Sunday, October 21, 2007

Alaska's Cost Of Living Still Higher Than Most States

Outsiders frequently wonder how we Alaskans can justify getting a "disproportionate" share of the Federal dollar. They denounce our Congressional delegation, particularly Messrs. Ted Stevens and Don Young, as "Kings of Pork".

I will admit we Alaskans can be a taxophobic lot at times. We hate taxes, unless it's the "other guy" paying them. And all too often, the "other guy" is the oil industry, the cruise ship industry, the hospitality industry, et al. But woe betide that we should pony up; we can't even get a proper sales tax passed in Anchorage although it would not only reduce and stratify property taxes, but would diversify our revenue stream and better insure us against sharp revenue downturns from any particular segment.

There is some reason for our taxophobia. In today's Anchorage Daily News, leading state economists reveal that not only is Alaska a pricier place to live than most, but that the cost of living continues to escalate, driven primarily by sharp increases in some enrgy costs. This bad news is offset somewhat by the fact that Anchorage, Fairbanks and Juneau are still cheaper places to live than San Francisco, New York or Honolulu. But stull, this provides small comfort to those who find themsleves living from paycheck to paycheck.

In the October 2007 issue of Alaska Economic Trends, state economists Neal Fried and Dan Robinson post a 23-page economic analysis of cost-of-living trends throughout the state. And while they ackowledge sharp rises in energy costs between 2002 and 2006, they claim the softening of the housing market appears to have put downward pressure on housing costs which rose only 2.4 percent in 2007, compared with 4 percent in 2006.

The annual article on the cost of living in Alaska measures the economy in two ways. The first is to measure the inflation rate, or the rate at which prices are increasing over time, using the Consumer Price Index as the authoritative source. The second meaningful measure is to examine the cost differences between locations.

While the CPI gives the most authoritative answer to questions about how much prices are rising over time in one location, determining cost differences between locations is a little more complicated, the economists said.

Rural Alaskans continue to pay more for food. Using Portland, OR as a benchmark, a typical market basket of food costing $100.67 in Portland costs the following at these Alaska locations (asterisks denote "rural" locations, or communities off the state's road network):

- *Naknek, $273.36
- *Kotzebue, $255.08
- *Bethel, $236.56
- *Nome, $207.93
- *Cordova $188.68
- *Dutch Harbor, $185.13
- Seward, $165.50
- *Kodiak, $162.73
- Homer, $160.42
- Delta Junction, $159.30
- Haines, $157.08
- *Sitka, 153.78
- Kenai-Soldotna, $135.84
- *Ketchikan, $132.31
- Anchorage, $122.95
- Mat-Su (Pamer-Wasilla), $121.07
- Fairbanks, $120.64

Rural communities, which are off the state's road network, can be roughly classified into two tiers. Interior rural communities have the highest prices because the only two methods of shipment are by air and by water. However, shipment by water is generally available only between June though October because sea and river ice must break up enough so that it poses no threat to ocean or river vessels.

The waters adjacent to southeast rural communities are generally ice-free year round, so both air and water shipments are always available. This reduces shipping costs slightly.

Prices for a gallon of heating oil ranged from $5.94 in Dutch Harbor and $4.59 in Bethel to $2.68 in Fairbanks, and compared with a benchmark figure of $1.85 a gallon in Portland, Ore. In Anchorage, where most homes are heated with natural gas, heating oil is $3.61 a gallon.

The economists said housing costs could be a good proxy for a community's cost of living when making geographic comparisons because they make up such a large share of total household expenditures. A 2006 survey of rental prices in 10 areas around the state, conducted by the Alaska Department of Labor and Workforce Development for the Alaska Housing Finance Corp., showed that rent for both homes and apartments was highest in Juneau and lowest in the Wrangell-Petersburg census area.

Median rent and utilities for a single-family house in the Juneau Borough in 2006 was $1,746, compared to $1,630 in the Fairbanks North Star Borough, $1,569 in Anchorage, $1,350 in Mat-Su, $1,221 in the Kenai Peninsula Borough, and $960 in the Wrangell-Petersburg census area.

Apartment costs were highest in Juneau, where rent and utilities averaged $1,081 for 2006, compared with $950 in Anchorage, $800 in the Mat-Su Borough and $740 in the Wrangell-Petersburg census area.

For the first quarter of 2007, the average statewide home sale price was $271,000. In Anchorage, home sale prices averaged $318,000, compared with $301,000 in Juneau, $237,000 in Fairbanks, $232,000 in Kenai, $231,000 in Bethel, $228,000 in Mat-Su, $214,000 in Kodiak and $207,000 in Ketchikan.

Commentary: This information should be taken into consideration by anyone considering permanent relocation to Alaska. The state's Division of Employment Security offers some additional guidance for those contemplating a move here. First, they suggest you exercise caution when you see books or ads that guarantee "big money jobs" in Alaska. Many simply offer names of companies and require you to find your own job. The information provided is often inaccurate. Companies outside Alaska calling themselves the Alaska Employment Service (or something similar) and offering employment services for a fee are not associated with the State of Alaska, Department of Labor and Workforce Development, Employment Services Program.

Second, before you come to Alaska, you should have a round trip ticket and cash or credit card resources ($2,000 for temporary and $3,000 for permanent work) to live on while looking for work. Many who arrived short of cash encountered serious hardship and shattered dreams. Public assistance programs cannot be counted on by persons relocating to Alaska without adequate funds. Homesteading is not available now. The climate and unpredictable summer weather generally discourage camper or tent living for extended periods. Better yet, you should have a bonafide job offer in hand. Be advised you cannot travel through Canada without showing customs officials cash and/or credit cards that are good in Canada. In addition, some previous misdemeanors and felonies will result in you being forbidden to drive through Canada; check the nearest Canadian legation if you have a criminal record to save the embarassment of being stopped and turned around at the Canadian border.

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