadian waters in 2021. It is hard to overstate how big of blow this ban has the potential to be for workers, businesses, and communities across the state. Traditionally, this sector accounts for more than ten percent of wage and salary employment in Alaska, and no sector suffered more from the pandemic. At the same time, communities around the state, from Ketchikan to Skagway and Haines to the Denali Borough, rely on taxes and sales taxes primarily paid by tourists. These municipalities survived one year without these revenues, but a second year is going to result in even larger job cuts and service reductions. The biggest kicker here is that this situation was partially avoidable as CARES Act I and CARES ACT II could have included a Jones Act exclusion for this year, which would have allowed non-US flagged cruise ships to sale directly between ports in Washington and Alaska. Let’s hope that our congressional delegation is working overtime to get such a rider into the current relief bill before Congress. This card is a two, but perhaps someone can call twos wild.
  • I’m calling the next card in the flop another a queen. There are increasing signs that the US is going to have enough vaccines to meet demand (i.e., people who want to get vaccinated) by April and that we’re going to be awash in doses by mid-summer. The average number of vaccinations each week has increased 40 percent in just the last three weeks. By the end of March/beginning of April, all our vaccination vectors in  Alaska- state, municipal, tribal, VA, pharmacies- should be vaccinating Alaskans. There’s a good chance that by mid-summer, depending on local vaccination rates and variants, that COVID in Alaska and the US could become a disease of localized outbreaks.
  • The final card in the flop is coming down from the dealer’s hand and we can’t quite see what it is yet. It could be relative stability in oil prices (ranging between $50 and $60) but without much upside beyond the range. Stability in oil prices would stabilize our fiscal situation and give us another mid-range card to match with the second card in our hand. In this case we would have a high-low pair to play with in our 2021 economic recovery: not great but not bad either.  An alternative that would also be helpful here would be municipal fiscal aid in the current COVID relief bill before Congress enacts a Jones Act exemption. Here again, that would give us a mid-range fiscal stability pair in the hand. Dare we hope for all three elements coming together?  On the other hand, it could be something like a COVID variant that slips past the vaccines, which would be garbage for our hand.

The Turn and The River

At this stage in the game, the turn and the river are unknown. The turn card will be the state budget, specifically at what level and how the legislature and governor choose to fund operations next year. I hazard no guess as to when the turn will appear except to say, “by June 30th.” Legislators appear very budget focused for the most part, but the delay in the organization of the House did not help the timeline. The last card, the river, is a true unknown at this point. It will reveal itself later this year.

Jonathan’s Takeaway: Alaska’s holding one high pair and could add another pair if we’re pro-active. While no Royal Flush, it’s a far sight better than 2020 when we had a hand full of nothing.

2021 will be a lot better than 2020 for Alaska. It won’t be a return to normal or a return to “0”, we’ll still be in the hole compared to 2019. However, the direction is starting to look positive in aggregate, and that’s a far sight better than where we’ve been the last 12 months.

Jonathan King is a consulting economist and Certified Professional Coach. His firm, Halcyon Consulting, is dedicated to helping clients reach their goals through accountability, integrity, and personal growth. Jonathan has 24 years of social science consulting experience, including 17 years in Alaska. The comments in this blog do not necessarily represent the view of employers and clients past or present and are Jonathan’s alone. Suggested blog topics, constructive feedback, and comments are desired at askjonathan@apcm.net.

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